A decade after the worst financial collapse since the Great Depression and eight years following the passage of Dodd-Frank, financial institutions still struggle to maximize profitability in the evolving regulatory landscape. New compliance requirements designed to protect consumers have had the negative effect of greatly diminishing revenue from trading activities.
Dodd-Frank regulations also had the effect of limiting existing sources of liquidity. In the absence of older trading mechanisms, technology-enabled securities such as exchange-traded funds (ETFs) have flourished and provide banks and hedge funds with new sources of liquidity. At the same time, technological advances and specialization within the banking industry have unwittingly caused different asset classes to silo-off from one another. Both in terms of communication and data collection, the banking professionals and the software they use are increasingly distinct from one another, and different departments within the same institution may rarely have the opportunity to share intelligence or otherwise contribute to each other’s success.
To combat the negative effects of these trends, financial firms are turning their attention to trade expense management platforms. These platforms provide a set of services that can centralize expense management, keep invoices and cost allocation tasks organized, help analysts get the most out of their use of tech-enabled expense management mechanisms, and break down barriers between asset classes. Here, now, is a look into the impact of the current financial climate on trade expense management practices.
Trade Expense Management and the Current Financial Climate
Although measurable progress has been made since the implementation of the Dodd-Frank Act began in 2010 and Markets in Financial Instruments Directive II (MiFID) regulations became active in 2014, financial institutions at different ends of the banking spectrum continue to feel the hurt from the 2008 global financial crisis. The subpar recovery coupled with a reduction in lending still influences decision making at major financial institutions.
As of 2017, approximately 70 percent of the more than 400 provisions outlined in the Dodd-Frank bill had been put into motion. The remaining 28 percent of its regulations will have to overcome legal opposition and bureaucratic complexities to be fully put into place. In 2018 and beyond, financial institutions will need to continue to be light on their feet in anticipation of the possible ripple effect from the remaining portions of the 2010 law. Experts are still working hard to map the changing regulatory environment and devise new sources of liquidity to supplement revenue streams that went dark after the new regulations came into being.
At the same time as the regulatory environment was changing, financial technologies continued to evolve at a rapid pace. Advances in software and artificial intelligence had the dual effect of making teams of traders more efficient but also more isolated thanks to greater specialization. Subdivisions between asset classes took shape throughout the financial world and created, as one expert says, “more data discrepancies across operations, investment, and distribution.” The goal of investment teams has transitioned from simply beating projections to reducing the amount of fragmentation in the marketplace. Greater fragmentation not only increases the complexity of trading but also makes the execution of trades more expensive and less transparent.
In the wake of these shifts, advanced trade expense management platforms have emerged to take some of the burden off analysts and business intelligence teams. MDSL’s Transaction Reconciliation Reporting (TRR) mechanism is one such platform designed to manage trading costs, invoices, and payment allocation in a user-friendly digital interface. Let us take a closer look at the five key benefits financial institutions gain when they use this type of trade expense management tool.
The Benefits of Your Trade Expense Management Platform
Using any of today’s future-forward trade expense management platforms, financial institutions can automate cumbersome processes and gain a comprehensive understanding of multiple asset classes to make well-informed decisions. MDSL’s TRR platform goes one step further, utilizing a calculation engine to predict invoice amounts for trades and vendors. By doing so, it combines two critical functions of both identifying invoice details and performing the analysis necessary to predict discrepancies and present them to the vendor before they can affect trading outcomes.
Each transaction and asset class is easily tracked, reconciled, and managed on MDSL’s award-winning Smart Dashboard interface.
Here are the five key benefits that using such an advanced system offers:
- Your trade expense management experience should allow you to track and manage each transaction and sort relevant records by vendor, location, asset class, individual traders, relationship, or function. Having all of this data under one roof gives teams the control necessary to achieve the greatest amount of profitability possible from their trading activities.
- Reconciliation of all vendor invoices should be a top priority for teams looking to maximize their profitability. MDSL’s TRR platform enables analysts an end-to-end understanding of each invoice, checking agreed-upon rates against actual costs.
- Each client connection is tracked and made visible throughout the transaction process, providing management teams with accurate and detailed information.
- Reconcile order management systems, execution management systems, and telecom spend, measuring access privileges against usage data for individual or groups of services. Your trade expense management system also allows teams to allocate costs with accuracy across business verticals, locations, and trading desks. The precision of each engagement on the platform enables financial firms to identify important opportunities for cost savings.
- Cost Avoidance. Get the most out of your resources and reduce wasted spend by identifying unused exchanges, trading platforms, and carriers.
Improve Your Trade Expense Management Experience
Automation of key aspects of the reconciliation process is making the laborious task of manually comparing invoices a thing of the past. Studies estimate that teams are saving up to 80 percent of their time by switching from manual to automated TRR systems. But finding the right TRR solution is an important step to getting the most out of new trends and making your business run more efficiently.
MDSL’s Transaction Reconciliation Reporting solution streamlines each stage in the reconciliation, trade management, and reporting processes from cost allocation and vendor verification to client deactivation and contract management.
To put your financial firm on the path to efficiency and cost savings, contact us today for a free demonstration of Transaction Reconciliation Reporting and MDSL’s Smart Dashboard