23512555 trade-life-cycle
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Life Cycle of a Trade
Training Academy
Page 2
Introduction Facilitator
Self
Course Outline
Break Timings 15 mins – Forenoon
45 mins – Lunch
15 mins – Afternoon
Expectations
Page 3
Expectations
Static data
How trade is booked
Settlement and before settlement
Trade booking and settlement
Impact of incorrect settlement
Pre-matching before a settlement
Entire life of a trade
Front office & middle office
How trade is entered and how it is booked
Page 4
What is your Idea of
Life Cycle of a trade ??
Section One
The Market Participants
Page 6
The Market Participants - FacilitatorsBrokers
Dealers
Investment Banks
Stock Exchanges
Agents
Securities Trading Organisations
Custodians
Clearing Banks
Regulators
Page 7
The Market Participants - InvestorsInstitutional Investors
Mutual Funds (Unit Trusts)
Pension Funds
Insurance Companies
Hedge Funds
Charities
Individual Investors
Page 8
The Marketplace
SecuritiesTradingHouse
Exchanges
INVESTORS
INV
ES
TO
RS
INVESTORS
AGENTS
AGENTS
AG
EN
TS
ISSUERS
ISSUERS
Securities
Securities
Page 9
Markets & Stock Exchanges
A Market is an environment in which securities are bought and sold. Central to some market places is the Stock Exchange.
Trades executed over an Exchange are executed “On-Exchange” or “Exchange Traded”
Other trades executed over the telephone are “OTC” (Over the Counter) or Non-Exchange Traded
Each securities market has an associated and recognisable place to effect settlementE.g. French Government Bonds traded on the Paris Bourse settle in
Euroclear
Page 10
Stock ExchangesRegion Country Financial
CentreStock Exchange
Europe UK London London Stock Exchange (LSE)London Metal ExchangeLondon International Financial Futures & Options Exchange (LIFFE)
Germany Frankfurt Deutsche Bourse
Spain Madrid Bolsa de Madrid
Asia Pacific
China Hong Kong Stock Exchange of Hong KongHong Kong Futures Exchange
China ShenzhenShanghai
Shenzhen Stock ExchangeShanghai Stock Exchange
Japan Tokyo Tokyo Stock ExchangeTokyo International Financial Futures Exchange (TIFFE)
Singapore Singapore Stock Exchange of SingaporeSingapore International Monetary Exchange (SIMEX)
Australia Sydney Australian Stock Exchange (ASX)
America USA New YorkChicago
New York Stock Exchange (NYSE)Chicago Stock Exchange
Page 11
Other Market ParticipantsSalespeople
Data Providers
Registrars
Coupon Paying Agents
Trade Matching Services
Settlement Instruction Communication Mechanisms
Page 12
Market Participants - IssuersOrganisations occasionally need to raise cash/capital to expand their businesses by:
Selling part ownership issuing shares or equity
Borrowing cash from investors issuing debt in the form of bonds
Type of Issuer Example
Corporations Vodafone (UK)
Sovereign Entities Kingdom of Denmark
Local Governments City of London
Government Agencies Federal National Mortgage Association
Supranational Organisations International Bank for Reconstruction & Development (World Bank – IBRD)
Page 13
Where does Deutsche Bank fit?
Deutsche covers multiple functions:
Broker
Dealer
Fund/Asset Manager
Investment Bank
Issuer
Global Custodian
Retail Bank
Page 14
So far Covered
I. Market Participants
Section Two
Static Data
Page 16
What is Static Data?
Static Data is the common term to describe the store of information used to determine the appropriate actions required for successful processing of each trade.
For Example:
Trading Entities
Trading Books within each entity
Counterparties
Instruments
Currencies
Prices
Page 17
Sources of Static DataWhere possible, financial institutions try and create a core
of “Golden Source” static data to avoid data conflicts in inter-dependent systems
Companies specialise in gathering and distributing financial data to institutions via:Electronic File Feeds
Internet
Through on site terminals.
