SO Scoala aan TC Trade Lifecycle Man OTC TLC consists ofthe below steps TSOYA seco Ta aE ToT Stes nts nt Office (FO) Trade Initiation (FO) ‘= Here the front office of an organization will begin the negotiation of a trade by either reaching out to client to understand their requirements (sales) or by publishing prices to the other market participants (trading) = The terms of the trades are negotiated between the two parties © Various tools are used in order to trade. They include © Emails © Phone o Face-to-Face € ©. Platforms provided by Thomson Reuters, Bloomberg Platforms created by banks (dark pools) such as CrossFinder (C5), LX Liwuidity Cross (Barc), NightVision (MS), SIGMAX (GS) ‘o. Electronic trading tools such as Algo, Hight Frequency Trading (HFT) Using the above channels, the below terms are generally agreed Trade Date Date on which the trade is agreed Settlement Date Date on which actual exchange takes place Price Cost of contract that the buying party has to pay to the seller Quantity Size of the trade meaning how much needs to be bought or sold Counterparty Parties involved in the buying and selling Trade Direction Agreed to decide who is the buyer and seller of the financial ‘instrument Confidential and restricted, Do not distribute. (c) Imarticus Learning Page 13,Trae nee rane ears number and another tag, ‘This is of two types one client account \ccount Number e —_ as a in orderto initiate the trade on behalf of dlienp ae red post execution Brokerage Settlement Amount Standard Settlement Instructions il ste a inal cash amount that will be tra oe 7 omnes delivery of the securities and cash. In international cts a5 a for deli Trading so delivery address is in electronic form Trade Execution (FO) Once the trade economics is agreed between the two counterparties, they exchange a simple ‘agreed, don’ TH, iné message with eachother 7 + Thisstage sinown as Brcation or order mathing) * Here ate sheet/recap is generated which recaps the economics ofthe trade Incase a brokers used to negotiate the trade wit eachother, then the broker will generate a broker recap and sen it to both FOs Trade Capture (FO) Once the trades have been executed by the FO, the next. ‘onto a Rsk Management System (RMS) + Also known as trade recording or booking Fake cpt exremety important 5 the RUS highlights the potential PB and positon thatthe firm has © ESE ee opus rade witha quansty of 200 shares nea 6 AS he has executed, his view on the company will only be of 200 1+ Ife closes his postion at 200 shares, he will not on the remaining 1,800 + In addition, the complete activities are based on the trades processed from RMS ~ Qnes ens have been eeatd bythe F, he neste sto caput the trade istics nto a Risk Management System (RMS) * Also known as trade recording or booking “Trade captre extremely inporant as the RMS highlights the potenti PAL and position that the firm has JS If trade caprres a trade witha quantity of 200 shares instead of has executed, hs view on the company will only be of 200 Ihe cases bis postion at 200 shares, he will not have any view ieacts onthe remaining 1,800 te hills oe the 2,000 that he changes:nT eae niet Semen * In adiition, the complete TLC is dependent on the trade belng captured as al ‘operational activities are based! on the trades pracessed from RMS Middle Office (MO) ‘Trade Validation (MO) + Avery important function ofthe MO i the trae validation + Mere the MO validates every trade captured inthe RMS to ensure thatthe trade and the trader are within ‘limits’ + For eg, Atrade may have the below liits ‘Trade only Swaps Notional per trade tobe within $50m or equivalent CCounterparties only from the Americas region Currency shouldbe ether of USD, GBP, EUR or AUD Hence, the aim ofthe MO team is to ensure that each an the limits preseribed above + Any exceptions will have to be escal: + Overal, here the MO checks whether \l every trade booked is within lated to the trader/desk for resolutions the trades are booked within the limits (RDM=RMS) ‘Trade Verification (MO) “= Once the trade validation is completed, the MO then verifies the trade Here the MO checks whether the trade has been captured accurately in the RMS ‘The MO uses the term-sheets generated by the FO to compare against the RMS racial step as the MO is ensuring that the P&L and position ofthe RMS is accurate = Thisisact traders undertake is based on the info provided ‘+ Remember, all the speculation vs. hedging that by thelr RMS + Any mistake here can lead to incorrect strate gies being applied in the market Back Office (BO) ‘Trade Confirmations (BO) = Now the trade flows down to the Back office department for processing «The trade until now has only been agreed by the FO of the two organizations, with no legal acceptance Hence, the back offices of the counterpartles wil sign a legal document that includes the ‘economics, non-economics and signatures of the two parties of the transaction ‘nce the document i signed, itis a legal acceptance ofthe terms and conditions ofthe trade “The economics are taken from the RMS, while the legal language is taken from the RDM. “The electronic forms of confirmations includes SWIFT (FX) and DTCC (Swaps) With regards to the timeline of the confirmations, below is a general one followed Confidential and restricted. 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