Ensuring compliance with the proposed SEC rule changes to 15c3-3 may create process improvement challenges for broker-dealer organizations. And converting from a weekly to daily computation will affect only clearing broker-dealers with large total credits. While this rule change will not adversely affect how the computation is performed, it will have a tremendous impact on existing organizational resources used in current reporting processes.
Typically, reporting groups spend Mondays working on the computation and the remainder of the week working on net capital tasks. By moving to a daily computation, firms must review their current processes and develop more efficient means of producing the computation to meet this requirement.
Clearing broker-dealers should consider the following questions to get an overall understanding of how the rule change would affect their organizations.
How Is the Computation Prepared For Your Firm?
- Do you have an in-depth understanding of all the processes and associated tasks involved in a computation?
- Are you familiar with the systems that supply data, understand which files are received, and know what processes are performed to enhance the data?
- How many spreadsheets are used to accumulate the data for the computation?
- How is the deposit or withdrawal amount communicated to the treasury group?
- What is the supervisory review process and control structure for the 15c3-3?
- How do you staff the computation process?
What Resources Are Involved With Your Current Computation Process?
- Who performs each task? How many people work on the process and are their efforts coordinated?
- Do you know which tasks take the longest to perform? Is improving their efficiency a priority?
- Is there wasted time waiting on emails and inputs? Do you have documented process flow to understand where the "bottlenecks" can occur?
- Are staff members cross-trained to perform all the tasks? Do you have adequate staff to perform the process?
How Will Daily Computation Impact Other Areas of Your Organization?
- Do you have the required suspense and other reconciliations needed for the computation? Will your operations groups be able to provide this data daily?
- What margin inputs will be needed daily?
- Are the system reports programmed to only produce reporting on a weekly basis?
- Who are the consumers of computations? Will the treasury group be able to manage the 15c3-3 deposits daily?
Looking Forward: Why Automation Can Help With Computation Reporting
While the proposed SEC rule changes to 15c3-3 may sound ominous from a process improvement standpoint, it is important to remember that only clearing broker-dealers with large total credits will be affected. With considerable amounts of trading data moving from a weekly to daily reporting cadence, the focus on developing more efficient means of producing the computation reporting should be an organization’s priority. Automating the accumulation of data is an effective approach that broker-dealers should consider when looking to optimize internal processes. For example:
- Determine whether you have the technical resources and elements to feed the calculation systems. External software systems can accumulate the data and replace manual spreadsheets.
- Understand what your current spreadsheets are doing, and the formulas used in automation efforts. Spreadsheet optimization software can streamline your formulas and produce quicker results.
- Identify whether you have the resources to implement standardized reconciliations. Reconciliation software helps to centralize operational processes involved with computational reporting.
Clearing Obstacles For Broker-Dealers
Recognizing the need to be compliant if this proposed rule change is implemented, it is evident that broker-dealer clearing firms will need the resources to automate and/or improve efficiency in the existing processes. Not changing the current process could create inefficiencies which will place a strain on meeting all other regulatory requirements, and may lead to employee burnout. Firms should use this proposed rule as the catalyst for improving their reserve computation processes.
Daily reporting, as put forth by the proposed SEC rule changes, looks to be a solution that will result in improved computation reporting efficiency for clearing broker-dealers.
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