Large banks which spend between US$6 billion and $9 billion processing standardised trades each year, and could reduce those costs by up to 40 percent by adopting a “utility” model, according to a new study by Broadridge Financial Solutions.
The study says that by sharing in a range of trade processing functions – from core post-trade processing, reference data and reconciliations to trade expense management, corporate actions, and tax and regulatory reporting – in a utility model, the industry could save up to $4 billion annually.
The report, Charting a Path to a Post-Trade Utility, addresses the ongoing regulatory pressures and economic challenges that weigh on banks’ profitability. “Despite significant cost cutting and restructuring post-crisis, most banks still struggle to post returns that exceed their cost of capital,” said Tim Gokey, Broadridge chief operating officer and co-author of the report.
“Over the next five years, regulatory pressures are set to grow, so banks are increasingly looking to new and unconventional ways to regain efficiencies, particularly within the trade lifecycle. Emerging utility models hold significant promise.”
