Straight-Through Processing and Orchestration of Web Services

Oct. 21, 2002 12:00 AM

One word can describe the current state within financial organizations as far as straight-through processing (STP) is concerned: confusion.

In the current state of STP implementation in almost every financial institution, its scope is still limited and it targets only a portion of the underlying financial instruments and product and business lines, and requires a full development cycle for each product addition.

This article presents a paradigm to achieve internal and external STP through the orchestration of Web services. We discuss the fundamentals of STP, introduce the concept of orchestration, relate how business-critical STP processes can be orchestrated as Web services, and envision building the entire STP model over a service-oriented architecture (SOA)-based framework.

What Is Straight-Through Processing?
Straight-through processing, a solution that automates the end-to-end processing of transactions for all financial instruments, from initiation to resolution, is positioned to revolutionize the financial industry. STP encompasses a set of internal and external applications, business processes, and standards that will redefine the settlement and processing paradigm within the capital markets industry. It aims to make trade processing as automated as possible, allowing STP-related business processes to be carried out without unnecessary human intervention, thereby reducing to a minimum the overall processing lead time and the related risks, including inevitable human errors.

STP can be categorized into three logical levels (see Figure 1), each comprised of multiple applications and systems:

Transactional
Asset Management
Informational

STP Encompasses EAI and B2Bi
STP encompasses both enterprise application integration (EAI) and business-to-business application integration (B2Bi; see Figure 2). EAI for STP, also known as internal STP, relates to the trade and settlement processes that are internal to an industry participant. B2Bi for STP, also known as external STP, is about connecting seamlessly to all external partners in the trading and settlement process, including the industry-matching utilities such as GSCC's RTTM and Omgeo. The external partners include custodians, exchanges, clearing corporations, central security depositories, and other information providers.

BPM: The Most Important Component of STP
Business process management (BPM) is the most important component of STP. It enables financial enterprises to automate and integrate the disparate internal and external corporate business processesby supporting dynamic process topologies that allow the boundary between processes and participants to be determined either statically or dynamically on a real-time basis. Further, its implementation will provide every financial corporation with the opportunity to redefine and automate core business processes, resulting in streamlined business operations and reduced costs.

BPM for internal STP would enable companies to achieve internal systems that are truly integrated through the automation of information flows. The business processes that control information flow by coordinating interactions with business applications and systems within an organization are called private or closed STP processes.

BPM for external STP would focus on how financial institutions, as a vertical industry, can refine business processes so that the applications supporting them can be seamlessly integrated across enterprises. The external business processes that control interactions among independent financial institutions are called public or open STP processes.

What Is Orchestration?
Orchestration can be defined as the fabric used for the automation of business processes and long-running transactions comprised of loosely coupled services. Through orchestration, you can automate the following parameters of a business process:

Why: The goal of a business process

What: The activities/tasks that it involves, along with their input and output

Who: Who performs the activities and where do the results go

Where: The location - application, system, user - of the activities

When: The order and timing of the activities

In the context of STP, orchestration would imply control of information flow for both private/closed as well as public/open processes (as defined earlier). With effective orchestration, financial institutions can become part of a unified business process flow. Unified business process flows would allow the dynamic sharing of trade-related information among internal applications of a company and external applications of trading partners through which all communication can be tracked and recorded. Since STP transactions are long running (e.g., can span multiple days), orchestration of unified business process flows becomes critical in ensuring the integrity and completion of automated business transactions.

The key orchestration requirements for STP will include identity management, stateful asynchronous interactions, flow coordination, business transaction management, and activity monitoring. Applying orchestration effectively to STP requires a dramatic reduction in the complexity associated with the above requirements needed for deploying and managing distributed business processes. This reduction in complexity will be achieved through the use of an orchestration server, which will be essential for addressing the critical requirements of orchestration for STP explained later.

Web Services as the Enabling Technology for Orchestration
Web services are sets of business operations that companies can make available through the intranet or Internet using open standards, such as SOAP, WSDL, and UDDI. It's worth mentioning that a Web service can be implemented as its own business process, which can then be executed under the control of an orchestration server. In that case, the process model is published as a Web service. Alternatively, a business process can be orchestrated through any number of Web services, which themselves can aggregate other Web services to provide a higher-level set of features. Web services, as an enabling technology, empowers orchestration to become the foundation of process-centric applications, implementing collaborative business processes and long-running transactions.

