March 2024

Elevate Your Business: Outsourcing for Seamless Clearing System Upgrades

In today's fast-moving market environment, many CCPs and clearing houses find it necessary to handle shifting demands and future needs. This involves continuous risk assessments, technological advancements, flexible regulations, and incident management. 

When a clearing system starts to struggle with increasing performance demands, security vulnerabilities becomes a growing concern, and maintenance costs escalate due to the complexity of maintaining legacy code, it is time to upgrade. 

Ensuring that a business is equipped with a modern system allows for better preparation to tackle challenges and embrace innovation without the risk of errors that cannot be rectified. However, developing systems in-house is both expensive and challenging. Finding the key people with the right knowledge is not easy in today’s market. Addressing complex technical challenges internally may also result in a shift of priority from the core business. 

Instead, by outsourcing and using system solutions from a vendor it may offer both cost and time savings. By obtaining technology from a specialist, a business gains access to specialized resources and expertise without the need for extensive in-house development. However, challenges may arise during the outsourcing process. Depending on the business and its needs, the process can be more or less complex. Clearing systems often require more customization due to laws and regulations, whereas trading systems are more standardized. Some vendors offer off-the-shelf products or traditional solutions built on outdated code with limited customization, which can result in excessive costs for changes, delivery delays, or a system that lacks integration into the client’s existing environment. 

When transitioning an organization's business systems to an IT provider, effective communication is crucial. It helps to ensure active customer interaction and maintains control for the customer over the development process. Through clear and open communication, trust is built between the business and the vendor, and it also helps clarify requirements and expectations. 

A proficient vendor works in cross-functional teams and has both great business and technical knowledge. Business analysts review the possibilities of optimizing the business model with the new system and customize it according to needs and requirements. The technical experts, developers, and business analysts will then create a clearing system tailored to the business. With transparent communication there is an opportunity to establish and prioritize requirements, ensuring full engagement in the development of the new system, thereby unexpected expenses and surprises can be avoided during the process. With continuous updates, regular demos, and testing of the system, the client will always be in the loop and able to provide feedback and new requirements until the final delivery. 

Establishing a long-term partnership with a vendor implies that the process is not a one-time event but rather an ongoing engagement. This fosters continuous evaluation of the partnership, including feedback and making improvements, as necessary. 

In conclusion, outsourcing clearing systems and collaborating with technology providers offer an efficient pathway for exchanges and clearinghouses to utilize modern technology to safeguard and expand their business. By investing in well-established partnerships and technological solutions, market participants can lay a solid foundation for future growth and innovation within the financial sector.