4-page Case Study - Posted 1/10/2007

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Pershing Limited

New Messaging Framework Lets Outsourcing Solutions Provider Easily Handle Huge Increases in Volumes

Pershing Limited, the European affiliate of Pershing LLC, recently made the decision to further develop its systems and services to meet the requirements of institutional brokers in Europe. One of the key challenges the firm faced was the huge increase in trading volumes that would result from taking on institutional businesses. Following a consultation with Microsoft, Pershing introduced Microsoft® BizTalk® Server 2004 to process the increased volume of new messages. BizTalk Server 2004 enables Pershing to process messages in any format, vastly reducing the time and resources the company would normally have to spend coding translation protocols. Furthermore, the Business Activity Monitoring (BAM) functionality provides Pershing with a clear view of current trade positions. Pershing also deployed Microsoft® BizTalk® Accelerator for SWIFT to quickly integrate SWIFT messages into its systems.

Situation

Pershing is a leading provider of financial services outsourcing solutions to the United Kingdom’s private client stockbroking industry. It recently made the strategic decision to further develop its systems and services to additionally meet the requirements of institutional brokers in Europe.  For its employees, this meant managing a vast growth in trading volumes—a task that, if not handled correctly, could significantly increase their work load and hinder their efficiency. It was therefore essential that the infrastructure to handle this increase in volumes also incorporated a functionality to lessen the impact on the firm’s employees. The process of incorporating an institutional trading platform into a system designed to handle retail transactions brings with it many challenges, as Alpesh Patel, Director of  IT Development at Pershing Limited explains: “Institutional business generates large trade volumes, often many thousands of trades per hour.  In comparison, a private client broker typically generates hundreds, rather than thousands, of trades per hour. Clearly, we had to be sure our systems and personnel were capable of responding to such a significant increase in volumes.”

We see BizTalk Server 2004 playing a large part in our infrastructure, communicating between our internal systems as well as our external ones. Alpesh Patel Director of IT Development Pershing Limited

The increase in trading volumes was just one of the considerations when developing the new platform; the transaction flows associated with institutional trading are quite different from the more straightforward flows typically associated with the private client market. Pershing had to ensure the new system could, for example, process and control the many sub-transactions that together constituted large block trades. “An institutional broker might use a matching engine to construct a complex collection of buys and sells involving numerous clients and market-side parties. The individual components could be delivered over many hours or arrive as a massive bundle, whereas it would be more typical for a retail client to purchase a thousand shares for a single underlying investor,” says Patel.

All information pertaining to the status of each trade has to be stored and messages relayed to each party in close to real time. In line with risk management best practice, Pershing was keen to ensure that the processing of each transaction required minimal manual intervention and the firm therefore sought to engage a solution capable of near total straight-through processing (STP).

Solution

After an initial consultation with Microsoft to define the structure and technology resources of the project, Pershing decided to build a new institutional module to complement its established and successful retail platform.

To develop a platform capable of handling both types of transactions and generate timely, accurate messages for investors, Pershing deployed Microsoft® BizTalk® Server 2004. This ensured that Pershing could accept any message types from an unlimited number of third-parties, initially offering XML and SWIFT formats. This solution avoids the costs associated with translating messages into a standard internal format, because BizTalk Server 2004 addresses this.  Furthermore, Pershing is effectively safeguarded against future changes to message standards, as Patel explains: “With BizTalk Server 2004 in place, we will be shielding our internal system from external message formats or technology changes.”

Pershing also implemented Microsoft® BizTalk® Accelerator for SWIFT. With this module in place, Pershing can accept messages in SWIFT format, providing the firm with flexibility to serve organizations that require SWIFT message standards as well as smaller organizations that may not be able to invest in such complex protocols and prefer to use XML. “From a strategic perspective, we needed a middleware solution that would sit between Pershing’s IT infrastructure and external parties’ infrastructures to handle the mapping between their messages and ours,” says Patel.

Because Pershing may receive many thousands of trades in a single file, rapid processing is essential. Darren Jefford, Application Development Consultant in Microsoft’s Premier Support for Developers, says: “If you had many thousands of trades in a file, and you process them one by one, it takes a long time. But if you have a server product it makes more sense to split that work up and let multiple processors deal with it. Using BizTalk Accelerator for SWIFT, Pershing can de-batch all the transactions into individual trades to get messages into BizTalk Server 2004 far more rapidly.”

