Scotia Capital speeds up straight-through processing

Scotiabank has migrated its foreign exchange operation’s IT system to a treasury engine that an executive said will improve its ability to seamlessly process trades electronically.

The firm said it converted Scotia Capital

dealing rooms in Toronto, Tokyo and London, along with regional sales centers in New York, Calgary and Montreal, onto a platform provided by British firm Wall Street Systems, based in London. The roll-out happened across four time zones in a single day following an initial pilot at the Scotia Capital’s U.S. funding operation in New York.

Scotia Capital managing director Garry Fredrickson said the migration, which replaced a patchwork of decades-old legacy systems, will allow the company to enhance straight-through processing (STP), a way of passing trades system-to-system to all parties in the transaction chain without human intervention.

“”This is front, middle and back (office systems), whereas we had separate front and separate back with spreadsheets in the middle,”” he said. “”This is one transparent system where it makes it very simple. The efficiency is vastly increased.””

Combining its trading, limit monitoring, static data and transaction processing systems should help Scotia Capital bring processing costs down considerably, Frederick said, because it will reduce the overhead needed to maintain multiple in-house and third-party systems.

Bob Smythe, a principal with Toronto-based consultant eClientscope, regularly helps financial institutions move to STP. He said few of them find it easy with an off-the-shelf offering.

“”I would say integration has been one of the primary challenges for most companies trying to do this,”” he said. “”In many cases they have had these systems in place for some time, and there’s usually on single product that can bring them all together.””

Scotia Capital had already centralized its operations by creating a global processing operations centre in Toronto, but Fredrickson said working with Wall Street offered another chance to review key processes. The company’s Technology Application Group, for example, helped develop payment interface security and cross-system fallback / disaster recovery applications with the Wall Street system that have since been been presented to Canadian Customs and Revenue for recognition under the Scientific Research and Experimental Development provisions of the Income Tax Act.

“”In a foreign exchange department like ours that’s been operating for decades and decades, you get into doing things in a certain way,”” he said. “”When you deal with an outside vendor, it gives you an opportunity to get comparisons to how other folks do it. There are certain things we changed.””

The Canadian Capital Markets Association, a non-profit organization aimed at making Canada’s capital market more competitive, is promoting STP as a way of reducing a transaction’s exposure to market fluctuations if stock prices move significantly. Smythe said many financial institutions are looking to third parties for assistance.

“”Just looking at the market, there used to be only about six vendors,”” he said. “”Now there’s 30. There are a lot of companies seeing an opportunity here.””

Wall Street Systems said it also customized its system as part of the Scotia Capital implementation to enhance free format confirmation matching, sales margin attribution and rules-based transaction routing.


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