Securities Operations: A Guide to Trade and Position Management

Contents......Page 8
Foreword......Page 16
Introduction......Page 18
Acknowledgements......Page 22
1.2 Terminology......Page 24
1.4 Differences in the Exchange of Goods/Securities and Cash......Page 25
1.6 Remaining in Control......Page 27
1.7 Recording Details of Individual Trades......Page 30
1.8 Summary......Page 31
2.1 Introduction......Page 32
2.2 Securities......Page 33
2.3 Participants......Page 39
2.5 Custodians......Page 50
2.7 Globalisation......Page 52
2.8 Summary......Page 54
3.2 Methods of Issuing Securities......Page 56
3.3 Bond Issues via Syndication......Page 58
3.4 Equity Issues via IPO and Public Offer for Sale......Page 63
3.7 Further Issues of Equity......Page 67
3.8 Summary......Page 68
4.2 The Group of Companies......Page 70
4.3 Companies within a Group......Page 71
4.5 Departments within Divisions......Page 72
4.6 Departments Independent of Divisions......Page 87
5.2 Securities Transaction Types......Page 94
5.3 Cash Transaction Types......Page 103
5.4 Overview of Transaction Types......Page 109
5.5 Automation......Page 110
5.6 Summary......Page 111
6.2 Registered Securities......Page 112
6.3 Bearer Securities......Page 114
6.4 Methods of Transfer of Registered and Bearer Securities......Page 116
6.6 Summary......Page 122
7.2 Equities......Page 124
7.3 Bonds......Page 126
7.4 Grouping of Securities......Page 133
7.6 Summary......Page 134
8.1 Introduction......Page 136
8.2 Gross Cash Value Calculation......Page 137
8.3 Additional Trade Amounts......Page 139
8.4 Net Settlement Value......Page 149
8.5 Summary......Page 150
9.1 Introduction......Page 152
9.3 Counterparties......Page 153
9.4 Trading Books......Page 157
9.6 Securities......Page 158
9.7 Security Groups......Page 160
9.8 Timing of Static Data Set-Up......Page 162
9.9 Sources of Static Data......Page 163
9.10 Management of Static Data......Page 165
9.11 Summary......Page 167
10.2 Straight Through Processing......Page 168
10.3 Summary......Page 170
11.1 Introduction......Page 172
11.2 Orders From Institutional Clients......Page 173
11.3 Trade Execution......Page 174
11.4 Trade Capture (Front Office)......Page 175
11.5 Trade Capture (Settlement System)......Page 185
11.6 Summary......Page 186
12.1 Introduction......Page 188
12.2 Trade Enrichment Components......Page 189
12.3 Determining Factors in Trade Enrichment......Page 190
12.4 Static Data Defaulting......Page 193
12.6 Enrichment of Counterparty Custodian Details......Page 195
12.7 Summary......Page 197
13.1 Introduction......Page 198
13.2 Straight Through Processing......Page 199
13.4 Basic Trade Validation......Page 200
13.5 Additional Trade Validation......Page 202
13.6 Methods of Trade Validation......Page 204
13.7 Summary......Page 207
14.1 Introduction......Page 208
14.2 Reducing the STO\'s Risk......Page 209
14.3 Trade Agreement Methods......Page 210
14.4 Outgoing Trade Confirmations......Page 211
14.5 Incoming Trade Confirmations......Page 217
14.6 Trade Matching with STOs......Page 218
14.7 Trade Affirmation with Institutional Investors......Page 221
14.8 Summary......Page 224
15.1 Introduction......Page 226
15.3 Transaction Reporting Methods......Page 227
15.4 Transaction Components......Page 228
15.6 Summary......Page 229
16.1 Introduction......Page 230
16.2 Risks Associated with Settlement Instructions......Page 231
16.3 Main Settlement Instruction Types......Page 234
16.4 Content of Settlement Instructions......Page 235
16.5 Methods of Transmitting Settlement Instructions......Page 236
16.6 Format of Settlement Instructions......Page 238
16.7 Deadlines for the Receipt of Settlement Instructions by Custodians......Page 240
