The three things to future-proof listed derivatives reconciliations?

The post-trade industry is currently going through a momentous shake up. Listed derivatives reconciliations are being placed under the microscope to unlock their potential and free up resources. What are the key features to look out for?

Reconciliations have for years been seen as a necessary yet mundane part of the OTC and listed derivatives trade lifecycle. However, with huge increases in transaction volumes recently and greater regulatory expectations, reconciliations have emerged as the keystone in post-trade processing.

They play a critical role in understanding your organisation’s risk exposure and are more than just matching data and files. Reconciliations are now seen as a key means to preventing losses and ensuring that any reporting is truthful, timely and accurate. The right system can allow your organisation to be efficient, cost-effective, and agile.

A successful system allows an organisation to create a ‘golden source’ of data from which benchmarks can be created and strategic goals can be established. The benefits are clear to see yet there are still so many organisations using technology that is woefully inept. Our recent study showed that 81% of Tier 1 banks used spreadsheets as part of their core recs process. It begs the question, why are so many companies using technology that is dependent on manual processes and workarounds?

Choosing the correct reconciliations system will allow your organisation to unlock the value of your data and futureproof your processes and procedures. This article captures the three features needed to futureproof your listed derivatives recs platform:

  1. Automation

Automation is currently one of the biggest buzzwords in the post reconciliation industry. Manual processes, especially the uploading of data, can often result in time delays, human error, and file corruption. The more people involved in the process, the more opportunities for mistakes. Most of the manual processes instilled now often block new opportunities as they lack flexibility and are too rigorous to change.

If a system can only reconcile data if it is uploaded in a fixed format, then this will cause serious issues when new formats are introduced. To overcome this, organisations need to invest heavily in expensive new tools that can extract the relevant data and convert it into a format that can be read on their system.

Automation means that new data can be understood and uploaded without the need to convert it using expensive time-consuming processes. Ultimately, new formats cannot be blocked and there is minimal need for human intervention and the subsequent errors associated with it. The data can also be automatically ingested overnight and visible in the system first thing in the morning. It also retains the original information, perfect for auditing and compliance needs.


  1. Cloud-based

Cloud-based systems have been the buzzword for the past half-decade and the introduction of the pandemic fast-tracked digital transformation projects for many organisations. Using the cloud has allowed providers to eliminate the need for legacy systems and expensive hardware costs. This means no more annual upgrades as providers now instead prefer to utilise a Software-as-a-Service (SaaS) payment model. SaaS payment models are often half the price of on-premises deployment used by legacy system providers.

With it being web-based, teams can collaborate from all over the world as processes can be started in the east and picked up as global teams come online in the West. New users and any new products added to an exchange can also easily be uploaded through cloud delivery. SaaS solutions are also able to tap into the power of the cloud and a security-first approach can be used meaning users can’t change their own permissions and an audit trail is protected.


  1. Single click adjustments

The reconciliation software that you use, should allow you to overcome any problem that you face. This could be increasing data volumes or multiple breaks that need to be resolved. The focus of your team needs to be on the most important part, investigating and resolving breaks.

Single click adjustments allow you to make adjustments in real-time and track the status of any issues raised. These issues are often raised as tickets and are automatically assigned or escalated for resolution. The result is an issue is resolved promptly and managers can view a compliant audit trail to send to regulators.


The right solution is key to staying on top of industry trends and mitigating risk for your organisation. New technology though is constantly changing the way data is managed and acted upon. New features, regulatory requirements and infrastructures are constantly being introduced and need to be integrated to keep up with competitors.

Cloud implementation allows your team to work together around the world, automation allows you to deal with your data in a fast flexible manner and single-click adjustments mean any break can be resolved in minutes.

Rubiks cube

Our recent research report highlights some of the issues discussed above. The report commissioned by Kynetix and based on a survey and series of interviews with executives at over 60 sell-side firms, argues that through investment in technology, data normalisation or standardisation and automation, firms can navigate the ‘data jungle’ whilst achieving a new paradigm of risk reduction and efficiency.

In the report, we set out to benchmark approaches being taken by different parts of the industry, to understand the drivers for investment and get insights into how much automation is currently being deployed to mitigate risk versus sheer numbers of manual operators and processes in derivatives reconciliations.

The report is free to download and can be accessed here.