The document describes the life cycle of a trade from execution through settlement. It discusses the key participants in the trading process like brokers, dealers, exchanges. It also covers important stages like trade capture, validation, confirmation and instruction matching that occur between execution and settlement. Maintaining accurate static data is important for straight-through processing throughout the trade life cycle.
This gives a high-level view of the processes involved in a trade life cycle like Trade execution, capture, affirmation, settlement and reconciliation.
This presentation delves one through all the offices and the organizations involved in a trade life cycle. This tells us how a trade is executed in the real world with the help of the Front Office, Middle and Back Office.
This gives a high-level view of the processes involved in a trade life cycle like Trade execution, capture, affirmation, settlement and reconciliation.
This presentation delves one through all the offices and the organizations involved in a trade life cycle. This tells us how a trade is executed in the real world with the help of the Front Office, Middle and Back Office.
Guide to otc trading,
I. PLAYER’S DEFINITION
II. PLAYER’S DESCRIPTION
III. REGULATORY REPORTING, ACRONYMS AND IDS
IV. TRADE TYPES BY EXAMPLES
V. TRADE LIFECYCLE AND WORKFLOW
VI. TRADE EVENTS
VII. INTRO TO MARKETWIRE & VCON
Trading has changed from local to global and so have the processes from paper to Online. The result is change in process from T+3 to T+1 and real time trading and settlement of a trade.
The New Hedge Fund-Prime Broker RelationshipBroadridge
The financial crisis has changed the relationship between hedge funds and prime brokers. With the default of some leading providers, funds have realized that they should diversify their prime broker relationships and require more transparency on operational processes of prime providers. However, as the funds industry regains momentum, they are looking to their prime brokers to provide services that will support business expansion. Hence, prime brokers need to adapt their offering and IT infrastructure to respond to the changing market.
Algorithmic trading, also called automated trading, black-box trading, or algo trading, is the use of electronic platforms for entering trading orders with an algorithm which executes pre-programmed trading instructions accounting for a variety of variables such as timing, price, and volume.
FESE capital markets academy - introduction to capital marketsTracey Roberts
Learn about different markets and products, about market participants and their motives and how markets are built and organised. Also, about the role of central counterparties (CCP) in secure capital markets and how a CCP comes between the buyer and the seller. Finally, learn about the post-trade process.
Guide to otc trading,
I. PLAYER’S DEFINITION
II. PLAYER’S DESCRIPTION
III. REGULATORY REPORTING, ACRONYMS AND IDS
IV. TRADE TYPES BY EXAMPLES
V. TRADE LIFECYCLE AND WORKFLOW
VI. TRADE EVENTS
VII. INTRO TO MARKETWIRE & VCON
Trading has changed from local to global and so have the processes from paper to Online. The result is change in process from T+3 to T+1 and real time trading and settlement of a trade.
The New Hedge Fund-Prime Broker RelationshipBroadridge
The financial crisis has changed the relationship between hedge funds and prime brokers. With the default of some leading providers, funds have realized that they should diversify their prime broker relationships and require more transparency on operational processes of prime providers. However, as the funds industry regains momentum, they are looking to their prime brokers to provide services that will support business expansion. Hence, prime brokers need to adapt their offering and IT infrastructure to respond to the changing market.
Algorithmic trading, also called automated trading, black-box trading, or algo trading, is the use of electronic platforms for entering trading orders with an algorithm which executes pre-programmed trading instructions accounting for a variety of variables such as timing, price, and volume.
FESE capital markets academy - introduction to capital marketsTracey Roberts
Learn about different markets and products, about market participants and their motives and how markets are built and organised. Also, about the role of central counterparties (CCP) in secure capital markets and how a CCP comes between the buyer and the seller. Finally, learn about the post-trade process.
BlueMax Capital- The Most Reliable Forex Brokerage Firm | Forex - Foreign Exc...BlueMax Capital
BlueMax Capital is a major provider of online foreign exchange (Forex) trading services, offering margin FX and commodities trading to individuals and institutional clients world-wide. Our multi-bank liquidity feed, fast execution and flexible leverage options set us apart as an industry leader. We think that the trader’s only concern should be search of a successful trading strategy. Therefore, we strive to provide high-quality brokerage services so that you can just trade, without being disturbed by anything else.
