TRADING   Cover Image

ТРГУВАЊЕ
TRADING

Author(s): Sasho Trajkovski
Subject(s): Economy
Published by: Економски институт - Скопје
Keywords: money market deals; input; verification; confirmation; settlement; controll;

Summary/Abstract: All deals – whether an FX deal, money market loan or deposit, derivative transaction or repo – have certain common characteristics. All require input to the bank system to be recorded for verification, confirmation, settlement and reconciliation. This process ensures transaction are properly recorded and enables correct accounting in the books of a bank and accurate risk management measurement. Strict control at each stage of the processing cycle is critical as e wrongly recorded trade will not only corrupt the remainder of the processing cycle (for example, a wrong confirmation or payment message will be sent), but the error may eventually prove costly to correct, as well as taking up valuable back office rescue time. In this scenario, the controls and checks in straight-through processing (STP) become even more critical as they are driven by exception and therefore fewer in number. Most major international banks have built interfaces between their trading and back office systems. After the trade is done on one of these trading systems it is passed automatically to the back office systems. Other trades will also be arriving from different sources, such as telephone trades done with customers, trading done on the internet will also have an automatic feed into the back office. The trade or deal will probably not be completed at this stage, requiring addition to complete the data required for further progression through the process to risk management, settlement, accounting and reconciliation. The challenge of dealing is that it is a fast moving area where financial innovation is the lifeblood of the markets. Dealers professionals must anticipate market developments as efficiently as the traders and work closely with them. Perspective on flexible control is making sure that the right amount of attention and response is given in proportion to what is really required. The first core function for the back office is to recall the deal through the input system and decide what has to be done to complete the details of the deal. Deals input through front-end data capture or agreed on one of the proprietary trading systems will have already been subjected to numerous system checks to ensure that the transaction is technically correct. The second core function for the processing support unit is to verify the deal from an external source as soon as possible after the transaction has been done. The third core function in the processing chain is that of settlement. This can take the form of a clean currency payment / receipt at the bank’s agency accounts. Operations areas are typically involved in a number of reconciliation processes, including the agreement of traders’ overnight positions, nostro accounts and brokerage.

  • Issue Year: 10/2008
  • Issue No: 3
  • Page Range: 285-302
  • Page Count: 18
  • Language: Macedonian