Straight-through processing has been marketed as the ultimate solution for years but there is little record of its successful implementation.

Vendors to the investment and capital markets have been pushing the idea of straight-through processing (STP) for many years. The idea is that a trade can be processed from indication of interest through to settlement without any human involvement. So I find it amusing that, after hearing about STP since the mid-1990s, there are still few, if any, examples of true STP implementations in existence. Why is this?

Personally, I believe it is because STP is similar to BPR (business process re-engineering), TQM (total quality management) and CRM (customer relationship management). All of these concepts are good in theory, but they just do not work in practice. They are pushed as utopian paradises by vendors and consultants – because it makes money – and yet successful projects that deliver the promised benefits are few and far between.

The reason is that the only way to realise these dreams is to completely decimate the existing organisational structure. All of these programmes require a complete enterprise re-structuring. In the case of BPR and CRM, the mandate is to restructure around the customer. In the case of STP, the requirement is to restructure around the trade cycle. The result is that the only way these programmes can work is if you throw away the existing silos and power bases; you blast the ingrained organisational culture and approach; you sack half of the staff and management. In other words, you start afresh. Now, who in their right mind is going to do that?

For example, to make STP work, the first implication is that bonds, FX, equities, derivatives and all other trading operations are merged into a seamless operation around the trade cycle. The second is that there is a single integrated technology that can replace all of the existing technology infrastructure. And third, that everyone will be happy with the idea that trading desks, settlement operations, compliance operations and all other departments are wiped out.

The only way to truly realise the benefits of STP is to get turkeys to vote for Christmas or, in other words, to get your staff and management to vote to have their position eradicated.

The bottom line? STP is a great idea in theory and can potentially deliver substantial results for new operations or CEOs who are willing to throw their organisations into total turmoil. Alternatively, STP really stands for Savvy Technology People Selling Total Paradises Successfully To Punters. Long live the dream.

Chris Skinner is founder of Shaping Tomorrow and chief executive of Balatro Ltd. Find out more at www.ShapingTomorrow.com or e-mail Chris at chris.skinner@shapingtomorrow.com

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