Page 18
Security Data Providers or Data Vendors Reuters
Bloomberg
Telekurs
Rolfe & Nolan
SWIFT
DTCC
Alert Direct/OMGEO
Standard and Poors
Euroclear
Wallstreet
SIAC
NSCC
Page 19
Counterparty Static DataName, Address & Contact Details
Authorized Credit Limits
Related Companies
Standard Settlement Instructions
Date of account set up
Type of Institution
Documentation signed
Tax Status
Registered Representative
Confirmation DetailsFax, Telex, Electronic Trade Confirmation, SWIFT, Email
Page 20
Instrument Static DataType of instrument
Equity, Bond, Warrant, Derivative, Commodity
IssueShort Name, Long Name, Size, Denomination, Issuer
Coupon DatesCoupon Rate, Payment Characteristics - 30/360, A/360 etc
Alternative/External References, ISIN, Common Code, RIC, Quick Code, Cusip etc
ExchangeCurrencyMaturity DateFactors
Page 21
Maintaining Static Data
Incorrect static data causes many processing errors:
Delayed Confirmations
Unmatched Transactions
Settlement Failure
Incorrect Fee calculations
Incorrect Profit & Loss Calculation
Poor Reporting (Regulatory & risk impact)
Increased cost per transaction due to reduced STP
Incorrect static data leads to reduced service and dissatisfied customers.
Page 22
Static Data SummaryBad Static Data results in reduced service levels to clients
due to processing hold-ups and possible trade failure
Bad Static Data impacts operational risk and increases the cost per trade processed
Bad Static Data contributes to poor internal & external reporting impacting risk & reputation
Static Data will continue to be an important dependency on the efficient processing of trades especially as the trade lifecycle window becomes smaller
STATIC DATA Must be populated correctly within all of the relevant systems.Must be obtained from a credible source as timely as possible.
Page 23
So far Covered
I. Market Participants
II. Static Data
Section Three
Trade Execution & Trades Processing
Page 25
Straight Through Processing
Str
aigh
t Thr
ough
Pro
cess
ing
(STP
)
Trade Execution
Trade Instruction
Trade Confirmation/Affirmation/Matching
Trade Processing
Trade Validation
Trade Capture
Trade Settlement
Instruction/Agent Matching
Fails & Fail Management
Trade Enrichment
Pos
ition
/Inve
ntor
y m
anag
emen
t
Cor
pora
te A
ctio
ns
Trad
e/P
ositi
on A
ccou
ntin
g
Sec
uriti
es L
endi
ng &
Bor
row
ing
Cas
h Fu
ndin
g
Rec
onci
liatio
ns
Page 26
What is a Trade?A legal contract between two ‘counterparties’. A seller and
a buyer.
The SELLER must deliver the commodity he has sold to the buyer.
The BUYER must pay the agreed purchase price on the agreed value date.
Page 27
The Front OfficeTrading
Sales
Broking
Corporate Finance
Repo Desk
Page 28
Why Trade?Speculate
Profit from price move or increase in value of the asset.
Accumulate Benefit from dividend on shares and interest on bonds.
Hedging: To speculate and accumulate.
To reduce risk.
Page 29
Trade Execution
Trade execution tends to operate in one of three ways where sellers and buyers execute trades:
Trading FloorTraditional method of trading – face to face on the trading floor of a
Stock Exchange.
Computerised Exchanges Established in the UK as part of the Big Bang in 1986. This term
applied to the liberalization of the London Stock Exchange (LSE) when Trading was automated.
Telephone
Page 30
Trade Execution
Furthermore Trades can be:Quote Driven
Market Makers quote prices via computerised screens showing the level at which they are prepared to buy and sell with the intention of attracting business.
NASDAQ (US) SEAQ (UK)
Order DrivenOrders from sellers are matched with buyers’ orders electronically.
Xetra (Germany) SETS (UK) SEATS (Australia)
Electronic Communications Networks (ECN)ECN’s operate on an electronic basis only.
Euro-MTS Brokertec Archipelago
Page 31
Trade CaptureRegardless of the trade execution/origin, all trades must be recorded formally by the market participant.
To update a trading position for a specific security within a trading book
To update average price of the current trading position to enable the trader to calculate trading profit or loss
To allow trade detail to be sent through to the Back Office for trade processing and settlement
As part of Market & Regulatory Reporting requirements
To facilitate risk management
Traders use complex trading systems to facilitate trading & position management, trade processing is usually done via Back Office processing systems.
Page 32
Front Office Trade DetailTrading Book
Trade Date
Deal Time
Value Date
Operation (e.g. Buy/Sell, Lend/Borrow, In/Out)
Quantity
Instrument/Security
Price
Counterparty
Page 33
Trade Validation Trade validation occurs to check if the trade information received in
the Back office systems corresponds with the Front Office record.
Trade validation includes the checking of constituent static data information:
Examples include: Is the security recognised on the system?
Is the Counterparty account recognised?
