1. www.niit-tech.com
NIIT Technologies White Paper
Performance Measurement and Exception
Management in Investment Processing
Performance Measurement and Exception
Management in Investment Processing
Vinit Sharma

2. Introduction
Straight-through Processing and its Challenges
Performance Management
Components of a System
Performance Reporting System
How does NIIT Technologies’ solution work?
Conclusion
NIIT Technologies Experience
References
About the Author
About NIIT Technologies
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CONTENTS

3. INVESTMENT
REVENUEREVENUE
INVESTMENT
INVESTMENT
INVESTMENT
FINANCE
FINANCE
FINANCE
FINAANCE
FINANCE
WEALTH
MARKET
MARKET
MATKET
CAPITAL
CAPITALCAPITAL
CARGO CAPITAL
ECONOMICS
ECONOMICS
BANKING
The financial securities market incurs about 80% of its total cost
associated with trade processing in exception management. The
competitive pressure has led majority of the back office service
providers to turn to Straight-through Processing (STP) to increase
speed and efficiency with which trades are processed and settled
and to reduce risks and costs associated with trade processing.
STP is a much-beleaguered term in the securities industry as it has
been used for a wide range of technologies , products, and
business objectives.
The objective is well understood — increase efficiency of trade
processing to enhance customer service, cut costs, and increase
profits. Despite significant IT investments, there is lot of room to
improve at every stage of trade processing — from order initiation
to settlement. The back office service providers need to constantly
monitor operations, identify bottleneck s and take corrective
measures. To successfully attribute any exception during back
office trade processing, it is imperative to benchmark tasks and
measure performance of each of the tasks against it. Any deviation
necessitate s further investigatio n and provides scope for
improvement. The conclusion is that any system that provides
meaningful performance benchmark, appropriate tools, minimum
service requirements, and information to monitor and manage
business result will definitely add value to the end client.
This paper analyzes a system that monitors the complete back
office operations involved with trade processing; evaluates
robustness of processes and the efficiency of employed resources
to manage the complete transaction lifecycle and yield optimum
results at competitive cost.
Introduction
The concept of Straight-through Processing (STP) is not new. STP
is seamless, electronic end-to-end processing that encompasses
the entire life of a transaction or a business support process —
from execution through settlement and reconciliation, across the
entire financial markets value chain. Ideally, with STP, once a trade
is entered in the system, it never needs to be touched or manually
administered again, unless subject to legal and regulatory
restrictions. With the number of participants involved in completing
a trade transaction, it is important that all of them achieve high
level of STP. However, it is extremely difficult to achieve enhanced
efficiency in today’s electronic and automated marketplace due to
several factors:
• In order derive competitive advantage, investment firms
continuously introduce new financial products with varying
degrees of complex processing needs
• Trade volumes are continuously rising due to greater participation
of retail and institutional investors
• Smaller lot sizes
• Decreasing margins per trade transaction are making any error in
the process extremely expensive
Operationally, there are far too many touch points, from order
initiation through execution and settlement , increasing the
possibility of errors and the cost of manual intervention. With the
proliferation of new products and multiple reference data providers,
it is an added challenge to ensure data consistency between order
initiation and settlement. The challenge is a much bigger one for
global markets service provider. There are multiple regulatory and
compliance requirements which require investment processing
firms to spend on resources. This in turn shifts the focus from
improving operational challenges with trade processing.
Straight-through Processing and
its Challenges
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4. The business benefits of such a system are immense. Building
such a system provides enhanced client experience, by measured
timely and accurate service performance data, to meet client’s
specific requirements.
Quality and performanc e management serve as “centers of
excellence” to an organizatio n by providing reliable, accurate
performanc e data on key business processes. Quality
management enables an organization to examine its processes
on an “end-to-end ” basis. It also enables more effective,
fact-based conversations with the market units, solution groups
and external clients. This in turn results in improved Service Level
Agreements (SLA’s) and enhnced client satisfaction.
In the investment processing industry, getting an insight into the
performance of the services being offered to clients is the key
reason for the value proposition to be outsourced. The goal is to
broaden the areas of focus, so as to include measurable elements
like accuracy, productivity, volume, and timing. The service provider
should provide the mechanics to analyze every error/ exception;
enrich the exception with reasons; and enable the conversion of
data into information on a consistent basis for management
reporting, internal quality assurance, analytics, and forecasting.
The service provider often has multiple functional areas performing
various back office tasks for its clients. Many of these functional
areas are transaction driven supporting and managing millions of
transactions per month. The transaction data is usually pulled from
multiple systems or manually captured. In such cases, data errors
and exceptions are a common occurrence. Therefore, data needs
to be sanitized and organized in a form that can be easily analyzed
and presented to the management so as to provide complete
transparency into the efficacy of processes.
Performance ManagementPerformance Management
Components of a SystemComponents of a System
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Exception Exception
Exception
Exception
Exception
Exception
Disrupt
Customer Service
Compliance/
Risk management
BUY
SI
DE
SELLSIDE
CLEARANCE / SETTLEMENT
BUY
SID
E
SELLSIDE
CLEARANCE / SETTLEMENT
Basel ll
SEC Rules 17a-3, 17a-4
NASD 3110J-SOXMiFID
PIPEDA
Serbanes-OxleyRegNMS
Fig 1: Challenges with end-to-end Straight-through Processing
The performance management system requires establishment of
standardized processes for measuring service performance by
capturing, enriching, and converting exception data into productive
information. The core logic of such a system would be based on
three levels of data:
• Functional Process Metrics: These metrics capture all incidents
and exceptions that are inherent in each process that makes up
the measures (accuracy, productivity, cost, volume and timing)
• Enrichment Coding: It reduces the manual effort of adding
research clarification to an exception, such as an incident type, as
well as the reason areas for root cause analysis and controllability
• Parsing of data: To enable conversion of data into information
for more analytics
The system should serve as a scorecard and benchmark the
exception data in an automated fashion, saving several thousand
man hours wasted in manual data preparation. This leads to higher
service quality which in turn improves customer loyalty.

