This document outlines the key steps in the securities trade life cycle from order origination to settlement. It describes the roles of different departments within a brokerage firm or securities trading organization, including the front office for order origination, middle office for order validation and confirmation, and back office for clearing and settlement. The life cycle involves order entry, execution, reconciliation, confirmation, booking, accounting, cashiering and settlement functions to complete a trade.
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.
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.
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.
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.
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
By www.ProfitableTradingTips.com
Scalping in Day Trading
Traders who engage in rapid momentum trades are often scalping in day trading. These traders make their profit from the difference between bid and ask prices. Even in a flat market traders can profit from scalping in day trading. In order to successfully make a business out of scalping in day trading the trader needs to pay close attention to the market, always be aware of market fundamentals, and keep abreast of technical analysis. Despite the theoretical possibility of trading in an absolutely flat market the price of a stock constantly moves to some degree throughout the trading day. Thus when scalping in day trading one acts as a mini trend trader as well.
In and Out of Positions in a Hurry
There is a rhythm to scalping in day trading and it is fast. Traders seek to profit from the actions of traders to simply take the bid and ask prices of a stock. This strategy guarantees a profit if the trader acts quickly. It can result in losses if the stock price moves too quickly. As an example, Xyz Corporation has a bid price of $10.10 and ask price of $10.15. If the scalper can buy at the bid price and sell at the ask price he gains $0.05 per share, a small amount but a lot if repeated many times throughout the day. However, the market might move lower before he can complete his trade. Let’s say that the stock moves so that the bid price is now $9.90 and the ask price is $9.95. The trader who purchased for $10.10 now needs to sell at $9.95 if he wants to quickly exit his trade. The other choice is to continue the trade in hopes that the market will turn upward and not fall farther. This later course is anathema to scalping in day trading. When scalping a trader is never trying to outguess the market but simply helping to make the market and make repetitive small profits.
The Nature of Bid and Ask Prices
Bid and ask prices are available on markets across the world. By using this price system traders are able to execute trades immediately, so long as there are enough bid prices to match ask prices. The difference between bid and ask prices is called the spread. Gaining the spread on every trade is the goal when scalping in day trading. The ideal scalping trade would be instantaneous. Buy at the low price and sell at the high. Getting in and out in an instant would seem to be the ideal situation if dealing with absolutely static bid and ask prices. However, the market is never static so traders must look to market direction even when scalping in day trading. A successful scalper also engages in trend following in day trading.
Think of the Spread as a Bonus
Scalping in day trading takes advantage of market movement as well as the bid to ask spread. While trend traders use technical analysis to read market sentiment they attempt to ride out a trade to gain the maximum profit.
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
By www.ProfitableTradingTips.com
Scalping in Day Trading
Traders who engage in rapid momentum trades are often scalping in day trading. These traders make their profit from the difference between bid and ask prices. Even in a flat market traders can profit from scalping in day trading. In order to successfully make a business out of scalping in day trading the trader needs to pay close attention to the market, always be aware of market fundamentals, and keep abreast of technical analysis. Despite the theoretical possibility of trading in an absolutely flat market the price of a stock constantly moves to some degree throughout the trading day. Thus when scalping in day trading one acts as a mini trend trader as well.
In and Out of Positions in a Hurry
There is a rhythm to scalping in day trading and it is fast. Traders seek to profit from the actions of traders to simply take the bid and ask prices of a stock. This strategy guarantees a profit if the trader acts quickly. It can result in losses if the stock price moves too quickly. As an example, Xyz Corporation has a bid price of $10.10 and ask price of $10.15. If the scalper can buy at the bid price and sell at the ask price he gains $0.05 per share, a small amount but a lot if repeated many times throughout the day. However, the market might move lower before he can complete his trade. Let’s say that the stock moves so that the bid price is now $9.90 and the ask price is $9.95. The trader who purchased for $10.10 now needs to sell at $9.95 if he wants to quickly exit his trade. The other choice is to continue the trade in hopes that the market will turn upward and not fall farther. This later course is anathema to scalping in day trading. When scalping a trader is never trying to outguess the market but simply helping to make the market and make repetitive small profits.
The Nature of Bid and Ask Prices
Bid and ask prices are available on markets across the world. By using this price system traders are able to execute trades immediately, so long as there are enough bid prices to match ask prices. The difference between bid and ask prices is called the spread. Gaining the spread on every trade is the goal when scalping in day trading. The ideal scalping trade would be instantaneous. Buy at the low price and sell at the high. Getting in and out in an instant would seem to be the ideal situation if dealing with absolutely static bid and ask prices. However, the market is never static so traders must look to market direction even when scalping in day trading. A successful scalper also engages in trend following in day trading.
Think of the Spread as a Bonus
Scalping in day trading takes advantage of market movement as well as the bid to ask spread. While trend traders use technical analysis to read market sentiment they attempt to ride out a trade to gain the maximum profit.
