Straight-Thought Processing Adoption

Abstract

Free trading has been instrumental in the enormous growth of the number and volume of cross-border trading transactions across all industries. In 2000, volume at the National Securities Clearing Corporation (NSCC) reached 18.1 million securities transactions, with actual daily share volumes regularly exceeding 5 billion shares in major financial markets (Depository Trust and Clearing Corporation [DTCC], 2000). Securities trading starts with either an individual or a business institution expressing desire to purchase securities. While the process is deceptively simple, approximately $1.8 trillion of securities trades remain unsettled and outstanding every business day (David & Kumar, 2000), which poses significant risks to all participants and players in the securities trading cycle. A shorter settlement cycle is seen as an approach to reduce both nonpayment and nondelivery risks to all stakeholders in the trading cycle (Toppen, Smits, & Ribbers, 1998). Compressing settlement cycles needs the redesign and management of securities business processes with significant IT support and involvement. Recent advances in information technology provide ample opportunities for various stakeholders to communicate seamlessly through electronic communication networks (ECNs), enabling both speedier and richer information exchange (Dale, 1996; Venkataraman & Zaheer, 1990). Currently, settlement times largely vary between 2 and 5 days. Constant push from governmental regulatory bodies is expected to reduce this to 1 or less than 1 day, popularly known as T+1/T+0 settlement times (Freund, 1991; Group of Thirty, 1993). While it is possible to achieve straight-through processing (STP) without targeting for T+1/T+0, it is almost impossible to attain T+1/T+0 without STP (Leman, 2003). There is a dearth of empirical research with emphasis on financial securities operations. This article attempts to address an existing void in this area. The first part of this article examines current securities trading operations and STP, and discusses the business drivers of STP. The second part of the article elaborates the factors influencing the adoption of STP by various participants. Finally, the article discusses areas that are amenable to future exploration and empirical research with the aim of ultimately increasing the adoption of STP globally