Straight through Processing Technology in Global Financial Market: Readiness Assessment and Implementation

With rising trading volumes in domestic and cross-border security transactions, risks faced by global financial firms and markets are increasing. To manage settlement risks and maintain competitiveness in global financial markets, the U.S. Security and Exchange Commission (SEC) has decided to shorten the settlement cycle of security transactions from the current T+3 to T+1. As a result, key players in financial markets will need to develop capabilities to cope with challenges arising from this impending change. One initiative for addressing the issue is referred to in the securities industry as Straight Through Processing (STP). STP provides a nonstop flow of information from trade execution to settlement. It is to be used for cross-border trades to speed up settlement, reduce risk, and facilitate the move toward T+1. This paper presents a general model of security trading processes under the umbrella of STP, and proposes a framework of STP readiness assessment from a global perspective of electronic business, which can be used to guide the STP implementation in organizations.