5. The common components of such a system should include the
following:
• A user interface for maintenance of master data for entities
related to exception
• A user interface for exception enrichment
• An “approval process” workflow for enriched and wrongly
assigned exceptions
• A user interface for user administration module that defines user
roles, team mappings and their function points. The system
should support role based security at data level, report level and
screen level.
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Extract, Transform
Load (ETL)
Extraction of data from source system, transforming flat files to Normalized Database Structure and finally
loading the data into the end target
Workflow Logic and intelligence in the application to show only the relevant data to the user for enrichment or approval
Enrichment Framework and functionality that allows users to enrich data
Allows for troubleshooting and quicker response to production issues
User
Administration
Master Data
Error handling and
E-mail alerts
Provide secure access to the application and defines who we can see and what we can do
Authentication
and Authorization
Framework
This engine is typically a tool like Business Objects, Cognos and Hyperion
These are customized interfaces that provides rich user experience implemented on top of tools like Business
Objects
Reports that are generated out of the system in a pre-determined format with a limited selection criteria
Business
Analytics and
Performance
Reporting Engine
Ad hoc reports
and Dashboards
Canned Reports
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Framework and functionality that allows adding of organizations, teams, and users and maintaining their
details on an ongoing basis
Setup and maintenance of configuration data required for normal functionality of the system
S.No Component Name
The ultimate goal of performance reporting system is to make sure
that it automatically extracts pertinent exception data from appropriate
systems; enriches this data with reasons; enables the conversion of
data into information on a consistent basis for management reporting,
internal quality assurance, analytics and forecasting.
Typically performance management and exception reporting can
primarily be done at four different levels:
1. Productivity
2. Accuracy
3. Incidents
4. Volume
Performance Reporting System
Description

