Once a darling of the industry that brought people to conferences in droves, the concept of STP became tired when T+1 was shelved in 2002. But now, some industry observers say, as financial institutions once again fill their coffers with profits, STP is back. Still, that depends on to whom you talk.
John Panchery, Securities Industry Association STP project manager and vice president and managing director of systems and technology, says that as far as the SIA is concerned, STP never went away. "Being so close to it, I have never seen where we have lost momentum," he says.
When it comes to the Street, however, he says that the removal of the deadline for a move to T+1 definitely had an effect.
"Any time that you are doing something without a deadline, other things will come up that have to be done yesterday, and all of a sudden, resources get diverted from a 'nice to have,'" he says.
Instead, issues like compliance -- in the wake of so many corporate scandals -- have the attention of CEOs throughout the industry. "Other topics have been introduced that are a day-to-day drain on resources that duel for budget dollars," Panchery says.
Some insiders say the concept of STP is still relevant and popular, though it is being expressed through other, less hackneyed monikers. "I think the problem is the term," says Damon Kovelsky, senior analyst, capital markets, with Financial Insights. "People still think that STP and T+1 are the same thing, and too many people get them confused."
Kovelsky agrees that compliance is the new buzzword that gets attention in a sales meeting, and vendors understand that. "You can quantify compliance," says Kovelsky. "With STP, it's much more difficult to compare two firms, and the reputational risk is minimal, as long as you are keeping your clients happy, so in that way it is very much a discretionary spend."
Tim Lind, a senior analyst with TowerGroup, says that investment in STP-like projects -- such as integration between order-management and accounting systems or linking those applications with settlement systems -- has been consistent. "What changes is the justification and rationale, or the sales pitch, for those changes," he says.
Lind notes that first it was Y2K that justified writing a big check, then T+1 and now compliance -- especially with Sarbanes-Oxley requiring CEOs and CFOs to personally put their signatures on their company's financial reports. "From mid-2002 to 2003, we didn't have a good catchphrase. Thank God for corporate malfeasance," Lind jokes.
Matt Beinfang, also a senior analyst with TowerGroup, explains that vendors have refined their sales pitch to reflect the marketplace's new realities. "They now lead with compliance, and the by-product is STP," he says.
"STP is the derivative, not the driver," Lind agrees. By implementing different compliance solutions, he adds, firms also gain higher rates of STP.
Beinfang says, for example, that often compliance solutions require analysis of the firm's security master, along with checking transactions against customer profiles, both of which move a firm toward automation. So vendors, in response, are positioning their offerings in that light, moving away from the term STP almost entirely.
In fact, only 10 out of the 66 vendors classifying themselves under the operations heading on the SIA's exhibitors' Web page used the term STP or straight-through processing when describing their solutions and the problems they solve.
Bruce Schachne, vice president of business development with Cicada, says that no one is interested in hearing the term STP. "I don't use STP as a buzzword to get attention," he says. Where he would have positioned Cicada's security-master solutions under the STP heading in the past, Schachne says that now he gets more interest when positioning it under the compliance banner.
"It used to be difficult to get the attention of senior management when talking about middleware, but with compliance issues, it's different," TowerGroup's Lind asserts. "With compliance issues, they know they can go to jail or get fined seven or eight figures."