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Asset Management

03:41 PM
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The Price of STP

At Wall Street & Technology's Straight-Through-Processing Conference, T. Rowe Price's Doren Jacobs explains his firm's path to trade-processing nirvana.

After trying to plug T. Rowe Price's STP gaps one by one, Doren Jacobs realized it was time to step back and develop his firm's integration plans with a more strategic approach.

Jacobs, vice president of T. Rowe Price Investment Technologies, says a number of important questions could then be addressed, such as: "Were we duplicating efforts? Could a single system be used for more than one function? People had good ideas, but we really hadn't looked at integration end-to-end, so we decided to do that at the end of 2002."

T. Rowe, like many other financial institutions, is a best-of-breed shop. That means the firm purchases most of its applications from the vendor offering the strongest system in any one area. While having obvious benefits, this approach's main drawback is the extensive integration required for disparate systems to communicate.

To facilitate inter-application communication, Jacobs says T. Rowe decided to migrate to a message-based IT architecture that could insulate the firm from external changes such as protocol upgrades.

The objective, says Jacobs, was to develop an architecture blueprint that would take into consideration each unit's state of STP, the technologies that could solve outstanding business issues like corporate actions, and external industry drivers and milestones T. Rowe had to keep in step with.

To help understand the external influences on its internal development, T. Rowe hired financial-technology-consultancy Capco. "They really did help us document the current state of the industry and layout a timeline," says Jacobs.

The GSTPA debacle, in which industry players lost over 90 million euros on the failed matching utility, enforced the notion that it's critical to understand the impact of industry initiatives on internal business. "We don't want to be first, but we don't want to be last," he says. "The GSTPA is a great example of why you shouldn't move too quickly."

As part of its STP vision, T. Rowe wanted to develop as much standardization across its business units, both according to asset class and geographical location (Baltimore, Hong Kong, London), as possible.

The firm also wanted to reduce the number of systems it maintained without losing the functionality. For example, Jacobs says T. Rowe maintains a separate trading system for mortgage-backed securities (ADP) because its main fixed-income system (Charles River Development) "didn't support the mortgage desk well."

Though some in the industry say STP is dead in an era where ROI is everything, Jacobs counters it's all about ROI. "The value of the STP work is really in the benefits that we are giving the front office - more timely and accurate information on things like corporate actions which they can integrate with their trading actions. They can then understand the impact of various entitlements on trading," he says. "We think those things are truly going to be the benefits of STP."

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