How can CIOs Improve Post-Trade Processing in Forex?

How can CIOs Improve Post-Trade Processing in Forex?

Capital Markets CIO Outlook | Wednesday, September 25, 2019

Forex traders remain on the lookout for advanced technology-backed solutions that can simplify and reduce the cost of post-trade processing.  

FREMONT, CA: The forex technology market has evolved rapidly as trading processes develop in tandem with advancing digital capabilities and changing requirements of stakeholders. Post-trading, just like any other segment in forex, is trying to leverage the power of modern technology to deliver better results. In forex trading firms, there has been a greater focus on improving front-office, whereas post-trade infrastructure development has conventionally received less attention. However, owing to the changing risk and compliance dynamics, post-trade processing has assumed greater significance in recent times. CIOs today are busy identifying solutions that give post-trade processing a boost while minimizing costs and standardizing rules.

Vendors offering technologies to forex firms are now developing high-impact, low-cost solutions that traders and trading firms can deploy to make post-trade affordable and optimized. Complexity in post-trade processing arises when there is a lack of efficient management tools. Centralizing trade and bringing everything onto one platform simplifies transaction recording and post-trade monitoring. Many of the solution providers today have designed products which, when used by trading parties, creates optimized forex relationships. Counterparties get to share a joint record of transactions, rather than having separate, individual documents.

Reconciliation, which most forex trading entities use, is an intensive process that requires dedicated software and leaves no space for errors. Post-trade processing solutions are now eliminating the need for reconciliation, enabling companies to save cost and effort. Through automation technologies, service providers are equipping counterparties on the same platforms to conduct post-trade processing based on mutually agreed rules. The challenges of ambiguity and the chances of risk reduce significantly, making the trading ecosystem faster and secure. CIOs can leverage these solutions to make post-trading management in forex seamless in today’s digital age, that demands instant processing and real-time controlling without the baggage of high operating costs and IT overheads.

Blockchain technology has found applications in financial enterprises owing to its unique features. The same technology has the power to revamp post-trade processing in forex trading as well. For that to happen, CIOs must note that digitization is crucial. Assets, agreements, and processing capabilities in forex trading firms have to be transformed through implementation of modern back and front-end systems. Once the first step is achieved, CIOs would be in a position to deploy advanced blockchain-based solutions. The solutions create matches for trade, form unique records for each transaction that can be shared between parties, simplify aggregation to improve flow and post the processed transaction data onto ledgers. Settlement and reporting become optimized, giving traders the best opportunities to reconcile and manage portfolios. Thus, from the perspective of forex trading firms, automation and blockchain are impactful ways that CIOs must focus on, to gain the upper hand in consistent forex trading practices.

As the volume of forex trade increases, traditional and manual processes are becoming insufficient because of their inability to handle operations in a way that prevents risks. Improved post-trading infrastructure in forex can enrich traders with better regulatory reporting capabilities through which compliance management gets a boost. CIOs are aware of the growing complexity in the regulatory environment. With accurate reporting that efficient post-trade processing solutions offer, CIOs can ensure that forex trading remains compliant. 

The well-regulated forex trading market is undergoing a digital shift, and CIOs can take this opportunity to make post-trading standardized and efficient. Well-managed post-trading offers incentives that can make a big difference in the profitability of forex trading firms. 

Weekly Brief