The elements that make Web services an ideal technology for orchestration are:

Web services provide a clear separation of business process logic and the participating business services, thereby making the development, execution, and management of these services much easier.

Web services fully leverage open standards, including HTTP; XML; Simple Object Access Protocol (SOAP); Web Services Description Language (WSDL); and Universal Discovery, Description, and Integration (UDDI).

A typical business process may be supported by multiple diverse applications. It is virtually impossible to manage the information flow and execute the different tasks associated with it, which may require using APIs of other systems or exchanging messages with them, unless the underlying technology provides easy integration facilities. XML-based Web services are ideal technology for orchestration as they allow applications to communicate across the intranet or Internet in a platform- and language-independent fashion.

The key technologies and specifications that enable the orchestration of business processes as Web services include Business Process Execution Language for Web Services (BPEL4WS), Web Service Interactions (WS-Coordination, WS-Transaction), Business Transaction Protocol (BTP), Electronic Business XML (ebXML), and ISO15022 XML. These specifications are in a state of convergence from earlier efforts by individual companies, such as WSFL from IBM and XLANG from Microsoft.

Building an STP Solution over a Service-Oriented Framework
An STP solution has to connect multiple networks, applications, and platforms; has to be stable; and has to provide fast and accurate processing of complex transactions. The technology infrastructure should be extensible for today's and tomorrow's needs. Using this infrastructure, it should be relatively easy and cheap to use the opportunities of tomorrow to mass customize both financial and nonfinancial products and services. Further, it should assist the financial industry in migrating from IP-based environments to leveraging the full potential of the Internet. Finally, and most importantly, it should provide a solution that assists in the orchestration of business processes.

An SOA-based framework can enable financial companies to achieve their business goals by providing a service-based platform to integrate new and existing applications and systems with STP functionality, implementing industry standards, and building an infrastructure that would support the dynamic financial messaging required for continuous processing for all types of financial instruments. Service-oriented architecture can provide the foundation and Web services can provide the building blocks for application architecture in order to achieve seamless trade processing.

An SOA-based framework can provide support for multiple XML standards, such as ISO15022 and FpML, at the same time, and provide additional standards support without significant redevelopment effort. Using Web services as an enabling technology, STP-related problems and issues will shift from connectivity among different applications in-house and with trading partner applications to the content and structure of the information that is exchanged. The analogy here will be that Web services will define the standard postal mechanism along with the envelope and addressing format for exchanging letters. What is inside the envelope (the content of the letter) will be defined by the XML-based business process standard, such as ISO 15022 XML.

Orchestration in the Context of STP
Making Web services work for STP will be a two-step process. First, financial companies will have to publish STP-related internal and external Web services and then orchestrate them. Publishing would require taking a piece of business-related functionality that already exists within a back office, middle office, or front office application and making it available over the network using Web services standards so that it can be easily integrated into other applications. Orchestration would require designing, building, and executing an STP-related business process comprising of one or multiple Web services into a long-lived, multistep business transaction.

STP-related business processes could span multiple applications and levels (see Figure 1). Each of these systems can be written in a different language and run on a different platform. It is not possible and rational to rewrite these systems just because some of their functionality is part of an STP-related business process. Such functionalities will just have to be exposed and published as Web services standards-compliant interfaces, which can then be orchestrated as part of a process-centric application.

Critical Requirements
The critical requirements for the orchestration of internal as well as external STP are:

Real-Time Information
In order to achieve STP, the trade information has to be passed between the buying entity, selling entity, exchanges, depository participants, and any other entity involved in the trade processing on a real-time basis at fast speeds. This requires either synchronous or asynchronous integration between applications running on different platforms (i.e., heterogeneous development and deployment environments) and possibly across the firewall.