Is the Trader allowed to trade on the trading book?
Is the trading book valid to trade security x?
Is the value date a valid settlement date in the location of settlement?
Are the securities restricted?
All detected errors must be investigated and corrected.
Page 34
Trade EnrichmentTrade enrichment exists to add specific trade data to the
basic trade detail to allow downstream processing.
This data is not usually held in Front Office Trading systems.
This data can be added manually however in the STP environment the aim is to derive this automatically.
Examples include:Calculation of cash values.
Regulatory Reporting required.
Trade Confirmation requirements.
Selection of custodian details.
Selection of Settlement Instructions and communication method.
Page 35
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Trades Processing
Section Four
Trade Confirmation
Page 37
Trade Confirmation/AgreementTrade Confirmation/Affirmation is an important process
required to reduce the risk of the traders P&L.
Until the counterparty acknowledges the trade detail the effect on the price or quantity of the trade is subject to change, impacting the traders book.
Trade agreement can be achieved through:Sending trade confirmations to the counterparty.
Receiving trade confirmations from the counterparty.
Trade or Contract Matching.
Trade Affirmation.
Page 38
Trade Matching
Trade Matching generally applies to mandatory electronic matching of trade details.
Both parties are required to input details to a central matching facility.
Matching results (i.e. matched, unmatched) are provided by the trade matching facility to both parties.
Examples include:Omgeo Central Trade Manager (CTM).
TRAX (Internationally traded debt & securities).
Depository Trust & Clearing Corporation (DTCC)
National Securities Clearing Corporation’s Trade Matching Service. (NSCC)
Page 39
Trade AffirmationTrade Affirmation relates to the electronic matching of trade details typically between securities institutions and Institutional clients.
Trade details are input by the securities house and sent to a trade affirmation facility.
The Trade affirmation central hub sends on the message.
The institutional client agrees (affirms) or disagrees and the response is sent back to the securities house.
Both parties must subscribe to the service.
Examples include: Omgeo’s Oasys Global system.
FIX – (Global)
Oasys Domestic - (US)
DTC ID (Institutional Delivery) – (US)
Page 40
Summary
Basic Principles
The longer a trade’s detail remains unchecked after trade date, the greater the risk of price movement and P&L impact.
Trade confirmation/matching messages should be issued as soon as possible after trade validation.
Timely and accurate confirmation generation is a major client service consideration.
Prompt actioning of all confirmation discrepancies reduces trade risk.
Page 41
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
Section Five
Trade Instruction
Page 43
Settlement Instructions
Settlement Instructions are used to communicate the movement of securities and cash to the custodian.
Trade Agreement confirms the commercial details of the trade.
Settlement Instructions indicate the commercial details of the trade AND the location and account details for the cash and security movements. (Settlement Details).
Page 44
Instruction Content
Settlement Instructions tell the custodian/Agent to carry out precise commands such as:
The quantity of securities to be received or delivered.
The net settlement value to be paid or received.
From whom securities will be received.
To whom payment must be made.
From whom payment will be received.
To whom securities must be delivered.
On which date to carry out these instructions.
Page 45
Instruction Communication Methods
S.W.I.F.T.
CREST
DTC
Euroclear
Clearstream
Agent Banks
Custodians
Proprietary Messaging
CREST
DTC
Euclid (for Euroclear)
Cedcom (for Clearstream)
Page 46
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
Section Six
Instruction/Agent Matching
Page 48
Why do we match instructions?
To reduce settlement risk by:
Increasing the chances of trade settlement on value date
Resolving differences between trades and counterparties
Enabling accurate funding of cash in nostro accounts
Managing stock inventory in depositories
Page 49
Matching at The Settlement AgentOnce Instructions have been received at the Custodian, the next lifecycle steps include:
Instruction MatchingCustodian attempt to match the instruction to the counterparty
instruction.
Status UpdateAttachment of the current status of the instruction.
(matched/unmatched/unknown).
Unmatched Resolution Investigation and resolution of non-matching instructions.
Trade SettlementUpdating the current status within the securities trading
organisation’s books and records.
Page 50
Instructions Matching: Example
SecuritiesTradingHouse
CounterpartySecurities
HouseCounterparty
CSD or ICSDInstruction
Comparison
2
1 1
4 4
3Status Status
SettlementInstruction
SettlementInstruction
StatusMatched orUnmatched
StatusMatched orUnmatched
1 Instructions sent in by Securities House and Counterparty.
2 Instruction matching occurs.
3 Status is recorded.
4 Instruction Status (Matched/Unmatched) is sent back to both parties.
Page 51
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
Section Seven
Trade Settlement
Page 53
Settlement Terminology
Trade settlement is the act of exchanging securities and cash between buyer and seller.
