New Electronic Settlement Network Aims to Lower Post Trade Costs

A pay-as-you-go post trade processing utility for capital markets that promises to lower costs for tier two and three financial institutions players has been launched by Wall Street Systems.

The utility, called the Electronic Settlement Network (ESN), aims to level the playing field between the top tier-1 banks that can "pump so much volume through their systems that it reduces the cost per transaction," and smaller banks that don't have the volume of transactions to support a complex and expensive post trade processing infrastructure, says Tony white, managing director at Wall Street Systems. Depending on the volume of transactions an institution sends through ESN, the costs could be lowered from an industry average of $25 per transaction to less than $1, according to White.

ESN is focusing on processing "plain vanilla types of assets that everyone understands and knows how to price," White adds. "We are not talking about processing structured products." ESN will process FX cash, FX derivatives, money markets, vanilla interest rate derivatives as well as listed futures and options. The utility's services span the entire post trade lifecycle including position management, P&L, deal confirmation, settlement, credit exposure, cash management, scenario and risk analysis, accounting, reconciliation, overall workflow and reporting.

"Wall street is switching back to products that everyone understands, but the problem is that is that they are low margin, so the banks need to reduce costs," White contends. "Cash is king at the moment. Institutions need to align their trade processing so they can take advantage of it. [ESN] will allow people to respond to some of the cost pressures." 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