In addition, Pershing sought immunity from external changes that impacted Pershing code. “We wanted to shield our system back-end from any external changes coming in from the market,” says Patel. “Currently we code everything internally, so every time there is a change to a SWIFT or FIX message, or our own defined message, we have to change code. With BizTalk Server 2004 and BizTalk Accelerator for SWIFT installed, any new changes to the SWIFT format can be easily incorporated with no internal disruption. Introduction of FIX messaging to the system can be incorporated in much the same way, and with little coding required.”

Pershing benefited from a close relationship with Microsoft’s Premier Support for Developers team. Peter Rist, Business Manager at Microsoft, explains how the department’s ongoing support has assisted Pershing: “We have had a close relationship with Pershing over the past eight years during which time Pershing has consistently been an early adopter and optimizer of our premium products. In selecting BizTalk Server 2004, Pershing continues to demonstrate its commitment to leveraging the latest technology to deliver quality services to its clients now and in the future.  Should BizTalk Server 2004 expertise be required in a specific technology area we can access all the Microsoft Experts in our team and provide a wealth of knowledge across many areas.”

He goes on to explain that Pershing has direct access to the product team to resolve any issues. “They can talk directly to the product team or in this case, the actual developer, to resolve any issues quickly,” he says.

Benefits

Thanks to the rich functionality of its Microsoft infrastructure, Pershing has been able to realize a host of benefits.

Significant Reduction in Code Saves Employees Time and Effort
Pershing has millions of lines of custom code that have to work in a highly scalable performance environment. Writing such code and updating it to keep track of new standards is typically a complex and laborious process that can push projects past deadline. BizTalk Server 2004 reduces this problem. Pershing’s developers are free to concentrate on writing effective business code that adds value rather than allocating resources to “plumbing” code. “Once the business code is entered into BizTalk Server 2004, developers can be confident it will perform and scale exceptionally well,” says Rist. 

Business Activity Monitoring Improves Employee Decision Making
One of the key benefits of BizTalk Server 2004, according to Patel, is Business Activity Monitoring (BAM). Traditionally, when Pershing’s developers wanted to compile information regarding message status they would have to write more code to make that information accessible.

“BAM offers an out-of-the-box, drag-and-drop solution that lets Pershing’s developers see in real time what is going on inside BizTalk Server 2004,” says Jefford. “For example, trades can take days to actually settle, and in that time any number of issues could affect the workflow of a particular transaction. BAM lets users instantly access the exact status of a trade, identify any issues with it, and resolve those issues in a timely manner. This is very important for institutional clients because they need to see exceptions and this system lets them do so very easily.”

With BizTalk Server 2004 and BizTalk Accelerator for SWIFT installed, any new changes to the SWIFT format can be easily incorporated with no internal disruption. Alpesh Patel Director of IT Development Pershing Limited

XML Support Encourages Smaller Businesses
Thanks to the functionality of BizTalk Server 2004, Pershing is able to offer two message formats; one to support the SWIFT message, and another internal XML format for non-SWIFT members. “Because there is a format choice it reduces the need for organizations to change their systems in order to use our service,” says Patel. “Smaller business users can avoid the need to change the direction of their message strategy which potentially eliminates the requirement for them to become members of message transfer systems. The key is to offer the easiest and cheapest implementation route to clients, which in turn helps us rapidly increase our institutional volumes” he adds.

Scalable Solution Drives Future Growth
“We see BizTalk Server 2004 playing a large part in our infrastructure, communicating between our internal systems as well as our external ones,” says Patel. “Based on the success of the project so far, we expect to have our mainframe send data out via BizTalk Server 2004 for processing.”

Meeting T+1 Deadline Drives Competitive Advantage
With the drive towards a next day settlement cycle (T+1) in full swing, Pershing’s enhanced STP environment will better position the firm to meet this strict deadline. Says Patel: “Our remit is to efficiently handle all trades that come in, whether that be 100 trades an hour or 10,000 trades per hour. This new Microsoft environment will allow us to meet this challenge and easily handle increasing volumes in the future as our institutional and private client business continues to grow.”

For More Information

General information:
For further information about Microsoft products and services please visit www.microsoft.com/uk or call 0870 60 10 100*

For hearing impaired customers with a Minicom contact: 0870 50 30 400*

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For more information about Pershing Limited products and services, call +44 (0) 20 7864 8000 or visit the Web site at: www.pershing.co.uk

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