State Street Launches Latest Vision Report on Derivatives Servicing Market
March 02 2009 - 10:00AM
Business Wire
State Street Corporation (NYSE: STT), the world's leading
provider of financial services to institutional investors, today
released its sixth in a series of Vision Reports, this one focused
on derivatives servicing. State Street�s Vision Report Series is
intended to advance the understanding of key themes and trends
within the financial services industry.
�It is crucial that the sell-side community, the financial
services industry and regulators work together to develop new
approaches to processing and servicing these complex transactions,�
said Jay Hooley, president and chief operating officer of State
Street. �Our report frames the issues that are key to success, and
encourages discussion about the most effective ways to address
standardization and the adoption of industry best practices.�
This latest Vision paper contends that the volume of OTC trades
may prove a challenge for legacy technology systems. The technology
platforms used to process these trades were originally designed to
process traditional equity and fixed-rate transactions, but are now
handling non-traditonal trades as well.
�Growth in the derivatives space and the customization of many
products, raises questions about risk management and post-trade
administrative support for these transactions. The challenge lies
in capturing and recording all of the relevant features and terms
contained in a transaction,� said Neil Wright, senior vice
president and product manager for derivatives servicing at State
Street. �With increasing volumes and complexity, the range of
procedures to confirm, process and otherwise manage the trade
life-cycle of OTC derivatives needs to be automated. In addition,
providers will need to keep pace with the increasingly
sophisticated analytics needed for derivatives trades.�
In relation to the servicing and administration of derivative
trades, State Street�s report says that greater consistency of
information, a more streamlined flow of reporting, rigorous
statistical analysis, independent pricing and risk modelling, and
superior expertise and insight are needed to work effectively with
the data. All of these features require a significant investment in
infrastructure, technology and human capital.
Given the key role of third-party custodians and asset servicers
in supporting the derivatives market, State Street's report
highlights four best practices as benchmarks for post-trade
activity. These practices are: reliability, flexibility,
transparency and trained expertise. All four, taken together, are
important for meeting the challenges this market faces and for
maximizing the strengths that derivatives, when properly used and
managed, can offer.
The latest report reflects State Street's deep experience
servicing derivatives. In August of last year, State Street
announced the launch of its industry-leading over-the-counter (OTC)
derivatives servicing platform, the OTC Hub, which is currently in
production with PIMCO, a leading global asset manager and long-time
State Street customer.
State Street has published Vision Reports on topics including
the Asian bond markets, hedge fund servicing, the insurance
industry, global pensions and sovereign wealth funds. To obtain a
copy of this Vision Report on derivatives or for more information,
members of the press can contact publicrelations@statestreet.com.
All other requests can be directed to vision@statestreet.com.
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors,
including investment servicing, investment management and
investment research and trading. With $12 trillion in assets under
custody and $1.4 trillion in assets under management at December
31, 2008, State Street operates in 27 countries and more than 100
geographic markets worldwide. For more information, visit State
Street�s web site at www.statestreet.com.
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