A major provider of online foreign exchange (Forex) trading services, offering margin FX and commodities trading to individuals and institutional clients world-wide. Our multi-bank liquidity feed, fast execution and flexible leverage options set us apart as an industry leader. We offer our clients by sharing our dedication, intelligence and passion for trading.
Trends in the European Fixed Income MarketBroadridge
Explore the leading trends shaping the fixed income landscape in Europe in the next several years. Key issues explored: rising trend to move towards electronic trading; improving post-trade infrastructure, rollout of new solutions in fixed income and impact on the back office. The paper concludes with the effect of MiFID on fixed income markets.
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how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
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What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
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Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
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Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
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 3
4. What is your Idea of
Life Cycle of a trade ??
Page 4
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 settlement
E.g. French Government Bonds traded on the Paris Bourse settle in
Euroclear
Page 9
10. Stock Exchanges
Region Country Financial Stock Exchange
Centre
Europe UK London London Stock Exchange (LSE)
London Metal Exchange
London International Financial Futures & Options
Exchange (LIFFE)
Germany Frankfurt Deutsche Bourse
Spain Madrid Bolsa de Madrid
Asia China Hong Kong Stock Exchange of Hong Kong
Pacific Hong Kong Futures Exchange
China Shenzhen Shenzhen Stock Exchange
Shanghai Shanghai Stock Exchange
Japan Tokyo Tokyo Stock Exchange
Tokyo International Financial Futures Exchange (TIFFE)
Singapore Singapore Stock Exchange of Singapore
Singapore International Monetary Exchange (SIMEX)
Australia Sydney Australian Stock Exchange (ASX)
America USA New York New York Stock Exchange (NYSE)
Chicago Chicago Stock Exchange
Page 10
11. Other Market Participants
Salespeople
Data Providers
Registrars
Coupon Paying Agents
Trade Matching Services
Settlement Instruction Communication Mechanisms
Page 11
12. Market Participants - Issuers
Organisations 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 12
13. Where does Deutsche Bank fit?
Deutsche covers multiple functions:
Broker
Dealer
Fund/Asset Manager
Investment Bank
Issuer
Global Custodian
Retail Bank
Page 13
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 16
17. Sources of Static Data
Where 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 17
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 18
19. Counterparty Static Data
Name, 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 Details
Fax, Telex, Electronic Trade Confirmation, SWIFT, Email
Page 19
20. Instrument Static Data
Type of instrument
Equity, Bond, Warrant, Derivative, Commodity
Issue
Short Name, Long Name, Size, Denomination, Issuer
Coupon Dates
Coupon Rate, Payment Characteristics - 30/360, A/360 etc
Alternative/External References,
ISIN, Common Code, RIC, Quick Code, Cusip etc
Exchange
Currency
Maturity Date
Factors
Page 20
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 21
22. Static Data Summary
Bad 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 22
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 26
27. The Front Office
Trading
Sales
Broking
Corporate Finance
Repo Desk
Page 27
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 28
29. Trade Execution
Trade execution tends to operate in one of three ways
where sellers and buyers execute trades:
Trading Floor
Traditional 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 29
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 Driven
Orders 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 30
31. Trade Capture
Regardless 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 31
32. Front Office Trade Detail
Trading Book
Trade Date
Deal Time
Value Date
Operation (e.g. Buy/Sell, Lend/Borrow, In/Out)
Quantity
Instrument/Security
Price
Counterparty
Page 32
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 33
34. Trade Enrichment
Trade 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 34
35. So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Trades Processing
Page 35
37. Trade Confirmation/Agreement
Trade 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 37
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 38
39. Trade Affirmation
Trade 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 39
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 40
41. So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
Page 41
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 43
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 44
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 48
49. Matching at The Settlement Agent
Once Instructions have been received at the Custodian,
the next lifecycle steps include:
Instruction Matching
Custodian attempt to match the instruction to the counterparty
instruction.
Status Update
Attachment of the current status of the instruction.
(matched/unmatched/unknown).
