Everything You Need to Know About Trade Validation and Enrichment in The Trade Life Cycle
The development of technology results in the rapid development of the trading landscape.
There are no messengers anymore. Instead, we have letters. In place of the stock ticker, there is a television.
Innovative technology accelerated the trade lifecycle process.
The workflow of a trade order from the time it is created is known as the trade life cycle. Front office, middle office, and back office activities make up the Trade Life cycle.
As a result, every element, from data storage and communication to online banking, has affected how the current market works.
A specific trade is executed in a market from the other side of the world in the wink of an eye.
Introduction to Trade Life Cycle
The Trade life cycle can be seen from different angles. The Trade Life Cycle can be seen as the interaction between the buyer and the seller. However, it can be divided into trading and operational activity.
Front Office: Frequently referred to as the trading floor, the front office primarily conducts the tasks of trade capture and trade execution.
Middle Office: The Middle Office in the Trade Life Cycle is crucial to the management of exceptions.
Back Office: The "backbone" of the entire commerce life cycle is, in a sense, the back office.
Trade Enrichment in Trade Life Cycle
Trade Enrichment refers to an enhancement of something valuable to improve efficiency. It adds specific trade data to the basic trade detail to allow Downstream processing.
Calculating trade cash values is known as trade figuration. It entails figuring out the net value of a securities transaction.
Selection of relevant custodian details
STOs engage local agents to exchange securities and cash on their behalf to decrease the risk of being without securities and cash and to interchange securities and cash.
Issuing Settlement instructions (For example, by SWIFT or fax)
When a trade is settled, both parties involved in the transaction receive their respective payments. It is, therefore, a two-way process.
Reporting of trade
It entails informing stock market regulators of trades. Reporting of trade is required. It is carried out to improve market transparency.
Trade Validation in Trade Life Cycle
Soon after the completion of execution and enhancing trade, the next step is establishing certain measures. This is known as Trade Validation. In this Trade validation and enrichment in Capital Market, the process inspects if the received trade information in the back-office systems coincides with the front-office records.
It takes a lot of preparation and follow-up for a trade to actually happen.
To gain a greater grasp of trading, it is necessary to comprehend the full transaction lifecycle or the series of events and procedures that take place when a trade is made.
Know More about Special Trades
Special trades – includes validation of certain trades such as
- That is deemed to be large
- Trades in a specific market
- Trades with a specific counterparty
- Trades with prior value dates
- Trades with prices outside a specified range
- Trade setting on a Free of Payment (FOP) basis
Few trades may require editions or have to be cancelled. In such instances, they are sent back to the front office. If any trade is not resolved within the stipulated period, it may be escalated to a more skilled member of the middle office.
Once you have a firm grasp on the life cycle of a trade, you may use it to learn more about investment banking's global markets section. You will gain knowledge of the various facets of the trade life cycle and the jobs accessible to those seeking to make a career in this field.