Challenge

The organization faced several critical challenges during the custodian migration:

  • Complex data mapping requirements between disparate systems
  • Need for accurate reconciliation of large volumes of holdings and transaction data
  • Different data formats and standards between custodians
  • Risk of data discrepancies during migration
  • Time-sensitive transition requirements
  • Need for automated solution to reduce manual effort
  • Requirement for audit trail and verification processes

Solution

We developed Report Center with the following key features:

  1. Automated Data Mapping:
    • Intelligent account mapping algorithms
    • Securities master data correlation
    • Transaction type standardization
    • Position reconciliation logic
    • Custom matching rules engine
  2. Integration with SmartStream TLM:
    • Seamless data flow
    • Enhanced matching capabilities
    • Exception management
    • Audit trail maintenance
    • Real-time reconciliation status
  3. Flexible Configuration Framework:
    • Customizable matching rules
    • Configurable tolerance levels
    • Adjustable reconciliation frequencies
    • Scalable architecture
    • Multiple file format support

Implementation

The development and implementation of Report Center began in Q3 2006 when our client, a major asset manager with over $50B AUM, initiated their strategic migration from a legacy custodian to State Street. The project emerged from a broader industry trend of financial institutions modernizing their custody relationships to leverage advanced technology capabilities and improved service models. Our initial approach focused on building a robust foundation for data intake and transformation. The team developed specialized parsers to handle multiple file formats, including the legacy custodian’s proprietary position files dating back to the 1990s and State Street’s modern ISO 20022-compliant formats. This technological bridge was crucial for spanning the gap between systems developed in different eras. The core mapping engine, completed in early 2007, represented a significant breakthrough in automated reconciliation. It incorporated machine learning algorithms to suggest account matches based on naming patterns and historical transaction flows. This innovative approach reduced the initial account mapping effort from an estimated 12 weeks to just 3 weeks, handling over 1,500 accounts across multiple legal entities. Securities mapping presented unique challenges due to the historical evolution of security identifiers. The system needed to handle legacy internal codes, CUSIP transitions (including the 2004 CUSIP format update), and the more recent adoption of ISINs. Our solution included a temporal mapping database that maintained historical relationships between different identifier systems, ensuring accurate position tracking across the migration period. A pivotal moment came during the parallel run phase in Q2 2007, when Report Center detected a systematic discrepancy in corporate action processing between the two custodians. This early detection prevented potential issues with approximately $150M in dividend reinvestment positions, demonstrating the tool’s value beyond basic reconciliation. The transaction reconciliation module evolved through several iterations based on real-world usage. Initial matching focused on basic elements like dates and amounts, but we quickly enhanced it to handle complex scenarios:

Multi-leg security transitions Bulk trade allocations Exchange rate variances Cancel/correct chains Historical cost basis adjustments Corporate action impact on positions

By Q4 2007, Report Center had successfully supported the complete custodian migration, processing over 2 million transactions and reconciling positions across 50,000+ securities. The tool’s flexibility became evident in early 2020 when the client initiated their investment accounting platform migration from an in-house system to SimCorp Dimension. With minimal modifications, Report Center adapted to this new use case, validating data consistency across the accounting transition. Key implementation milestones included:

Custom ETL processes handling 15+ file formats Automated daily reconciliation of 100,000+ positions Real-time break resolution workflow Historical transaction replay capability Multi-currency position aggregation Compliance with SOX audit requirements Integration with existing Security Master system

The system architecture emphasized scalability and performance, utilizing parallel processing for large data sets and maintaining a rolling 7-year transaction history for audit purposes. Exception handling was particularly sophisticated, with intelligent categorization of breaks and automated resolution suggestions based on historical patterns.

Results

The implementation delivered significant benefits:

  • 90% reduction in manual reconciliation effort
  • Successful migration to modern custodian platform
  • Enhanced data accuracy and reliability
  • Streamlined reconciliation processes
  • Reduced operational risk
  • Comprehensive audit trail
  • Flexible platform for future migrations

Unexpected Benefits

The tool proved valuable beyond its initial purpose:

  • Successfully supported subsequent investment accounting software migration
  • Provided ongoing reconciliation capabilities
  • Enabled regular data quality checks
  • Supported additional system transitions
  • Reduced future migration costs

This implementation demonstrates how a well-designed reconciliation tool can not only support immediate migration needs but also provide long-term value for future system transitions and ongoing operations.