Unmatched Resolution
Investigation and resolution of non-matching instructions.
Trade Settlement
Updating the current status within the securities trading
organisation’s books and records.
Page 49
50. Instructions Matching: Example
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 50
51. So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing
IV. Trade Confirmation
V. Trade Instruction
VI. Instruction / Agent Matching
Page 51
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 53
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 54
55. Types of Settlement
Full Settlement
Partial Settlement
Securities Only
Cash Only
Cross Currency Settlement
Net Settlement
Page 55
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 56
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
Page 57
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 59
60. Methods of Inventory Management
If 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 60
62. Automated Lending & Borrowing
Service provided by large Custodians and Central
Security Depositories:
Borrowers
Borrow 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 62
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 63
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
Page 64
66. Failing Trades and their Impact
A 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 66
67. Why Trades Fail
Instructions not received by custodian
Instructions remain unmatched on value date
Insufficient cash, collateral, credit line
Insufficient securities
Page 67
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 settlement
Australia – 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 68
69. Interest Claims
An 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 69
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
Page 70
72. What are Reconciliations
Reconciliations 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 72
73. Why do we monitor reconciliations?
Regulatory
Managing Risk
Corporate Actions
Types of Reconciliations
Position Reconciliations
Trade Reconciliations
System Reconciliations
Page 73
74. 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
X. Reconciliations
Page 74
76. Types of Custodian 1
Term Description Example
Custodian An organisation that holds securities Deutsche Bank
and cash on its clients’ behalf and Domestic Custody
may effect trade settlement on its Services
clients’ behalf.
Global Custodian As per custodian, but has a network State Street
of local (or sub-custodians) that hold Citigroup
securities and cash and effect trade
settlement on behalf of the global BoNY
custodian. Paribas
Local Custodian A custodian that operates within a Credit Lyonnais Paris
specific financial centre. Banco Espirito Santo
Lisboa
Sub-Custodian A custodian within a Global Citibank Milan
Custodian’s network of custodians. Citibank Madrid
Page 76
77. Types of Custodian 2
Term Description Examples
Central Securities An organisation that hold securities, DTC (USA)
Depository (CSD). normally in book entry form; usually CREST (UK & Eire)
the place of settlement, effected
through book transfer. JASDEC (JPY)
A CSD that handles domestic CCASS (HK)
securities of the country in which it is
located.
National Central
Securities
Depository (NCSD)
International A CSD that handles domestic and Euroclear
Central Securities international securities. (Brussels)
Depository (ICSD) Only two organisations are Clearstream
recognised as ICDS’s. (Luxembourg)
Settlement Agent An organisation that effects the Citibank Milan
Page 77 exchange of securities and cash on Citibank Madrid
78. 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
X. Reconciliations
XI. Clearing & Custody
Page 78
79. What is a Corporate Action?
Any action by an Issuer which may affect the investor:
The distribution of benefits to existing shareholders or
bondholders
Coupon Payments
Cash Dividends
Stock Dividends
A change in the structure of an existing security
Stock Split
Bonus Shares
A notification that may or may not require a response from
the securities owner
Annual Meeting
Voting Rights
Page 79
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 Controlling
Responsible for Managing Risk across the all divisions centrally.
Page 81
82. Controlling Responsibilities
Monitor 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 82
83. Example Control Reports
Reconciliations
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 83
84. So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing XI. Clearing & Custody
IV. Trade Confirmation XII. Trade & Position
Accounting
V. Trade Instruction
VI. Instruction / Agent Matching
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
Page 84
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 86
87. Regulator Responsibilities
Assessing 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 87
88. Financial Regulatory Authorities
Country Regulatory Authority
Australia 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 88
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 89
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 90
91. So far Covered
I. Market Participants
II. Static Data
III. Trade Execution & Processing XI. Clearing & Custody
IV. Trade Confirmation XII. Trade & Position
Accounting
V. Trade Instruction
XIII. Regulatory &
VI. Instruction / Agent Matching Compliance
VII. Trade Settlement
VIII. Position / Inventory Management
IX. Fails & Fail Management
X. Reconciliations
Page 91
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
Page 93
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 95
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 96
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 97
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
Page 98