SDA of trades key in creating efficient marketplace
26 June 2008

Written by Sophie Baker

Automation of the trade verification process improves settlement performance for securities firms in Europe and reduces operational costs and risks, with benefits to end-investors, according to research by Oxera and Omgeo.

Independent economics consultancy Oxera and Omgeo, the global standard for post-trade efficiency, conducted the report which cites automated Same Day Affirmation (SDA) of trade as key to decreasing trade failures, operational cost and risk. The failure rates can be as much as 50 per cent lower than for non-automated clients, and that automation enables a larger volume of trades to be processed without a corresponding increase in costs and risk. This allows firms to maintain the same level of staffing in the middle office irrespective of trade volumes.

The report also shows that market-wide adoption of SDA would lead to increased risk reduction and cost efficiencies. The report concluded that trade verification and SDA, and how to improve this process towards automated SDA, should form part of European policy debate.

Simon Haggerty, managing director of UBS, commented: “Same day affirmation is arguably the single most important initiative to progress cross border securities’’ productivity and risk management.”

Managing consultant at Oxera, Dr Leonie Bell, said: “The trade verification process is still conducted manually by many market participants in Europe, in particular on the buy-side, and there is currently no uniform practice and often not even a target to complete the process and affirm trades on trade day.”