Beyond the Trade
When a client is ready to place a trade, financial institutions are required to ensure the trade is suitable and executed according to best execution practices.
But getting clients to the point of placing a trade requires quite a bit of work. Much of this work pertains to what is done after trade execution.
This might sound a bit confusing, but the point is: the way financial institutions carry out post-trade activities has a great influence on future trades clients might place.
In 2020, the Bank of England issued a report: The Future of Post Trade, Findings from the Post-Trade Technology Market Practitioner Panel [1]. This report emphasizes the problems found in post-trade processes and their impact on future trade decisions. The different approaches to processes across firms and outdated legacy systems were listed as the main causes of operational errors, rising costs, and inefficiencies, which deter investors from their trade decision-making.
Please find a summary of our article Beyond the Trade!
Being proactive
Activities such as market research and product marketing are important to garner clients’ attention and present new trade ideas to them. As with any sales process, timing is important. Having a proactive approach to trade management helps provide the appropriate opportunity to present actionable trade ideas to investors. [...]
Providing better client services
Ultimately the goal of financial institutions such as Private Banks, Wealth Managers, and Family Offices is to help clients make the right decisions so that they can reach their financial goals. Providing clients with a clear view and timely information regarding their portfolios, naturally puts them in a better position to make the right decisions.[...]
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Recognizing the challenges of going beyond the trade
The benefits of going beyond the trade are clear, but there are complexities in achieving this. The diverse nature of investment products within client portfolios can pose a challenge to carry out post-trade and lifecycle management. [...]
Adopting the right technology
This is further highlighted in an article Poised for Digital Transformation: Derivatives Post-Trade Processing by Angie Walker in 2021 [4]. The lack of up-to-date systems and the multitude of workflow processes hinder banks' efficiency resulting in greater costs and operational errors. The use of new technologies through innovative FinTech and platforms is the best answer for financial institutions to navigate the derivatives industry challenges.
?Figure: The post-trade pyramid. Source: LexiFi 2022.
Worthwhile going beyond the trade
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