6. Productivity reporting can be done at multiple levels depending on
the client’s preference. Basic reporting involves total active
accounts per operation for a particular time interval. Potentially
useful information can be obtained by reporting productivity at
team level or at transactio n level. Reporting should be
customizable on daily, monthly or quarterly basis.
ProductivityProductivity
Accuracy metrics indicate count of total controllable exceptions
occurring per transaction. Reporting can be done at multiple levels
– individual, team or business unit and for multiple periods – daily,
monthly or quarterly.
AccuracyAccuracy
Incident reporting aims at identifying the count of total reversals
and the reasons associated with it. Reporting can be consolidated
for all clients or done separately for each client. It can be done at
multiple levels – individual, team or business unit and for multiple
periods – daily, monthly or quarterly.
IncidentsIncidents
Volume reporting displays total count of transactions at daily/
weekly/ monthly or quarterly period for past one year. This
reporting can again be done separately for Business units, teams,
clients etc.
VolumeVolume
As exception/ error volumes rise in trade processing, it is not viable
to rely solely upon manual intervention as the first line of defense.
In the current market environment, where there is a premium on
cost reduction and lowering risk, it is imperative, for firms to
actively consider the implementation of appropriate performance
management systems.
ConclusionConclusion
How does NIIT Technologies’
solution work?
How does NIIT Technologies’
solution work?
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NIIT Technologies has built an integrated solution that provides
enhanced client experience by measurement of timely and
accurate service performance data to meet every client’s specific
requirements.
NIIT Technologie s has a built a four step Performanc e
Management and Reporting System (PMRS).
NIIT Technologies solution, all incidents can be easily captured,
controlled and reported through a seamless workflow.
Most organization s have high volumes of incidents and
exceptions in the system during trade processing. With the
high volume of incidents, organizations fail to identify the root
causes and establish preventative actions manually. Using the
1. Capture all Incidents and Volumes1. Capture all Incidents and Volumes
The incidents, captured in the first step, are classified into
various exceptions. Every error (exception) is analyzed and
enriched with reasons. Once the errors are analyzed and
enriched, the data is converted into information which be
used for management reporting, quality assurance, analytics,
and forecasting.
2. Classify Exceptions, Incidents2. Classify Exceptions, Incidents
Our solution confidently reports on the quality, accuracy,
timeliness , cost, and FTE efficiency measures of current
exceptions data.
3. Report Generation and Analysis3. Report Generation and Analysis
4. Publisher/ Dashboard4. Publisher/ Dashboard
It enables the users to view information in the form of user
defined (ad-hoc), canned reports and dashboards in its end state.
PMRS
Capture All Incidents
& Volumes
Classify Exceptions,
Incidents
Report Generation
& Analysis
Classify
Exceptions,
Incidents
Report
Generation &
Analysis
Publisher / Dashboard

7. At NIIT Technologies, we have managed more than $1 trillion Assets
Under Management, engaging with more than 1.5 million end users.
NIIT Technologies considerable experience in Front Office, Middle
Office and Back Office operations. As per the Datamonitor Black
Book of Outsourcing 2010 survey, in the overall satisfaction ratings,
NIIT Technologies is ranked number 1 in the Data Management
Services. NIIT Technologies’ team has working knowledge of
several industry leading products including Charles River, Calypso,
Advent Moxy, Linedata Longview, MacGregor ITG, Eze Castle,
Omgeo, Bloomberg, Reuters, Yodlee solutions such as “Yodlee
Account Data gathering” and many other tools and products used
in the industry.
NIIT Technologies Experience
Strong Industry FocusStrong Industry Focus
NIIT offerings span business and technology consulting, application
development and management services, IT infrastructure services,
and business process outsourcing. Our services to customer-r-
partners across the world has led to the evolution of a strong value-e-
optimizing framework for offering similar services through a cost
effective delivery model that can be used in single shore, dual or
multi shoreformats.
Technology BandwidthTechnology Bandwidth
NIIT software factories are ISO 27001, CMMi Level 5 and PCM Level
5 accredited. Our resources are therefore well versed with operating
in a highly mature process oriented and secure environment and
bring this expertise to all client engagements.
Mature Best-in-class process frameworkMature Best-in-class process framework
NIIT has a large resource base of over 5000 analysts and consul-
tants and hence is able to quickly source professionals with the
desired skill sets required for the project. Furthermore, we also
possess the capability to ensure a quick ramp-up of project
resources when in need.
Access to large resource baseAccess to large resource base
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Several global organizations rely on NIIT Technologies Performance
Management and Reporting Solutions (PMRS) to meet their
complex and ever changing requirements at low compliance cost
and to deliver strong management processes. By using these
solutions, organizations report recorded exceptions in a timely and
accurate manner providing governance, visibility, and transparency.
Our PMRS solution is part of NIIT Technologies’ Performance
Management System which drives profitable growth by delivering
predictable results, improving confidence and compliance, and
streamlining business processes.

8. Vinit Sharma is a Business Solution designer within the Banking and Financial Services practice
at NIIT Technologies Ltd. He has over 8 years of experience. His expertise includes Capital
Markets, Corporate Finance, Credit Card and US Mortgage business.
About the Author
D_03_120413
Write to us at marketing@niit-tech.com www.niit-tech.com
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About NIIT Technologies
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