SWIFT is working with six of the world's major prime brokers to develop and operate a centralized pre-settlement matching platform to reduce the cost and risk of processing equity and fixed income trades originated by hedge funds globally. By matching a trade on trade date or T+1, the product will identify errors that could cause a settlement failure up to two days earlier than with today's current systems, drastically reducing risk for the brokers.
SWIFT was chosen to provide this platform following a competitive selection process, according to a press release from SWIFT.
The six brokers working together to pilot the product during Q4 2008 include: Citi, Credit Suisse, Goldman Sachs, Lehman Brothers and Merrill Lynch. SWIFT and the prime brokers are currently working together to encourage the wider community of brokers processing trades for hedge funds to take advantage of the new product. The trade-date matching product is based on SWIFT's established Accord central matching service and will use industry standard messaging.
Today, discrepancies between trade details submitted to prime brokers by hedge funds on one hand, and their executing brokers on the other, are a source of considerable operational risk. SWIFT's platform will improve the timeliness of pre-settlement matching of hedge fund trades between prime and executing brokers. Any errors likely to cause settlement fails will be identified sooner, reducing both risk and the cost of the manual processing required to fix breaks.
Gottfried Leibbrandt, head of markets at SWIFT, stated in a release: "We are delighted to have been chosen by this group of major prime brokers to provide a pre-settlement matching solution to the equity and fixed income markets, in addition to our existing FX matching capabilities." Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio