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Mandatory Standards Committee: Monitoring and mediation are key

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By Bruce Striegler

"It is CCMA's priority to promote straight-through processing (STP) initiatives among Canadian capital market participants," says Jerry Beniuk, chair of the CCMA retail trade processing working group. "Although we have accomplished significant progress in achieving our milestones, we have yet to determine exactly where we stand as an industry."

Industry-wide STP means seamlessly passing financial information electronically, on a system-to-system basis, to all parties in the end-to-end securities transaction chain without manual handling or redundant processing. STP became the focus of the Canadian securities industry when the U.S. Securities Industry Association announced plans to postpone implementing T+1, or one-day settlement.

CCMA released a white paper on STP in September 2003 that included milestones for implementation. "Achieving industry-wide affirmation of T+1 for 80 per cent of domestic transactions may have fallen behind," says Beniuk. "There are no measuring entities that can help us determine whether we are meeting that goal."

Beniuk says that FundSERV is the best measuring body the industry has, and the recent addition of Carol De Veau as vice president of business development is a welcome move. Her mandate is to address automation and look for ways to improve industry performance. "FundSERV has already contributed significantly to automation. Now the work is identifying what else can be done. This is being taken quite seriously."

The retail trade processing working group has met with FundSERV numerous times with regard to electronic standards. "They have committed through the standards steering committee to review all proposals brought to them and put them on the agenda after appropriate cost/benefit analysis has been done," says Beniuk. He adds that the release of XML Order Entry in 2004 will be the dominant initiative but sees further emphasis on automation to achieve STP in the 2004-2005 timeframe.

Standards and best practices — a first step

CCMA committees and specifically the retail trade processing working group have enlisted content and comments from all aspects of the industry. "We will soon issue our best practices document," says Beniuk. "However, the adoption of best practices is at best an adoption by its individual members. FundSERV's role includes supporting best practices for its customers; however, it has never been FundSERV's role to establish and enforce industry best practices as a whole."

FundSERV recently conducted a survey that showed automation of transactions at 74 per cent. "That's a combination of purchase redemptions, switches and transfers, representing seven of the larger FundSERV customers, with rates varying across the group." He says that FundSERV is working to replicate that calculation for all its members. "As expected, the most proficient STP clients are the largest, who have seen the benefits of producing their work in an electronic way." FundSERV is committed to improving automation rates for all of its customers, so the work planned for 2004 and 2005 will be crucial to the STP efforts within the Canadian industry.

"STP is clearly a better 'mousetrap' and all we can do is hope that it is adopted by all," says Beniuk. "As more people and companies become proficient with XML as the ESG standard, those firms will have the ability to be online and will be able to implement straight through processing."

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