Fat finger trades, sometimes referred to as freak trades, have a long history in financial markets. Although, since digitalization took off and introduced advanced algorithms in trading, human errors seemingly disappeared from the surface.
But recently, we were reminded that fat-finger errors can still have enough power to bring chaos to the markets:
The fat-finger error in May 2022 triggered a crash across European stock markets.
Reportedly, a trader mistakenly added an extra zero to a trade ticket, costing his company over $50 million in losses.
Now think for a second – if a well-computed stock market is vulnerable to such mistakes, what’s the volume for the commercial paper market that still largely operates by manual interactions?
Yup, today, the volume of fat-finger errors on the CP market is significantly high – some market actors estimated that human errors occur for more than 10% of the deal tickets.
Unless you use Onbrane – a debt negotiation and issuance platform that brings a commercial paper market to the 21st century and puts an end to human errors.
Fat-finger errors on the CP market
It goes without saying that the number of fat-finger errors is directly related to the number of manual inputs required throughout the process.
The way the commercial paper issuance market operates today is overwhelmingly manual – from setting up a pricer to negotiation, from entering deal tickets into back-office systems to a forex swap.
Every day, front offices require a huge amount of mental energy and time to manually execute numerous tickets, though a sizeable number of errors still go unnoticed on time.
It is no rocket science that more than a 10% error rate is unacceptable, especially when we consider the trade volume on the commercial paper market.
The solution? To catch the commercial paper market up with today’s technologies!
The Onbrane platform was built to answer these well-identified pain points of the market actors by minimizing the need for repetitive manual inputs.
And we think we did a good job at it:
From 10% to under 1.5%: A Power of a Full STP Platform
At the heart of the ecosystem, Onbrane created the digital bridge between different stages of debt issuance through APIs, facilitating a full STP process for the market actors.
Our platform’s architecture allows us to connect to any third-party software, thus automating data flow and minimizing the need for repetitive manual inputs.
For instance:
- Onbrane’s issuers can directly link their excel pricer to the platform and fill in the yield curve points with a single click instead of retyping each point by hand;
- Once the deal is done, our platform automatically sends the ticket to TMS/OMS systems, thus our users do not have to do it manually;
- To avoid the common error of setting a Bank Holiday as a value/maturity date, Onbrane automatically blocks the selection of these dates when creating a yield curve.
What’s more, the platform also notifies you of upcoming public holidays, though you can still choose those dates as a value/maturity date.
Additionally, Onbrane is connected to rating agencies, data providers, forex platforms, clearing & settlement systems…
Thanks to these connections, the rate of fat-finger errors on Onbrane is down to 1.5% – truly a drastic improvement from the conventional market ways. The remaining errors are due to the fact that human inputs are still necessary at the beginning of the negotiation.
But we do not rest on our laurels:
From 1.5% to 0.1%: Leveraging Technology for Maximum Accuracy
While a decrease in fat-finger errors from 10% to 1.5% is indeed a good start, we want to bring even more accuracy to the commercial paper market.
Using data and machine learning, we have implemented a fat-finger error detection system into our debt issuance platform. This system is set to analyse user activity and detect non-conventional inputs in real-time.
The system generates an additional alert, giving you a chance to check your CP characteristic, but it does not block the transaction.
This feature is live on the platform for several weeks and have already detected few errors.
Get on board with the error-free future of debt markets today
Onbrane’s debt negotiation and issuance platform brings ease to every actor. Contact us for a demo and get on board with the error-free future of debt markets.
