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Trade Lifecycle

1. The document outlines the key steps in a trade lifecycle from order receipt through to settlement. 2. It involves functions across front, middle and back offices including order execution, risk management, trade capture, enrichment, validation and clearing before final settlement. 3. Trade details pass through validation, enrichment and agreement with the counterparty before the final settlement stage of simultaneous exchange of cash and securities.

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Saurabh
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115 views

Trade Lifecycle

1. The document outlines the key steps in a trade lifecycle from order receipt through to settlement. 2. It involves functions across front, middle and back offices including order execution, risk management, trade capture, enrichment, validation and clearing before final settlement. 3. Trade details pass through validation, enrichment and agreement with the counterparty before the final settlement stage of simultaneous exchange of cash and securities.

Uploaded by

Saurabh
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Step Number Actors Functions

1 Front Office Order Received


2 Middle Office Risk Management
3 Front Office Order Execution

4 Front Office Trade Capture

5 Back Office Trade Capture

6 Middle offie Trade Enrichment

7 Middle Office Trade Validation

8 Front Office Confirmation


9 Clearing House Clearing

10 Back Office Settlement


Explaination

Check for sufficient margins


Exchange does the match making of the trades

The next step after trade execution is to capture details of all trades, irrespective of the origin it is recorded with
Normally an Investment Banking Operations flow through different heads all in other words called as "offices", s
Office,Middle Office and Back Office. Now the relation with it, the trade which flows through these are measure
environment. The trade which is being executed on a first hand is captured in front office where the basic detail
being recorded. Doing so is important to keep the track of trades and follow instructions to proceed to the next
operation. The bottom-line to this - the record will save the stated objective.

The next step, in contrast with it's preceding step, the executed trade is captured at front office, now the actual
to the back office operations, where the trade recorded is now ready to put into the books, this process in terms
called as book-keeping. The components which are meant to be in books are- Trade Date, Trade Time, Value date
or quantity, Security ( Equity, Fixed Income or Derivative), Price , Operation (Buy or Sell) and last but not the leas
involved.

Following trade capture within the settlement system, the details of trade required to be "Enriched". By Enrichm
improvement of something valuable to enhance productivity, over here the trade enrichment involves the selec
attachment to a trade of relevant information which is necessary to complete a number of essential actions follo
Trade components which required enrichment are related to - Calculation of cash values, counter-party trade co
requirements, selection of custodian, method of transmission of settlement instructions and determining the m
reporting

Once the execution, capturing and enhancing of a trade is done, the next step is to initiate certain measures, in w
trade validation. The different task which need to be taken into picture are- Issuing a trade confirmation, reporti
regulatory authorities and at last issuing settlement instructions. However adopting different methodologies to c
contained within a fully enriched trade is to reduce the possibility of erroneous information being sent to outsid
validation stand out to be an important mechanism to reduce risk and to remain in control.
This is an extremely critical step for the trade settlement.
Trade details and SSIs are agreed with counterparty at least a day prior to settlement date.
Netting

This is the process of simultaneous exchange of cash versus securities for a security trade or cash versus cash for

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