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www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
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Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Securities Trade Life Cycle
1. Securities Trade Life Cycle
Khader Shaik
Author of
“Managing Derivatives Contracts”
Amazon - http://www.amzn.com/1430262745
2. 2
Contents
•Introduction
•Brokerage Firm/Securities Trading Organization
•Trade Life Cycle
•Order Origination / Front Office
•Order Validation / Middle Office
•Settlement / Back Office
•Custodians, Commercial Banks
•References
3. 3
Brokerage Firm
•Made up with many departments
•Usually Brokerage firms play multiple roles
•One of the role is Securities Trading Organization (STO)
•Play a vital role in Securities Market
•Involve and execute large securities transactions
•Securities Trading department usually comes under ‘Capital Markets’ business of the firm
4. 4
STO
•STO facilitates trading of securities for their clients
•Sell Services - Sell various Securities as customers demand
•Sales Team (Sales Traders) deals with customers
•Traders execute Trades
•Usually have one or more branches
8. 8
Order Origination
•Orders are received from Clients
•Clients
–Institutional Clients etc
•Received by Sales Trader
–By Phone or
–Electronically
•New Orders are entered into Order Management System (Trading System)
–This step is referred as ‘Trade Capture’
9. 9
•Sales Team
•Also known as Sales Traders
•Responsible for all client communications
•Market new securities
•Keep knowledge of market demand
•Supply market information (demand/supply) to other departments in STO
•Move Customer orders to Order Room
Sales Department
10. 10
•Traders
•Collect Orders from Sales Traders
•Responsible for execution of orders
•Use various avenues to execute the orders
–Exchange
–OTC
–Internal inventory / Trader Book etc
•Return execution reports back to Sales Trader
Order Room
11. 11
•Reconciliation
–Reconcile orders with execution reports
–Verify executions against orders and their types
•Track Open orders
–Inform clients if any open order
–Organize GTC (good-till-cancel) orders
•Follow industry regulations and compliance rules
Trader – Additional Responsibilities
13. 13
•Unique Id is assigned to each trade and create Ticket with all the trade information
•Ticket ID is used for all further references during trade processing
•This process is also referred as TICKETING
Recording
14. 14
•Calculation of cash value of trade, commissions etc
•Recognize parties involved and amounts to be paid or received
Figuration
15. 15
•Report Trade information to Order Comparison System and/or other compliance systems as required
•Trades are compared with counter party
–Counter party / street side / contra
•Trade can’t be processed until it is matched with street side report
•Reports are submitted electronically
•For eg: NYSE Floor trades are submitted to OCS within 20/30 minutes
Order Comparison
16. 16
•Unmatched trades are reported back and usually fixed manually
•Errors are usual and sometimes may cost to the firms
•Regulatory agencies may fine for reporting failures by firms
Order Comparison cont..
17. 17
•Follows the trade comparison step
•Clearing agency issues Contract to both parties
•At this time both parties accepted the trade terms
•National Securities Clearing Corporation (NSCC)
Clearing
18. 18
•At the end of the trading day paper confirmations are mailed to clients
•Confirmation contains complete details of the trade
•Clients use this as transaction record
Confirmations
19. 19
•All processed orders are entered into firms books
•Updates Client positions, financial accounts and firms records and financials
Booking
20. 20
•Maintains the client accounts
•Manage the client funds in their accounts
•Responsible for calculating balance and maintain required funds based on the account types
Accounting Department
21. 21
•Responsible for exchanging Securities and Funds between trading parties
•Other responsibilities are
–Vaulting (holding certificates, maintaining book of ownership)
–Arrange bank loans to firms to maintain their positions
–Borrow and Lend stock as required
–Borrow and Lend funds as required
–Track stock splits
–Transfer securities (update company stock ownership records)
Cashiering
22. 22
•Cashiering functionality performed by either internally or outsourced other professional firms
Cashiering Firms
23. 23
•Holds funds and stocks of the clients, collects dividends
•Stock can be recorded in actual client’s name or custodian’s name
•Proxy and other communications from Issuer are directed to clients
•Depository Trust & Clearing Corporation (DTCC)
–Largest clearing and settlement corporation in US used by financial firms
Custodian
24. 24
•Lend money (loan) to Broker firms
•Underwriting of bonds (usually Munis)
•Facilitate International Trade (through issuing Bankers Acceptance)
•Act as custodians for Institutions
•Cashiering services to US Gov Securities
Commercial Bank
25. 25
Straight Through Processing(STP)
•Electronically processing the trade without any manual intervention
•Objective
–Reduce the processing cost and time
–Reduce the Operational Risk (avoid errors)
–Improve efficiency
–push for same-day (T+0) settlement
•Any errors in trade processing in STP will be separated and handled manually
26. 26
Settlement Timings
•Total time taken to process the trade after the trade date
•T+0 – Same day settlement (trade day)
•T+1 – One day after the trade day
•T+2 – Two days after the trade day
•T+2 – Three days after the trade day
•Settlement times varies based on the trade venue and other factors
27. 27
References - Books
•“After the Trade Is Made: Processing Securities Transactions” by David M. Weiss
•“Securities Operations” by Michael Simmons – Published by Wiley
28. 28
Thank You
Khader Shaik
khader@orbitra.com
khaderv@yahoo.com
My blog: http://www.ksvali.com
Editor's Notes
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC
Securities Trade Life Cycle Copyright@2007 Orbitra LLC