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Understanding The Trade Life Cycle

The document discusses the trade life cycle from order placement through settlement. It involves several key steps: trade initiation and order placement, trade execution, trade capture and enrichment, validations and verifications, affirmation and confirmation between counterparties, settlement of securities and funds, and reporting. Together this process ensures trades are accurately recorded and completes the transaction from initiation to closure across the financial system.

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217 views7 pages

Understanding The Trade Life Cycle

The document discusses the trade life cycle from order placement through settlement. It involves several key steps: trade initiation and order placement, trade execution, trade capture and enrichment, validations and verifications, affirmation and confirmation between counterparties, settlement of securities and funds, and reporting. Together this process ensures trades are accurately recorded and completes the transaction from initiation to closure across the financial system.

Uploaded by

jaypawar9923
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Understanding

the Trade Life


Cycle
Exploring the Journey of a Trade
from Placement to Settlement
Presented By: Prachi
Manisha
Jay
Niraj
Title Trade Life cycle
The trade life cycle is
the process of
executing a trade in the
financial market, from
the initial order
placement to the final
settlement of the
transaction.
Process of TRADE LIFE CYCLE
Process done in front office

Trade Initiation Trade placing Trade execution


It is the first step of the trade life cycle, Investors or traders create orders based on Trade execution is the process of fulfilling
where a trader or a client decides to buy or their trading strategies and market analysis. an order to buy or sell securities in the
sell a security. It involves generating a Oderbook is represented of all the books financial market.
trade idea, placing an order through a and trade is placed. can be done in It involves finding the best available price,
broker or an online platform, and carried different types of markets, such as order- method, and timing for the order, and com
out by trader that is prime broker and from driven or quote-driven markets pleting the transaction with the counterpart
y
where the trade is purchased or sold is
Eg : if in order driven market trade are
executive broker.
placed on boards.
Internal system transfer to OMS

Trade Capture Trade Enrichment Trade Validations


Trade capture is the process of booking a Trade validation is the process of checking
transaction into a front-office trading Trade enrichment is the process of adding the accuracy and completeness of a trade
system. It involves inputting all the trade relevant information to a trade, such as the after it has been executed and captured in
details, such as the product, quantity, price, cash value, the settlement instructions, the the system. It involves verifying the trade
counterparty, and settlement date, into the custodian details, and the reporting details, such as the product, quantity, price,
official book of record system. It also requirements. It is done after trade counterparty, and settlement date, against
involves linking all the reference data, execution and before trade confirmation. the market data, the legal documents, and
such as the market data, the legal Trade enrichment helps to ensure the accur the risk parameters.
documents, and the risk parameters, to the acy and completeness of the trade informat
trade ion and to facilitate the downstream proces
sing
Trade Verification Trade Affirmation Trade Confirmation
Trade verification is an essential •ISDA will write legal laws in master Trade confirmation also known as swap
process to ensure the accuracy and agreement and get it signed from both confirmation, is a receipt provided by your
broker. It confirms the price at which you
security of your trading account. It counter parties. It is only done in
executed a trade . Key details included in
allows you to verify the trades OTC market for eg : swaps
trade confirmations: Trade time, location,
executed in your account derivatives. and commercial conditions . Settlement
date . Once both parties agree to the trade
terms, the confirmation is sent to the
custodian.
Trade Settlement Trade Reconciliation Trade Reporting
•Trade settlement refers to the Trade reconciliation plays a crucial role •Trade reporting is reported to client
process of moving securities into a in the settlement process, helping to as well as custodians Trade
identify and resolve any discrepancies
buyer’s account and cash into the reporting is a critical step in the trade
between the two parties’ recording of a
seller’s account after a trade of life cycle. It involves submitting
trade. Trade verification is done within
stocks, bonds, futures, or other company and also outside the company detailed information about financial
financial assets. known as external reconciliation transactions to regulatory authorities.
•Typically,
stocks are settled within
three days after the trade execution
Conclusion

The trade life cycle involves a network of key players and their interactions, which are vital for the smooth functioning of financial markets. Traders, brokers, exchanges, clearinghouses, custodians, and regulators all contribute to the efficient execution, clearing, settlement, and risk management of trades.

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