Citi, UBS create game-changing post-trade solution

When UBS and Citi united their capabilities in the post-trade space, the two global firms turned traditional securities post-trade processing on its head with the creation of Post-Trade Plus.

An industry first, this comprehensive solution offers middle-office, clearing and settlement services and removes the need for brokers to maintain a post-trade infrastructure.

Quick to identify the common obstacles brokers are facing in their traditional trading business across Asia, UBS and Citi came together to conceive an offering that addresses the evolving needs of brokers in the region. That is, to create a post-trade solution that enables brokers to outsource non-core middle- and back-office functions.

Global firms looking to tap into Asian markets and regional firms exploring prospects beyond their home markets need a more efficient method to expand into and within the region.

The diverse regulatory environment and fragmented post-trade requirements in each market hinder brokers from building infrastructure that is scalable to support their needs.

Coupled with high direct investment costs that are fixed against variable volumes, it is becoming harder to sustain a competitive business through volatile economic cycles, particularly amidst increasing capital costs and expectations of higher returns.

“Some elements of post-trade functions are very commoditised, where you can no longer claim any competitive advantage against your peers even if you perform them well, with only downside for doing them badly,” says Andrew Murfin, Asia Pacific head of group operations for UBS.

“We believe that a commoditised product needs streamlined, utility-type solutions, otherwise it’s hard to survive in today’s market environment.”

Combining competencies

As the industry emerged from the global financial crisis in 2009, broker-dealers began to look at outsourcing operational functions that would allow them to focus on their core broking business. This served as a springboard for the development of Post-Trade Plus.

Industry-wide challenges led the two banking giants into a strategic discussion to explore the opportunity to leverage their respective capabilities in the middle- and back-office space, and optimise and create additional capacity within UBS’ Asia operating model.

These discussions resulted in the creation of Post-Trade Plus as an end-to-end, open-architecture middle- and back-office solution and UBS taking the bold decision to move its market-side clearing and settlement activity in Singapore to Citi in 2012. This is part of its own optimisation strategy looking at how to increase leverage of service providers in the industry.

Under the Post-Trade Plus service model, UBS performs all middle-office functions (including allocation processing, trade configuration and reconciliation, confirmation generation, pre-trade matching, exceptions management and settlement instruction generation), while Citi provides securities clearing, settlement and custody services.

This post-trade offering addresses the challenges faced by brokers in Asiain continuing to invest and grow their businesses, while allowing firms to retain capacity and manage costs.

Post-Trade Plus enables US and European firms to expand into and across Asia, and allows Asian brokers to develop beyond their home markets quickly and without a large upfront investment.

“Post-Trade Plus is an enhanced and efficient operating model which combines the core competencies of UBS and Citi. This first-ever comprehensive solution for broker-dealers in Asia Pacific delivers an innovative and effective model that is built upon both entities’ unparalleled knowledge, extensive capabilities and broad network.” says David Russell, Citi’s Asia Pacific head of securities and fund services.

“We see this as a game-changing product for the industry, enabling broker dealers to focus on their core business and more tightly manage fixed costs associated with maintaining operational infrastructure,” he continued. Since the service went live last year, other international broker-dealers have echoed the same view – that there is little reason for firms to retain every step of the post-trade transaction lifecycle in-house.

Today, this service is offered on cash equities and fixed income securities across most major markets across the globe.