In recent years, the trade cycle has witnessed significant changes driven by emerging trends and evolving regulatory requirements. These developments have posed strong challenges to traditional technology, promoting the need for a more robust and flexible trade life cycle.
Trading technology, although not a new trend, is not a new trend, has a rich history that has profoundly impacted modern financial markets, surpassing legacy systems in terms of innovation and advancement.
In this article, let's learn in detail about the emerging trends of the trade life cycle and its history.
What is a Trade Life Cycle?
Trade life cycle refers to sequential events occurring through various trade procedures in financial markets.
In a capital market, every trade goes through a life cycle. The trade life cycle starts with placing or buying or selling orders to execute the ends before the trade is even settled. It includes steps like trade initiation, trade documentation, trade execution, trade finance and payment, trade settlement, and trade post-settlement. The trade life cycle can vary in terms of complexity and duration, depending on the financial markets.
In India, the T+2 settlement cycle is followed in the stock markets. It includes the time frame between the trade execution date (T) and the actual settlement date (T+2).
Link Between ODH and Trade Life Cycle
An ODH or Operational Data Hub is used to manage trade life cycles related data. It is an enterprise architecture pattern that helps to unify data from existing systems and breaks down various data silos to provide a single source of data authority. An ODH is capable of offering data authority to the entire organisation.
There are many ways ODH is related to the trade life cycle. They are:
- When an ODH is connected with a trade life cycle, it typically becomes a trade data hub.
- Its robust architecture makes operational efficiency easier and makes a better way of data harmonisation, lineage and integration.
- ODH has a faster and more accurate way of reconciling and reconstructing trade events.
- ODH incorporates advanced data analytics and predictive technology, which drives opportunities for effective sales, risk management and trading.
Emerging Trends in Trade Life Cycle
In the modern-day trade life cycle, there are meticulous steps to embrace emerging trends in the trade life cycle. Let's see what they are.
Risk and resilience
Enhanced risk management has emerged as a trend in the trade life cycle. Businesses now recognise the importance of comprehensive risk assessment and mitigation strategies to ensure the success of each transaction. Elements such as
This trend encompasses customary Know Your Customer (KYC) checks, where businesses can invest in thorough due diligence processes to build trust. It also includes an in-depth comprehension of geographical risks allowing businesses to develop tailored strategies and contingency plans. Businesses can withstand future shocks if they expand, diversify, and enhance their network of third parties, including suppliers, goods forwarders, transport logistics businesses, and technology providers.
Another emerging trend in the trade life cycle is the focus on enhancing resource efficiency. It helps businesses in increasing visibility in supply chains and industry in general.
By promoting transparency, businesses can easily build links between surplus materials and by-products in one supply chain that might be a precious resource in another supply chain, reducing waste. Companies that can automate and streamline their processes, and use platforms and technology to do so, will win, whether they are well-established players in the market or newcomers.
Nearly every industry has seen an increase in competition due to business globalisation. To stay competitive, leaders and management teams must embrace a data-driven approach and harness its strategic potential to achieve desired outcomes.
Furthermore, efficiency and digitisation will also be important elements in the industry's transformation. Firms can use data analytics and other technology advancements to transition from a crisis-driven, reactive approach to a more deliberate, proactive strategy.
As today's firms are reacting to various data challenges, there are always new regulations that are coming up to facilitate the overall trade life cycle. Even though these new regulations add various complexities and transparency that might not be cost-efficient, in the long run, it is going to help in making the trade life cycle much easier.
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