True straight through processing (STP) is becoming an issue of critical importance within the ETF industry: the demands of managing passive funds are many, but at the core of this sits the management of data.
True STP requires fund managers and their counter parties be able to access data from one platform, but they must also be able to use it with a very limited level of human involvement. Without true STP, growing ETF products quickly can become very challenging.
True automation, automation which can be scalable as an ETF manager grows, requires the management of FTP files in a manner where human intervention is only required when something goes wrong.
Why human beings are important
Many fund managers are still receiving files from technology vendors that are subject to manual processes; files are being uploaded by human beings, with all the commensurate risk of manual errors and the prospect of a slow, non-scalable process. This is not palatable for fund managers contemplating an ETF launch: the processing of the thousands of trades needed for even a mid-sized ETF will clog any effort to achieve true STP.
Truss Edge’s Safari technology employs a traffic light system: amber and red indicators dictate when human intervention may be required, but for the most part STP is being achieved throughout the bulk of the data management process.
ETFs are an intra-day product: Safari has been designed to provide the alerts required that human intervention be called for only when there is a need for remediation.
Scalability of ETF operations requires automation
Consider the need to deal with brokers via FIX, to acquire the confirmations that trades have been booked. Can this be scalable without a high level of automation? Fund managers find themselves having to deal with counterparties at every level who need to be fully integrated into the process. Yet these bring with them the challenge of making STP really work for the organisation and its investors.
Fund managers – and their technology partners – have to cope with multiple file formats from different service providers, including transfer agents and administrators. Someone, somewhere within the STP process needs to be flexible enough to deal with the multiple data formats that need to be juggled on a daily basis, and to be able to process all of that data in a coherent and legible manner. This is where we are able to add value.
Partnerships lie at the core of success
At Truss Edge we work with a fund manager’s partners, helping with onboarding and later on with the management of daily reporting processes. We consider it essential that a culture of partnership is established at an early stage with an ETF’s service providers in order to ensure that data flows as cohesively as possible.
With trades in non-standard and non-listed securities it is even more critical that reporting is scalable and occurs in a format that can be readily processed, but just as importantly, that valuation capabilities play a role in this.
For further information on Truss Edge Safari, please contact email@example.com