Investment Operations

Roadblocks to Straight Through Processing

Buyside Operations

Straight Through Processing (STP) is a process in financial markets where a transaction can be executed electronically from start to finish without the need for manual intervention or rekeying of data. While STP has been in use in many parts of the financial industry for several years, the US markets have been slower to adopt it. There are several roadblocks that have prevented the US markets from achieving STP, including:

  1. Lack of standardization: The US markets are highly fragmented, with a large number of market participants and different types of financial instruments. This fragmentation has made it difficult to establish uniform standards for trade processing, settlement, and data exchange, which are necessary for STP.
  2. Legacy systems: Many financial institutions in the US have outdated legacy systems that are not compatible with modern STP solutions. Replacing these systems can be costly and time-consuming, and many firms have been reluctant to make the necessary investment.
  3. Regulatory barriers: The regulatory environment in the US is complex, and different regulators have different requirements for trade processing and settlement. This has created a patchwork of rules and regulations that make it difficult to establish a uniform STP system.
  4. Operational risk: The adoption of STP requires a high degree of automation, which can increase the risk of operational errors if not properly implemented. This risk has made some firms cautious about fully embracing STP.
  5. Resistance to change: Finally, there has been resistance to change from some market participants who are comfortable with the current system and reluctant to adopt new technologies or processes.

Overall, achieving STP in the US markets will require a concerted effort by market participants, regulators, and technology providers to overcome these roadblocks. Standardization of processes and data exchange, modernization of legacy systems, and cooperation between different regulators will all be necessary to create a more efficient and streamlined market infrastructure that can support STP. While there may be some challenges in the short term, the benefits of STP, such as increased efficiency, reduced costs, and lower operational risk, make it a goal worth pursuing.