Value Date / Contractual Settlement Date.
Actual Settlement
Value Date and Settlement Date will be the same in the majority of trade settlement cases.
A percentage of trades fail to settle on value date and will settle on another date referred to as the actual settlement date.
Page 54
Settlement Considerations
How to ensure trade settlement
Ensure the seller holds the required level of securities at the correct custodian.Some securities can settle at more than one location.
Ensure the purchaser has sufficient cash to make the payment.The purchaser may aggregate balances over a number of accounts,
the total amount must cover the amount required. (Funding).
The purchaser may have a credit agreement with the custodian who will cover the cash shortfall. (Secured credit line/Overdraft).
The purchaser may have a collateral agreement whereby collateral is held in the account to offset any non return of funds. (Margin)
Page 55
Types of SettlementFull Settlement
Partial Settlement
Securities Only
Cash Only
Cross Currency Settlement
Net Settlement
Page 56
Summary
Timely settlement of trades is an important part of the Trade Lifecycle with implications across the following areas:
Inventory Management
Cash Management
Settlement Risk
Cost Management
Firm Reputation
Page 57
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
Section Eight
Position/Inventory Management
Page 59
Inventory Management
Management of the stock holding is an integral part of trade settlement:
Inventory Management ensures: The correct amount of securities (nominal) are available
At the correct location (depot).
At the correct time (on value date).
Page 60
Methods of Inventory ManagementIf securities are unavailable we can consider the following:
Internal Book Transfer.Borrow securities from another firm account same depot.
Realignment.Borrow securities from another firm account different depot.
Stock Borrow Loan Trade.Borrow the securities from the market.
Autoborrow.Borrow the securities from the custodian/central depository.
Execute a Repurchase Agreement (Repo)
Do nothing and let the trade fail.
Page 61
Inventory & Funding Management
Transmit Settlement Instruction
Match Settlement Instruction at Custodian
Settle at Custodian
Securities
Choices
Cash
Choices
Do NothingLend Repo Do NothingBorrow via
RepoBorrow
UnsecuredAutoBorrow
Page 62
Automated Lending & Borrowing
Service provided by large Custodians and Central Security Depositories:
BorrowersBorrow required securities automatically.
Borrow certain types of security automatically i.e. Spanish Bonds.
Borrow upon request.
Sometimes used as a last resort due to the cost.
Lenders Lend all securities automatically.
Lend certain types of security automatically.
Lend upon request.
Page 63
How do Trades & Positions get updated?Automated Updates
Instruction statuses are sent in by the custodian (fully settled, partially settled, failed etc).
The Securities Trading House automatically loads this information into the settlements systems.
The system attempts to locate the relevant trade in its internal books and records.
Once found it records the status update against the transaction. It will also automatically update the relevant security positions and
balances reflecting the delivery or receipts.
Manual Updates In some cases it may be necessary to settle trade manually and a
settlements specialist may manually record the update against the trade record.
Page 64
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
Section Nine
Fails & Fail Management
Page 66
Failing Trades and their ImpactA failed trade is any securities transaction that does not
settle on value date.
The buyer and seller are impacted by settlement failure:Unable to use the cash to fund other security purchases.
Unable to lend on money markets and earn credit interest on cash.
Unable to pay off existing overdraft/debt.
Unable to use securities required for an onward delivery causing a break in the chain.
Risk impact due to movement in the market causing a change in the value of securities. (mark to market)
Page 67
Why Trades FailInstructions not received by custodian
Instructions remain unmatched on value date
Insufficient cash, collateral, credit line
Insufficient securities
Page 68
The Importance of Managing Fails Fails will have cash implications
Interest claims on fails to receive.
Interest expense on fails to deliver.
Fails make the reconciliation of corporate actions difficult which can lead to material losses
Regulatory Impact - In some markets fines are imposed for late trade settlementAustralia – Fines are imposed daily from value date to settlement
date for trades executed on the Australian Stock Exchange.
UK - Fines are imposed by CREST from a member’s failure to achieve pre-defined settlement targets.
Page 69
Interest ClaimsAn interest claim is compensation from the failing party to
for the loss of cash interest or use of securities.Failed trades are monitored to determine the reason for failure and
enable the interest claim to be executed against the counterparty.
