GPS Give-Up Payables Reconciliation

 Robert Adams is a senior manager with over 20 years of process re-engineering expertise within the financial services industry.  Robert specializes in designing tactical tools to solve critical business problems for Monticello clients.

Robert Adams is a senior manager with over 20 years of process re-engineering expertise within the financial services industry.  Robert specializes in designing tactical tools to solve critical business problems for Monticello clients.

A top-tier investment banking client recently engaged Monticello Consulting to develop an automated tool to reconcile its back office processing system GMI—the SunGard-owned industry leading platform for exchange-traded derivatives, futures, and options—with the Give-Up Payments System (GPS) run by the CME Group.

GPS is a web-based application used by clearing member firms for processing payments on a monthly basis.  GPS provides clearing firms with the ability to track give-up agreements, set rates, and process payments for give-up trades—where one firm executes the trade and another firm clears it.  GPS also calculates pay and collect amounts, and nets balances between member firms for settlement at the end of each monthly cycle.

This monthly process—referred to as the GPS Cycle—required our client to perform a monthly reconciliation between the GPS representation of the data and the firm’s internal GMI data.  Once reconciled, the matching trades were required to be flagged within the GMI system prior to the close of the GPS Cycle so that payables could be settled.

Prior to implementation of the automated reconciliation, the GPS payable cycle was managed using a set of four spreadsheets—one for each exchange—to aggregate the GPS and GMI datasets by executing broker, account, and product.  In the case where monthly totals matched perfectly, the transactions would be flagged to be released for payment.  This process resulted in an approximate match rate for payables of 80% each month.  In addition to being labor intensive, this high-level reconciliation did not provide actionable information as to why give-up fees were breaking between systems. 

To remediate this payables process, the MCG Tactical Tools Team implemented a reconciliation platform capable of matching the entire payables population across all exchanges.  The technology underlying this tool included a MS SQL Server database capable of managing millions of records, coupled with a user-friendly MS Access interface.

The impact of this implementation provided immediate benefits to the client including:

  • A 15% increase in month-end cycle matching from 80% to 95% “ready-to-pay” transactions.
  • Transaction-level matching with a clear audit trail of reconciliation activity.
  • Robust business intelligence reporting allowing analysts to pinpoint the cause of transaction breaks.
  • Automated match transaction flagging within the firm’s internal GMI system.
  • Reduced processing time that provides business analysts with more time to resolve breaks prior to the close of the GPS cycle.
  • Robust process metrics for monitoring system performance.

MCG’s work on this engagement highlights our capability for bringing tactical technology solutions to bear on existing business process challenges.  If your firm has high-volume, mission-critical data processing problems due to suboptimal infrastructure—for example, processing via spreadsheets—then you likely are a candidate for our Tactical Tools Team.  A relatively modest investment to implement one of our tactical data tools will provide your organization with a robust and scalable solution that will support your control environment.