Straight-Through Processing To Kick Off Today

Straight-through processing (STP), albeit in a limited way, will be starting in the Indian stocks markets tomorrow (December 2) paving the way for seamless trading connecting all market participants at a future date.

At the moment STP will be introduced connecting fund managers and institutions with brokers and custodians which will provide connectivity for the pre-settlement process.

Currently at each stage of the process a lot of confirmation and instructions is done over the phone which makes the entire process liable to errors and delay.

For instance when an investor (fund manager or institutional investor) punches in a trade instruction to a broker, the later executes the trade and then relays the trade confirmation received from the exchange to the investor manually. Even the settlement instruction between the investor and global custodian takes place manually.

 

The custodians also do data entry of every single contract note which increases the work, delays the process while the chances of committing errors at the time of data entry is always present.

The status updates and the contract notes between the local custodian and the broker is also manual.

With STP, the entire trade instructions and confirmation, between the investor (fund manager and institution) and broker, investor and custodian and broker custodian will be done seamlessly through STP so that the transactions punched in by the investor just goes through to the exchange without any intervention by the broker and return confirmation from the exchange also goes through to the investor and the custodians without manual intervention. In short, the information generated at one end goes through the entire cycle without any interference at any point.

This seamless connectivity will now been restricted to the receipt of digital contract notes since in order to gain seamless connectivity right up to receipt of securities and funds flow, it would require electronics funds transfer.

All the participants will be using a common messaging backbone using ISO 15022 standards. At present there are four vendors who are offering their services for STP - Financial Technologies (STP-Gate), NSDL (STEADY), Omgeo( which is a joint venture between Depository Trust Clearing Corporation and Thomson Financial) and NSE.IT, a subsidiary of the National Stock Exchange.