Some marketplaces (e.g. ISMA) have minimum claimable interest recommendations and deadlines by which claims must be issued.
Back Office Settlements add immense value by actively monitoring instruction statuses and helping to accurately fund cash shortfalls or short positions.
In some Securities Trading Houses, if the Firm Trader is at fault then the cost of the fail can be directly attributed to their book, impacting their P&L.
Page 70
So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
Section Ten
Reconciliations
Page 72
What are ReconciliationsReconciliations exist to check the accuracy of the firms
books and records: Internally between systems and departments
Externally where securities and cash are held.
A Reconciliation Break is a discrepancy between one record and another
All breaks should be investigated, accounted for and corrected to ensure continued integrity
Automation of reconciliation reporting facilitates timely investigation and resolution of breaks on a daily basis
Page 73
Why do we monitor reconciliations?Regulatory
Managing Risk
Corporate Actions
Types of Reconciliations
Position Reconciliations
Trade Reconciliations
System Reconciliations
Page 74
So far CoveredI. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
Section Eleven
Clearing and Custody
Page 76
Types of Custodian 1
Term Description Example
Custodian An organisation that holds securities and cash on its clients’ behalf and may effect trade settlement on its clients’ behalf.
Deutsche Bank Domestic Custody Services
Global Custodian As per custodian, but has a network of local (or sub-custodians) that hold securities and cash and effect trade settlement on behalf of the global custodian.
State Street
Citigroup
BoNY
Paribas
Local Custodian A custodian that operates within a specific financial centre.
Credit Lyonnais Paris
Banco Espirito Santo Lisboa
Sub-Custodian A custodian within a Global Custodian’s network of custodians.
Citibank Milan
Citibank Madrid
Page 77
Types of Custodian 2Term Description Examples
Central Securities Depository (CSD).
National Central Securities Depository (NCSD)
An organisation that hold securities, normally in book entry form; usually the place of settlement, effected through book transfer.
A CSD that handles domestic securities of the country in which it is located.
DTC (USA)
CREST (UK & Eire)
JASDEC (JPY)
CCASS (HK)
International Central Securities Depository (ICSD)
A CSD that handles domestic and international securities.
Only two organisations are recognised as ICDS’s.
Euroclear (Brussels)
Clearstream (Luxembourg)
Settlement Agent An organisation that effects the exchange of securities and cash on behalf of its clients; resultant securities and cash balances may or may not be held.
Citibank Milan
Citibank Madrid
Page 78
So far CoveredI. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
XI. Clearing & Custody
Page 79
What is a Corporate Action?Any action by an Issuer which may affect the investor:
The distribution of benefits to existing shareholders or bondholdersCoupon PaymentsCash DividendsStock Dividends
A change in the structure of an existing securityStock SplitBonus Shares
A notification that may or may not require a response from the securities ownerAnnual MeetingVoting Rights
Section Twelve
Trade & Position Accounting
Page 81
Controlling
The accounting group within the bank is responsible for correctly recording and monitoring all of the financial transactions occurring within the Securities Trading House:
Deutsche Bank Controllers include:
Legal Entity Controller (LEC)Responsible for DB Companies.
Business Area Controller (BAC)Responsible for product lines and the Business.
Central Functions – Risk ControllingResponsible for Managing Risk across the all divisions centrally.
Page 82
Controlling ResponsibilitiesMonitor Stock/Security Positions
Monitor Cash Balances
Track Firm Books and Records
Create Good Processes
Create Controls
Reconcile Trade Data
Reconcile Cash Flow
Reconcile all Journal activity
Page 83
Example Control ReportsReconciliations
Profit and Loss Statement (P&L)
Balance Sheet Reporting (BS)
Buy and Hold Reporting (B&H)
Management Information Reporting (MIS)
Credit Risk Reporting (CRES)
Page 84
So far CoveredI. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
XI. Clearing & Custody
XII. Trade & Position Accounting
Section Thirteen
Regulatory & Compliance Responsibilities
Page 86
Regulators
Regulatory authorities exist within the securities industry to ensure:
All business undertaken within the marketplace is done in the proper manner
To protect investors who are participants within the marketplace
Guard the reputation and integrity of the marketplace
Monitor activity which fails outside of normal business trading practice
Page 87
Regulator ResponsibilitiesAssessing suitability of securities trading houses to
participate within the market place.
Monitor the business undertaken by securities trading houses, investment advisors & fund managers.