Security
Secured interoperability holds the key for orchestrated STP to become a successful initiative. The security requirements for internal STP are almost a subset of those of external STP. External STP involves significant security risks as it involves the use of the Internet or VPNs, which mandates two levels of security. First, external STP necessitates opening up corporate firewalls to enable cross boundary communication between enterprises. Thus, financial companies have to secure their internal network against malicious attacks through these open ports. Second, the data transmitted over the Internet or any other mode has to be secured. The data may contain classified information, such as corporate information, trade information, and settlement information, and thus cannot be left unguarded.

Information Flow Modeling
In order for orchestration for STP to work, it is imperative that you be able to model and create the orchestration logic for the business processes. Process modeling involves drawing a flow diagram that links resources, logic, and movement of information between systems. Subprocesses are used when the main process becomes too complex and needs to be broken down to keep it simple. An orchestrated environment should provide the capability of binding the components (process models; real entities such as companies, organizations, or people; source and target systems of the trading partners) of a business process together.

Information Flow Execution
Any orchestration for STP will not be possible without a robust, scalable, and high-performance orchestration server. The orchestration server uses the process models to execute the processes, directing the flow of information as needed to and from a financial company's internal IT systems (front, middle, and back office systems) and over the Internet to the IT systems of its trading partners, including custodians, exchanges, clearing houses, and banks.

Activity Monitoring
Monitoring and reporting of all activities involved in an orchestrated end-to-end business process is essential for STP. This is important for several reasons, including audit requirements, regulatory requirements, performance management, and error resolution of underlying Web services.

Exceptions and Transaction Management
This is probably one of the most important requirements for achieving an orchestrated STP paradigm. It defines and scopes the capability to process automated transactions while handling exceptions either programmatically or manually. It is worth mentioning that STP will not be able to completely eliminate human intervention for all business processes, especially in cases of exception handling. There should be hooks provided in the orchestrated STP-related business processes to allow for human intervention for providing information or making decisions wherever necessary, as defined by the orchestration logic.

Transparency
Business process transparency is an extremely important requirement of STP. At any stage of the trade cycle and at any time, any entity (if entitled) should be able to determine the state of the transaction.

Standardization of Business Processes
It's only through the standardization of business processes that key requirements of STP - automation and common processing platforms - could be achieved. Without standardization, companies will not be able to leverage reusable solutions across business applications for either EAI or B2Bi. Business processes orchestrated through a Web services foundation need to be interoperable to ensure that new interactions and changes to the business process can be deployed quickly.

Let Your Imagination Run Wild!
Imagine that it's possible to customize a range of financial and nonfinancial product packages suited for each customer's specifications dynamically in real time. Imagine that it's possible to target products and bundle them together, based on end users' interests in real time. Imagine that it's possible to connect to any clearing corporation without new technical and business requirements. Imagine that you can use the back-office services of any company without the overhead of several days worth of setup. Imagine that it's possible to electronically create new financial instruments through collaboration across different companies. Imagine that it's possible to automate all activities related to corporate actions. Imagine that it's possible to forget about making changes for T + 1 and target T - real time, now.

Can these dreams ever become a reality? Yes, it's possible. Not immediately, though. It certainly can happen and in all likelihood it will be SOA-based frameworks that will make it happen through the orchestration of business processes. This is directly dependent on three technical factors: how soon can Web services standards mature; how soon can the XML standards representing business processes, such as ISO 15022 XML, for the financial vertical industry mature; and how soon can the tools and servers that will enable the orchestration of Web services mature?

We're optimistic that this will come true sooner rather than later. It's only by imagining the evolving technology that we can set the benchmarks and direction for its growth, future research, and last but not least, adoption.

Related Links

▪ Figure 1

▪ Figure 2

About Gunjan Samtani
Gunjan Samtani is Divisional Vice President, Information Technology at UBS PaineWebber, one of the world's leading financial services firms. He has several years of experience in the management, design, architecture, and implementation of large scale EAI and B2B integration projects. He is the primary author of the upcoming book title "B2B Integration - A practical guide to collaborative e-commerce" (http://www.manning.com/samtani/index.html), being published by Manning

About Doron Sherman
Doron Sherman is the CTO of Collaxa, Inc., a Web Service Orchestration Server vendor and a BEA Partner located in Redwood Shores, California. He has been involved with Java since its early days and pioneered application server technology while being a founder and chief scientist at NetDynamics.