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STRAIGHT THROUGH PROCESSING

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STP is a mechanism that automates end to end processing of transactions of financial instruments. It involves use of a system to process all elements of the work flow of a financial transaction, what are commonly known as the Front, Middle, Back office and General Ledger. 

It enables the entire trade process for capital market and payment transactions to be conducted electronically without manual intervention, subject to legal and regulatory restrictions. The process was developed by James Karat in the early 90‟s and the concept has also been transferred into other sectors including energy (oil, gas) trading and banking, and financial planning. 

Currently, the entire trade cycle, from initiation to settlement, is a complex manual process, will take several days. Such processing for equities transactions is commonly referred to as T + 2 processing, as it usually takes three business days from the “Trade” being executed to the trade being settled. The goal of STP is to minimize settlement risk for the executive of a trade and its settlement and clearing to occur simultaneously. 

In short, STP allows electronic capturing and processing of transactions in one go from the point of order origination to final settlement.

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