SmartStream Technologies: A Real-time, Pre-Emptive Approach to Back-Office Processing

Philippe Chambadal, CEO The banking sector is experiencing tremendous shifts in its business models with a myriad of new global regulations, rapidly evolving customer expectations, and continuing economic uncertainty. Contrary to relying heavily on retail deposits, like in the traditional financing model, banks now increasingly depend on market-based funding. Furthermore, “the Return on Equity levels have nearly halved compared to the levels seen before the 2008 financial crisis. Market conditions have put a lot of pressure on the banks: $100 billion in capital markets revenue have disappeared over the last 7 years whilst costs have remained near flat or increased, leading to major cost overruns,” begins Philippe Chambadal, CEO, SmartStream Technologies.

The latest market trends, like the global rise in trade volumes and increased regulatory oversight, have caused post-trade processes to become a source of cost escalation and risk, driving firms to re-tool their back-office. The key to tackling the cost overrun is to move toward mutualizing them and creating post-trade utilities to serve the industry requirements. SmartStream, is at the vanguard of post-trade processing. They are altering the back-office operations of financial institutions through Transaction Lifecycle Management (TLM) solutions and managed services to ensure a rapid Return-On-Investment (ROI) and regulatory compliance. SmartStream’s post-trade processing solutions and unique Data Management Services create a real-time, pre-emptive approach to decreasing trade failures, while accelerating and automating trade processes. The firm delivers greater efficiency, automation, and control to critical post-trade operations including reference data operations, trade process management, cost management as well as many other compliance processes.

Choosing the Right Model

“While banks have thousands employed in their back offices, they need a better way of doing business and the only sustainable way forward is to move to a mutualized model,” states Chambadal. Mutualization enables banks to tackle challenges caused by lower transaction margins. This results in lower costs per transaction and better operational controls. Moreover, this approach helps clear most of the challenges the banking space faces, many of which are directly linked to Wall Street trends. These include over half a century of layered IT systems, such as batch solutions and highly fragmented systems.

SmartStream RDU delivers a data service to vastly increase the accuracy of the data within the industry

It is no secret that there is no silver bullet in the bank’s quest to find an appropriate platform or service model. They must look at the extent of the platform customization required to process trade flows, confidentiality issues, and regulatory requirements prior to selecting the model that delivers the targeted savings. “The essence lies in centralizing the services,” says Chambadal.

A Centralized Data Management Approach

Large banks consume data from hundreds of sources, leading to high internal data processing costs. While users strive to execute on their data governance policies in an effort to comply with new regulations, they still face key challenges in identifying the correct data. “If one analyzes the counter party data or a set of settlement instructions, it is observed that there is no single method of reference as every transaction has a different representation of the data. Data collected from public sources is not necessarily accurate. To solve this, one has to move data processing to a central utility where it is cleansed, normalized and enriched, and only then made available to the client,” reckons Chambadal.

Understanding this requirement, the industry leaders like Goldman Sachs, JPMorgan Chase, and Morgan Stanley have backed SmartStream’s Reference Data Utility (RDU). The SmartStream RDU, also known as Securities Product Reference Data (SPReD), provides services for instrument reference data normalization and validation across all asset classes. Started as the first industry utility, based on the principles of collaboration and contribution, SmartStream RDU delivers a data service with the highest level of accuracy within the industry. The shared service model of managing data holistically fosters common fixes to data processing across the instrument lifecycle. The RDU acts as a processing agent for its participants’ selected data sources to manage their complete data life cycle, incorporating the sourcing, validation, enrichment, and cross referencing of data, while reducing trade breaks typically by 40 percent.

With SmartStream being the largest post-trade solution vendor worldwide, Chambadal affirms that the firm’s constant innovation always pushes the envelope of its workflow capabilities to deliver better scalability and usability—offering real world solutions clients can benefit from quickly. With the flexibility and ability to undertake any task required, the company’s trade and liquidity management solutions help banks attain a real-time view of the risks.
Optimized Costs Management

The sea change in banking programming, accelerated by the ’08 crisis, has resulted in a need for a total retooling of the way banks control their costs. “SmartStream analyzes all the brokers, clearing and the exchanges invoices coming to the banks and matches them at a transaction level. This helps optimize trading and eliminates overcharging, ensuring accurate verification processes instantly,” says Chambadal.

"SmartStream’s post-trade processing solutions and its Unique Data Management Services creates a real-time and pre-emptive approach to decreasing trade failures"

Being a power-suite of straight through processing, the firm’s TLM is a trademarked approach to solving operational process challenges by understanding the end-to-end transaction flow—starting from trade inception to complete settlement. SmartStream’s innovation and investment in latest technology enables customers to build scalable, flexible processes that bring real-time visibility and control into operations. Facilitating processes through a rules-based escalation, TLM solutions offer core capabilities and protect clients’ investments, while solving complex processing requirements across the back office. The single architecture also enables ease of deployment, lowers IT costs, and ease of data reporting across all solutions.

For instance, a customer required all of their financial models to be properly governed and controlled within a short span. “Using our on-premise solutions, we checked all the trade breaks and payment breaks in order to improve efficiency. Through our mutualization and utility model, the client benefited with cost reduction, and better regulatory compliance. Our engine captured the flow of payments and trades, and then streamlined the processes,” recollects Chambadal.

En Route to Solving ‘Real-World’ Challenges

By bringing automation and control to post-trade operations, SmartStream’s cutting edge solutions are a reflection of Chambadal’s immense experience in the IT industry. With a strong investor behind them, Chambadal affirms that the company has an immeasurable role to play in the externalization trend of the capital market post-trade operations.

Further, for Chambadal, the future rests on staying ahead of the competition by helping customers achieve their goals and solving real-world challenges by offering unconventional solutions. Striving to be a trusted partner, SmartStream is en route to lower costs per trade, enable full regulatory compliance and improve operational risk control.

SmartStream Technologies

New York City, NY

Philippe Chambadal, CEO

A provider of Transaction Life Cycle Management solutions and Managed Services to improve back office operations of financial institutions

SmartStream Technologies