Margin compression, the drive for cost reduction and increasing regulatory pressures are forcing banks to seek ways to reduce trade execution expenses and gain transparency, according to a paper by Broadridge.
The capital markets industry viewpoint whitepaper, titled “Key Challenges and Best Practices in Trade Expense Management”, found that the most sophisticated banks have moved toward a more centralised management of their expenses across business units and asset classes.
This has allowed them to gain a more holistic view of their trade operations and promote greater efficiency in order to provide accurate data-driven insights to lower costs, negotiate favourable vendor agreements and better allocate and forecast expenses to create more accurate profit and loss reports and budgets.
While almost all those surveyed for the paper agreed on the need for a more centralised and automated approach, very few banks have achieved it due to the challenges of creating a core utility linking various business functions and locations, as well as the need for invoice transparency, data and fee accuracy and regulatory compliance.
Terence Faherty, head of product strategy for Broadridge’s revenue and expense management solutions, commented: “There is a compelling business need and bottom line impact for banks to assess their current trade expense management practices.”
“Many of the challenges the industry faces around fee schedules are not new; however, there are increased complexities and regulatory pressures. We expect these trends to continue and will result in the need for an automated and centralised expense management utility that can provide a more holistic and data-driven view of the organisation.”
“This approach will allow for improved accuracy and transparency that can drive greater efficiencies and cost reductions.”
