Inside Reconciliations: Capital Markets Dirty Little Secret

Financial services practitioners commonly refer to the reconciliation function or process as the matching of positions, cash balances, and transactions from an internal system to an external book of record such as is kept by a custodian, sub-custodian or fund administrator. What is not generally discussed in polite company are the uncountable intersystem data reconciliations taking place horizontally and vertically across the enterprise itself, across the innumerable data sources and downstream applications, all utilizing the same data for different functions. In this context, reconciliation processes are occurring to ensure the consistency between the source of record and the target system—the objective being meaningful, accurate, actionable data for trading and analytics.

Capital markets firms have long accepted this need to continually replicate and reconcile data across internal systems (and the resulting exceptions) as a cost of doing business. Most of what has been written about has focused on external use cases for blockchain. What is less widely written about is the case for an internal blockchain, one where the various nodes acting as validators in a permissioned manner all belong to the same organization, as an alternative to a traditional database structure and as a possible solution to the internal reconciliation problem.