Security concerns around internal data sharing are slowing efforts to automate client limit management across sell-side execution desks, according to Ross Lancaster, Head of research at Acuiti.
“When execution desks work with a third-party vendor, concern around data sharing can become a factor,” Lancaster told Traders Magazine.
“Other departments in the bank can restrict the amount of data provided to a limits management platform out of security concerns, capping the effectiveness of any efficiency project,” he added.
His comments come alongside the latest Acuiti Sell-Side Execution Management Insight Report, produced in partnership with KRM22 and based on a survey of senior executives from banks and brokerages in Acuiti’s global sell-side network.
According to the report, more than half of sell-side execution desks focused on listed derivatives still rely on spreadsheets, email or chat tools to manage pre-trade risk limits. Only 46% of firms said they have automated processes for setting client limits, while 34% still use spreadsheets and 20% depend on email or chat-based workflows.
The report indicates that manual processes remain widely used for pre-trade risk limit management as firms evaluate automation initiatives.
“This quarter’s report reveals a divide across the sell-side between those firms that have invested in pre-trade risk and limit management automation and those that haven’t,” Lancaster said. He added that the gap is likely to widen as markets move closer to a 24/7 trading cycle.
Cross-asset consolidation also remains limited, according to the report. Just 29% of respondents said they have invested in consolidating limit management across asset classes, although nearly half said they plan to do so. Among firms that have already made that investment, all reported benefits, with one quarter citing significant efficiencies.
Operational silos continue to complicate decision-making, the report found. Only 37% of respondents said reviewing a client’s risk profile alongside a limits change request is simple enough to be handled by one employee, while more than half said the process still requires coordination across multiple desks.
Lancaster said that challenge reflects the broader complexity of integrating systems inside large financial institutions.
“A risk manager wanting information on pre-trade risk limits will often have to communicate with other departments and use spreadsheets and emails as a primary form of data management,” he said. “This is an inherently manual and time-consuming process, and its scale can be significant, with many thousands of accounts often forming part of the database.”
The report also found uneven progress on artificial intelligence. Just over half of firms said AI is being used in selected front-office production cases, while more than a quarter reported no meaningful adoption.
Still, Lancaster said firms are increasingly looking to AI to help clean up older operational processes, particularly around give-up agreements.
“There is excitement around the potential of AI to create efficiencies in these processes,” he said. “There is hope AI can help organize these sprawling databases and reduce the risk of long-forgotten agreements suddenly being used.”
Other operational pain points also remain, according to the report. Only 4% of respondents described exchange requests to test and validate client algorithms as straightforward, while a quarter said the process is either very challenging or impossible. Firms were also divided over Intercontinental Exchange updated ATS ID registration requirements, with 40% describing them as very complicated and 7% saying compliance is impossible.
Meanwhile, exchange fire drills continue to weigh on desk operations, according to the report. Nearly four in five respondents said such exercises are at least a minor inconvenience, while 35% called them a significant disruption.
