Innovation from Front to Back: How Our Post-Trade Hub Helps Broker-Dealers Navigate Shrinking Margins, T+1 and More

When it comes to the front office, broker-dealers have access to a vast array of trading tools built for speed, efficiency and flexibility. Why should post-trade processes be any different?

At LiquidityBook, we’ve determined that there’s no good answer to that question.

In recent years, the trade lifecycle has almost felt like a tale of two workflows – automation, acceleration and modern technology are major priorities up to the point of execution, but post-trade processes are still defined by manual work, fragmentation and rigid architecture with long development cycles and minimal capacity for configuration. Intensifying pressure to innovate and differentiate is compounding the problem. It’s high time the sell side had a better way.

That’s where we come in. LiquidityBook’s Post-Trade Hub – our suite of modular, cloud-native solutions for sell-side middle- and back-office operations – is built to deliver better experiences to broker-dealers and their buy-side counterparties alike. With so many firms having already embraced modern technology for their front-office workflows, this is a crucial step in ensuring every mile of the trade lifecycle is as smooth as possible.

But where do these efficiencies come from? And what forces are making it crucial to act now? Let’s explore in detail.

Raising the Stakes

As competition increases and profit margins shrink, broker-dealers are increasingly embracing multi-asset business models, moving into new global markets and delivering their products in new and more engaging ways. Rapid post-trade workflows, such as for allocations, matching and reconciliation, are necessary to support this level of innovation, so they will always be important priorities for acceleration.

That said, the realities of the current moment are raising the stakes – in particular, compression on margins and increasing clearing costs is incentivizing broker-dealers to optimize their post-trade operations like never before. Today, sell-side firms are likely to charge different commissions for different types of clients and workflows. A high-touch client may be charged at a different rate than an outsourced or prime client, etc.

These economics can have a profound impact on a broker-dealer’s margins and, in turn, where they send their trades to be cleared. For these firms, LiquidityBook’s Post-Trade Hub serves as a “catcher’s mitt” for trade allocation, commission calculation and trade recap generation for the end client, normalizing all data and sending it to the right clearing destination based on client, workflow type and a wide range of configurable trade attributes. Regardless of the data format – whether delivered via another technology vendor’s platform (like a third-party OMS), FIX, email or spreadsheet – our solution makes it easy to accommodate clients’ every request in a timely and optimal manner, yielding better outcomes for the buy side as well as the sell side. That contrasts sharply with legacy systems, which tend to tether broker-dealers to a single clearing broker, with months-long development cycles required to add another. This can be incredibly limiting: as the business becomes more complex, so does the need for flexibility. The alternatives are manual tasks and workflow fragmentation, which are productivity killers.

Next year’s transition to a T+1 settlement cycle will shine an even bigger spotlight on post-trade processes. Efficiency will effectively become doubly important, so having a system capable of serving trades to the right accounts, ensuring the details match for all stakeholders and sending them to the correct destination for clearing – rapidly and with robust exception management capabilities – is crucial. It all adds up to a powerful foundation for keeping up with the speed of business and regulatory change, no matter what form it may take.

Always Innovating

Our cloud-native, API-based tools mean it’s relatively straightforward for us to add new post-trade functionality – the ability to make client-driven enhancements has been part of our value proposition from day one. We can accommodate tough requests around complex commission structures, unconventional file formats and everything in between, configuring our system to keep up with changing business requirements. But events of the past few months have taken this innovative posture to a new level.

Our acquisition of Messer Financial Software, announced in October, invites the potential for powerful advantages across the trade lifecycle, including post-trade processes. Messer’s powerful reconciliation capabilities can serve as a bridge between once disparate processes, from reconciling front-office trades with middle-office allocations to identifying and minimizing deltas. By ensuring these details never get lost in translation, broker-dealers can avoid chasing clients or eating losses. Hyper-accurate P&L becomes far more realistic.

That’s just one example of our commitment to constant improvement and to delivering for our clients. Our ability to help them navigate market shifts is another. Through our Post-Trade Hub, we’ve taken a historically rigid workflow and unlocked a variety of avenues to greater operational efficiency, bringing it to a level that nearly matches the front office. Flexibility, agility and responsiveness to change are keys to success in any environment, but amid shrinking margins, competitive pressures and the looming move to T+1, we’re bringing something truly powerful to market.

Want to learn more? Drop us a line.

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