Straight-Through Processing boosts XML spending

[MARCH 21, 2002] - Expenditures for XML implementation in financial services will reach $8.5 billion by 2005, driven by the need for so-called Straight Through Processing (STP), according to a new study by ZapThink, a Waltham, Mass.-based consulting firm specializing in XML.

STP, long a goal of integration gurus but often derided as standing for "straight to printer" by skeptical IT professionals, is now a top priority in the financial sector due to the demand for "T+1" stock transaction settlements in one day, according to the ZapThink report entitled "XML in Financial Services."

"What is really bringing XML to the surface now is the T+1 initiative," said Ronald Schmelzer, senior analyst at ZapThink. "The government is moving to mandate next-day settlement times." Although spurred by the federal government, the financial industry is also anxious to compress the three to five days it currently takes for settlement to occur, Schmelzer said. The current process involving human interaction and paperwork processing is not only time consuming, it is expensive, he explained.

"The analogy I always give -- and these are very, very simplistic numbers -- [is that] if it costs a company a million dollars to make a billion dollars worth of trades, that million dollars is spent on the traders, technology and networks," he said. "If I could chop 20% of that, so that it only cost $800,000 to do a billion dollars worth of trades, that's all profit. So, integration is a big deal."

That is why it will be worth it for financial services companies to spend $8.5 billion on XML tools, Web services platforms and the developer consulting services that will be required to make T+1 and STP a reality, Schmelzer concluded.

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Rich Seeley is Web Editor for Campus Technology.


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