In brief
- In our latest blog post, Yogesh Khishagar explores the application of behavior-based testing models in the post-trade sector and explains how these techniques enhance project budgeting and boost business confidence with broad coverage and minimal effort
- The post provides a comprehensive overview of the banking and capital markets (BCM) domain, highlighting the pivotal roles of exchanges, market makers and other entities. It also delves into post-trade domain services, emphasizing the need for targeted testing techniques
- We take a deep dive into the variety of testing techniques applied within the post-trade domain and how they enhance defect detection, reduce testing efforts, and contribute to industry best practices, leading to greater business confidence and faster time-to-market
The application of behavior-based testing models, especially in the post-trade sphere, is a technique which will aid you in budgeting your project resources in a more informed way.
In this deep dive, we elucidate what the post-trade domain is and how it interplays with the banking and capital markets domain. If you aim to bolster your business confidence with minimal effort and maximal coverage, this article is tailor-made for you.
A comprehensive overview of banking and capital markets
BCM, an abbreviation for the banking and capital markets domain, encompasses a myriad of financial services, including investment banking, commercial banking, asset management and insurance. This domain is stringently regulated and mandates compliance with numerous regulatory bodies.
BCM can be partitioned into buy-side and sell-side firms that expedite investments and transactions. The roles of exchanges, market makers, clearing houses and hedge funds are pivotal to the BCM industry.
Unpacking post-trade domain services
The post-trade domain encompasses everything that transpires after a trade has been executed on an exchange, including trade confirmation, trade capture, allocation, risk management, reporting and various compliance-related services.
The services rendered by the post-trade domain hinge on a company's business model and requirements. To compose effective and efficient test cases for these services, a profound understanding of the domain and its services is essential. In essence, the post-trade domain takes care of all elements after your order transforms into a trade following its execution at an exchange or a clearing broker.
Applying established techniques to targeted post-trade sectors in testing
Testing within this domain embraces a variety of techniques and banking engineering solutions, such as equivalence partitioning, boundary value analysis, decision tables, state transition testing, and use case testing, among others.
While these testing techniques are applied across other domains, it's important to understand the correlation of these techniques to decide which should be employed for a specific post-trade project situation. Consider these techniques as tools in your toolkit, and you are the craftsman deciding whether to use an axe or a spanner.
These methods can be deployed for various services within the post-trade domain, including:
- Anti-money laundering projects
- Trade confirmations
- Risk management
- Reconciliation and reporting
By leveraging these testing techniques, testers can detect defects in a more efficient and effective manner.
A solution for any platform
It's important to note that the knowledge provided in this article is platform-agnostic. That is, it is not confined to a specific platform. It can be beneficial for anyone engaged in automation, particularly in capital markets and especially in post-trade digitalization.
Testing at different levels
Testing activities are typically performed by different teams according to their roles and responsibilities. For instance, developers handle unit testing, system integrators conduct system integration testing, and end users or business analysts perform acceptance testing. Each testing level has its unique purpose and objectives, contributing to the quality and reliability of the developing system. The true value lies not in performing tests at these levels, but in understanding how to test effectively within these levels.
Below, we summarize the post-trade services and the corresponding testing techniques that can be used:
|
Testing techniques |
Application to post-trade services |
|
Equivalence partitioning |
Anti-money laundering, trade confirmation |
|
Boundary value analysis |
Risk management (credit risk, market risk), sending payments via Swift |
|
Decision table testing |
Trade reporting, regulatory reporting |
|
State transition testing |
Trade capture, trade allocation, trade clearing, trade settlement |
|
Use-case testing |
Ops user operations, reconciliations |
Here are the benefits you can expect by using the testing techniques as per the above mapping:
- Comprehensive test coverage
- Reduction in testing efforts, leading to cost savings
- Detection of defects before going into production
- Increased business confidence
- Realistic test estimates
- Faster time-to-market
- Alignment with industry best practices
Behavior-based testing
All these techniques are behavior-based testing techniques. This means they focus on testing the behavior of the application. By using these techniques, you can uncover more defects in a shorter period and ensure that the application aligns with business requirements — a crucial aspect of the post-trade domain.
Curious to find out more? Get in touch with a Zoreza Global expert today.
Yogesh Kshirsagar
Yogesh has 19 years of IT experience in banking and finance. Before joining Zoreza Global, he held leadership positions across the UK, United States, Singapore, Malaysia, and India, working with clients like Standard Chartered, Credit Suisse, American Express, CLSA, Natixis, Bank of Ireland and MUFG Securities. He specializes in regulatory reporting, anti-money laundering, client lifecycle management and investment banking. Yogesh also writes and speaks about these topics. Any spare time is spent with his daughter, jogging, reading or experimenting with new ideas.