Enforcement of laws and possible prosecution of security law violators.
Page 88
Financial Regulatory Authorities
Country Regulatory AuthorityAustralia Australian Securities & Investments Commission
Prudential Regulatory Authority
Bahamas Bahamas Central Bank
France Commission des Operations de Bourse
Banque de France
Hong Kong Securities & Futures Commission
Monetary Authority
Japan Financial Supervisory Agency
Financial Reconstruction Commission
Singapore Monetary Authority of Singapore
UK Financial Services Authority (FSA)
USA Securities & Exchange Commission (SEC)
US Commodity Futures Trading Commission
National Futures Association
Page 89
Reporting Methods
A number of methods exist dependent on how the local Regulator requires reporting to be effected
Automatic forwarding of trade details by a computerised exchange requiring no additional reporting
Automated message transmission by the member for confirmation/matching/instruction purposes part of which is used to satisfy transaction reporting requirements
File feeds produced from Front Office/Back Office/Controlling systems and sent direct to Regulator
Page 90
Compliance
Compliance is the Bank’s internal regulator. Responsibilities include:
Ensuring compliance to rules of appropriate financial regulatory body
Handling confidential information
Ensure that personnel are adequately and properly licensed to operate in the marketplace
Managing anti-money laundering regulations
Monitoring Employee Personal Trading
Page 91
So far CoveredI. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
XI. Clearing & Custody
XII. Trade & Position Accounting
XIII. Regulatory & Compliance
Section Fourteen
Conclusions
Page 93
Conclusions Reduce Settlement Cycles
Increase Straight Through Processing for trades
Increase use of central Counterparties
Increase use of “Golden Source” static data
Active management of collateral
Minimise Risk
Minimise Operational Cost
Offer increased service to clients
Manage increasing volumes
Maximise internal efficiency
Section Fifteen
References
Page 95
Recommended Reading Michael Simmons
Securities Operations – A Guide to Trade & Position Management
Stephen Valdez An Introduction to Western Financial Markets
David Dasey An Introduction to Equity Markets
Moorad Choudhry An Introduction to Repo Markets
Robert Hudsen Treasury Management
Financial Engineering The Handbook of Equity Derivatives
Oxford paperbacks Dictionary of Finance & Banking
Page 96
Industry Websites http://www.crestco.co.uk/ CREST
http://www.dtcc.com/ Depository Trust & Clearing Corporation
http://www.euroclear.com/ Euroclear
http://www.jasdaq.co.jp/index_en.jsp Japanese Securities Depository Centre
http://www.isma.org/home.html International Securities Market Associations
http://www.bankofengland.co.uk/Links/setframe.html Bank of England
http://www.fsa.gov.uk/ Financial Services Authority
http://www.sec.gov/ Securities Exchange Commission
http://www.nasdaq.com/ National Association of Securities Dealers Automated Quotations.
http://www.amex.com/ American Stock Exchange
http://www.londonstockexchange.com/London Stock Exchange
http://www.lchclearnet.com/ London Clearing House
http://www.liffe.com/ International Financial Futures & Options Exchange
Page 97
Industry Websites http://www.iosco.org/iosco.html International Organ Securities Commission
http://www.ipma.org.uk/ International Primary Market Association
http://www.isda.org/index.html International Swaps & Derivatives Association
http://www.isla.co.uk/ International Securities Lending Association
http://www.isma.com/home.html International Securities Market Association
http://www.liba.org.uk/ London Investment Bank Association
http://www.lsta.org/ Loan Syndic Trading Association
http://www.sia.com/ Securities Industry Association
http://www.securities-institute.org.uk Securities Institute
http://dspace.dial.pipex.com/jhalsey/ Compliance Exchange
http://www.world-exchanges.org/ Federation of Exchanges
http://www.trioptima.com/tri/ OTC Derivatives termination service
http://www.finanz-adressen.de/WE-fin-regulatory.html
Financial Regulatory Authorities
Page 98
Industry Websites http://www.exchange-handbook.co.uk/Exchange Handbook
http://www.investorwords.com/ Glossary
http://www.stpforum.com/ STP Forum
http://www.stpinfo.com/ STP Info
http://www.afponline.org/ Association for Financial Professionals
http://www.calpers.ca.gov/index.jsp?bc=/investments/straightthrough.xml Virtual Matching Utilities (VMUs);
http://www.omgeo.com/ OMGEO
http://www.sungard.com/ Sungard Systems
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