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Reconciliation tips on speeding up casing, reviewing and resolving breaks


At first glance, it may seem that reconciliation is a fairly “settled” match- ing activity of trade, position, and cash transactions, and managers have developed processes that largely fulfill their day-to-day needs. With as many as 35 stand-alone or bundled reconciliation tools available for purchase that automate approximately 60-65% of the listed and 50% of OTC data flows, the landscape would seem stable and serene. Yet upon closer examination, the scene is far less settled, and this phenomenon is not the concern of just a few managers.

Manual chore heavy activities detract from the more intelligent reviewing and resolving functions that search for patterns in mismatched data. Additionally, as roles have become highly specialised within each product group, sharing workloads and integrating information amongst them is greatly diminished. Without integration, comprehensive reporting that is sufficiently vigorous to alert a manager to global mismatch patterns is almost impossible to achieve. Knowledge of these trends — combined with permanent improvements in system integration, data handling, and shared processing — allows for a highly efficient system.

A cacophony of systems

It make business sense to focus on maximising solutions that fulll operating essentials day-to-day, whether these are a manager’s or a provider’s. Often specific processes and systems are developed as solutions for each operating need. The result is a cacophony of systems that do not easily integrate with each other. One fund, for example, may prefer one order management system over the many other options because it streamlines execution of the bonds it trades frequently. Hence, with a wide range of asset classes and in the absence of standardisation across the cacophony of systems, breaks prevail. Managers require either an automated engine to transfer information from one system into a stream compatible with the next or they adapt to manual intervention, with its accompanying deleterious effects on efficiency.

Qualitative phases are underserved

Because the various tools available for reconciliation have difculty fullling the qualitative phases of reconciliation, these phases remain underserved2. Fifty percent of the survey respondents indicated limited automation capabilities, difculty in integrating complex instruments, and the inability to generate custom reports as continuing drawbacks.While each tool has merit has merit by providing all or a combination of position and cash reconciliation, few tools offer the ability to customize around rule building and mapping, and how output is defined. An integrated view, by contrast, focuses on the quantitative alignment of data and ensures that sources are synchronised It also includes a qualitative structure to analyse breaks and incorporates resources to work on improving the quality of the source information.

Data aggregation and mapping

In cases where the administrator provides break reports, there can be as many as 200 separate les to review that require comment. The more compartmentalised the data is, the more tedious this handling becomes. If a mismatched trade occurs across entities, for example, comments are needed in all les where it occurs before they are returned to the admin- istrator. In addition, patterns of breaks are overlooked when this manyles are handled manually. In an integrated reconciliation, breaks can be viewed using a simplied exception management process that provides a unied view of breaks across funds/brokers. This also aids in managing the exceptions in a much more robust manner.

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