EXCHANGE TRADE LIFE CYCLE

NANMA E P

It is a process a trde goes through from trade initiation to trade settlement. A trade goes through 3 main department in an organization.

1. Front office
2. Middle office
3. Back office/ core operations

• Trade Initiation: The Client Decides to buy or sell a specific Security & Contact one of the STO’s with whom it normally trades.
• Trade Execution: Orders are placed on the exchange and gets a confirmation from the exchange that orders has been Executed.
• Trade Capture: Once the Order has been executed the order is fed down to the RMS/OMS. Details like: Direction, Qty, Name of the Instruments, Price, Counter Party, Trade date are Fed in RMS/OMS.
• Trade Enrichment: Adding Economic and Non-Economic details to the trade.
  Economic details are: Commission Charged, Taxes, Etc. in economic details Non-Economic details are: Bank account, Custodian Details Etc.
• Trade Validation: Have to Check Trade, Trader and CP Check. Trade Check: Check the order in the standard specification of the exchange like Qty,( Standard) Price, Lot Size Etc.
  Trader Check: Does the Trader has the certification to trade in these type of Securities, Limits available to the trader.
  Counter party Check: To Check various aspects of the counter party like any news (Negative) of the CP & whether counter party is eligible to trade in these securities.
• Trade Verification: Here trade is compared with the trade sheet
  (Email/Excel file sent from Front Office to middle office) Just to make sure that details are entered & booked are correct.
• Trade Confirmation: Send the Economic & Non-Economic details sent to the Client. It can be sent through PDF File / Excel File or by using Electronic platforms Such as OMGEO & MARKIT to confirm the trades.
• Trade Settlement: Exchange of securities Vs. Cash this is where clearing house comes into picture & make all necessary calculations for the buy side & sell side of the trade in order to determine what needed from each of them & by when.
  Example: T (Trade Date) +2 days were cash and securities are exchanged.

• Trade Reconciliation: Reconciliation Involves matching ledgers against statements to ensure correct accounting of all the trades booked. " It is a Control Process where in 2 or more independent sets of data elements are compared and Matched"
• Trade Reporting: Trade Reporting is also one of the most Important step in trade life Cycle were we report all the trades to the regulators. We need to report to the appropriate regulators the details of each transaction undertaken within a Pre-Started time frame from the time of trade Execution. This is commonly referred to as supervision or Surveillance with in the Regulatory environment.