 Paul Skuriat
Senior Analyst, Product Management
One of the most satisfying aspects of my job is that I get to dole out liberal helpings of "constructive criticism" during my quarterly broker reviews, then sit back and watch whether my advice is taken to heart. I get tremendous satisfaction when I see operational improvement which, while not directly attributable to my efforts, can be traced back to an analysis that I'd done which highlighted weaknesses that needed to be addressed. And so it is with "Error Rate" - at least for some.
About 2 + years ago I reported that the total percentage of all ETC trades that had to be either cancelled and rebooked, or amended because of either input, or communication errors between buyers and sellers was just over 10%. That's not good, full stop. As part of our effort to standardise measurement tools for ranking broker performance, our working party came up with a formula which placed up to 35% of the final broker score upon Error Rate. Clearly, to rank highly in the eyes of the clients, brokers had to make every effort to bring down the error rates. A number has done this, either through holding their traders' feet to the fire to ensure accurate input, or through instituting new account set-up procedures or standardised commission tables to catch those two errors which accounted for 49% of all exceptions in Q4 2002. So how have they fared?
The accompanying chart tells an interesting story. It shows the error rates for Q4 2002 compared to the error rates for Q1 2005 for the top 12 UK based brokers, plus their percentage change in error rates over that time period. As you can see, there are some brokers who have significantly reduced their error rates over the past 9 quarters, while others have stayed fairly constant, or are worse. Five of the top six brokers appearing in this chart happen to be those that I would consider "fully committed" to analysing their benchmarks data & acting on uncovered weak areas.
While a drop from 11.6% to 8.1% Error Rate for the top broker may not seem significant, that represents for Broker C on average 168 trades PER DAY which do not need to be cancelled/rebooked or amended. That�s a significant number of exceptions avoided in anyone's book!
Moral of the story? When you get bad news, don't try to defend yourself. Accept it, find out why it's happening, and try to correct it. Who knows, you may have 168 fewer things to do tomorrow.
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