SmartStream: Solutions Architectured to Retool Trade Environments

Sitting comfortably in his reading room, Richard Bemindt carefully reads every word of the ground breaking new book ‘Journal of the American Revolution’ that debunks myths, addresses unanswered questions in remarkable style. It reminds him of how SmartStream has evolved over the years just like the independent nation which was formed after the revolution. Leafing through the pages he could feel an acute connection between the turbulent moments of the 1780’s and the present day upheaval in capital markets. The evolving regulatory landscape, the shifting of market structure from the traditional trading to leaner electronic platforms, and rising globalization opportunities now requires software vendors to continuously evaluate their business strategy and produce cutting-edge solutions.

SmartStream, a vanguard in trade reconciliation, withstands the capital markets revolution by consistently innovating and meeting pre- and post-trade reconciliation requirements in the industry.

Reconciliation, the internal audit processes performed after core trading activities in the trade lifecycle, has long been a key component in the capital markets. The heightened focus on risk in today’s operating environment has only served to increase the relevance and importance of trade reconciliation. Consequently, financial institutions have started to evaluate platforms delivering a range of value-added services beyond core trade reconciliation services, as a measure to centralize and standardize the whole process. Companies, smart enough to offer state-of-the-art reconciliation engines are in great demand and as such SmartStream’s Transaction Lifecycle Management (TLM) Reconciliations Premium, delivered as-a-service or on premises, has fascinated clients with its market leading match rates of more than 95 percent, compared to the industry average of approximately 84 percent. The platform is fabricated with complex asset types and juristic capabilities and allows multi-way matching. It is a trademarked approach of SmartStream to solve operational processing challenges by understanding the end-to-end transaction flow—from trade inception to settlement.

When Northern Trust, provider of asset management, banking, asset servicing and fund administration solutions, decided to implement a transaction based reconciliation methodology, high on their agenda was ensuring that the solution would create an environment for continuous process and operational improvement. SmartStream’s TLM Reconciliation enabled Northern’s managers to monitor their operational processes and quickly implement ideas whenever they saw an opportunity for improvement. This process contributed to better Straight Through Processing rates resulting in ‘same-day’ settlements and hence better service levels for Northern’s customers. The solution has facilitated the monitoring of entire process flows through rules-based escalation.
The result was a decline in the number of exceptions assigned to internal processing groups as TLM’s integrated workflow allows exceptions to be passed straight through to the departments responsible for investigating and resolving them.

The Leap Ahead

Anchoring itself to the reconciliation zone in today’s complex capital markets environment, SmartStream has evolved from a dedicated focus on reconciliations to become a provider of software solutions that bring automation and control to post-trade operations. Adding to its fervor is Bemindt’s more than two decades of extensive experience in the IT industry that further facilitated the ground work for developing SmartStream’s reference data utility that is the lifeline of trade processing. It is no more a mystery that quality reference data that covers all relevant particulars for complex transactions with multiple dependencies, entities, and contingencies, makes way for rapid, error-free completion of financial transactions. Researches show that 30-50 percent of trade breaks/failures occur due to misaligned reference data which in turn leads to spending ten times the cost of cleansing reference data. While most players in the industry believe that the best way to get accurate data is to compare two different sources, SmartStream goes by re-computation of data. Its relational data model maps all the reference data from different parts of the transactional lifecycle and normalizes it to a consistent standard through a cleansing engine that uses more than 250,000 business rules and gives an impressive 99.5 percent accurate data compared to an industry standard of 80-84 percent.

One Stop Shop

With financial organizations under increasing pressure to cut costs improve efficiencies and increase effectiveness, there is a drive towards a single point of efficacy as opposed to multiple operations, in the back office, where one team can manage the entire back office function. Underinvestment in the middle and back-office automation by organizations has magnified inefficiencies in the form of increasing transaction complexity, data management and fluctuating volumes and therefore the need for a solution that is automated and embraces all other components is paramount. The pressing requirement on software vendors today, is to replace manually intensive processing and loosely coupled systems with automated workflows that will provide enhanced risk management and control of back office costs.

Paving the trail to alter the way the back-office works, SmartStream has been streamlining and automating the event processing through its software solutions. The company has rolled out its next generation solutions, based on its platform 4.0 technology, which provides an event driven substrate that allows publishing and consuming events in real time. The platform is built in a way to naturally integrate with other components and today SmartStream has already plugged-in its reconciliation engine, corporate actions processing, and cash management solution into the platform.
Financial institutions are now saved from the headache of moving data between reconciliation platform, middle office, cash management and all other solutions as once data is loaded into the platform, it is sharable across all solutions plugged into the platform. Moreover, the platform has inherent auditing, enabling views of how the data and states have changed through the transaction life-cycle. “We understand what it takes to move trades and transactions through the middle and back-office and the need to automate this process. We therefore have become an enabler of ‘the virtual back office in a box’,”says Bemindt.

We understand what it takes to move trades and transactions through the middle and back-office and the need to automate this process. We therefore have become an enabler of ‘the virtual back office in a box’.

Big Meetings, Bigger Innovations

Heading the R&D and IT departments in SmartStream, the fact has not skipped Bemindt that to ensure continuous improvement of its solution components, a firm needs to invest in its R&D department. The investment at times could be as high as 25 percent of annual revenue as exemplified by SmartStream. The vast majority of this company’s employee count comes from the team exploring science and technology and is spread over different development centers in India, Austria, England and New York. To foster a sense of innovation, experimentation and collaboration, Bemindt chairs a ‘Big Meeting’ every Tuesday that has become a ritual at the R&D centers of SmartStream. Remaining “hands-on”, Bemindt also personally meets weekly with each of the solution architects to discuss design, performance and integration. An inspiring outcome of such meetings would be the recent release of TLM SmartRecs, which allows for the loading and delivery of documented reconciliation results. It is a smarter way of on-boarding a company’s reconciliations as it sits on the front-end of recon capabilities. It enables users to onboard new recons faster, while keeping the power of the matching engine unencumbered.

Offering unparalleled visibility, control and accuracy to the modern trade processing environment while automating what was an inherently flawed, manually intensive process, reflects the type of dedication SmartStream brings with its software deliverables. It is this zeal that keeps the company at the forefront and helps it win accolades throughout the industry.


Solutions Architectured To Retool Trade Environments