16.9 Settlement Instruction Validation......Page 241
16.11 Safe Custody Related Settlement Instructions......Page 242
16.12 Settlement Instructions Issued under Power of Attorney......Page 243
16.13 Maintaining a Link between a Trade and its Settlement Instruction......Page 245
16.14 Summary......Page 246
17.2 Services Provided by Custodians......Page 248
17.3 Types of Custodian......Page 250
17.5 Custodian Selection......Page 255
17.6 Settlement Instruction Related Services......Page 256
17.7 Securities and Cash Holdings Related Services......Page 258
17.8 Comparison of Custodian Services......Page 261
17.9 Summary......Page 262
18.1 Introduction......Page 264
18.3 Settlement Instruction Statuses (Pre-Value Date)......Page 265
18.4 Investigation and Resolution of Unmatched and Advisory Statuses......Page 270
18.6 The STO\'s Risk......Page 273
18.8 Updating the STO\'s Books and Records......Page 274
18.9 Summary......Page 275
19.1 Introduction......Page 276
19.3 Causes of Settlement Failure......Page 277
19.4 Impact of Settlement Failure......Page 278
19.5 Methods of Communicating Statuses from Custodians......Page 280
19.6 Prevention of Settlement Failure......Page 281
19.7 Enforcing Trade Settlement......Page 282
19.8 Summary......Page 283
20.2 Enabling Trade Settlement......Page 284
20.4 Types of Trade Settlement......Page 290
20.5 Settlement Netting......Page 293
20.7 Settlement Processing at the Custodian......Page 294
20.8 Result of Trade Settlement at the Custodian......Page 295
20.9 Summary......Page 297
21.1 Introduction......Page 298
21.2 Pre-Settlement Trade Record......Page 300
21.3 Post-Settlement Trade Record......Page 302
21.5 Achieving Timely and Accurate Reflection......Page 306
21.7 Settlement Instructions Issued under Power of Attorney......Page 309
21.9 Unsettling a Settled Trade Internally......Page 310
21.10 Summary......Page 311
22 Position and Trade Related Operations......Page 312
23.1 Introduction......Page 314
23.2 Funding Choices......Page 315
23.3 Do Nothing......Page 316
23.4 Borrow (and Lend) Cash Unsecured......Page 318
23.5 Borrow Cash via Repo......Page 320
23.6 Currency Movement Deadlines......Page 332
23.7 Funding Projection......Page 333
23.9 Internal Funding Allocation......Page 336
23.10 Updating Internal Books and Records......Page 337
23.12 Summary......Page 338
24.1 Introduction......Page 340
24.3 Principles of Securities Borrowing......Page 341
24.4 Methods of Lending and Borrowing Securities......Page 343
24.6 Summary......Page 349
25.1 Introduction......Page 350
25.2 Basic Safe Custody Services......Page 351
25.4 Safekeeping Clients\' Securities and Cash......Page 352
25.5 Safe Custody Holdings at External Custodians......Page 353
25.7 Updating Holdings as a Result of Corporate Actions......Page 354
25.10 Safe Custody Movement Types......Page 355
25.12 Advanced Safe Custody Services......Page 361
25.14 Summary......Page 362
26.1 Introduction......Page 364
26.2 Benefits......Page 365
26.3 Reorganisations......Page 381
26.4 Multifaceted Actions......Page 383
26.5 General (Relevant to All Corporate Actions)......Page 385
26.6 Summary......Page 387
27.1 Introduction......Page 388
27.2 Overview of Reconciliation......Page 389
27.3 Reconciliation Terminology......Page 394
27.4 Types of Reconciliation......Page 395
27.5 Methods of Reconciliation......Page 402
27.6 Frequency of Reconciliation......Page 403
27.7 External Movements Affecting Positions......Page 404
27.10 Benefits Derived from Reconciliation......Page 405
27.11 Summary......Page 406
28.1 Introduction......Page 408
28.2 Generic Accounting Principles......Page 409
28.3 Accounting for Securities Trades and Positions......Page 410
28.4 Accounting Entry Lifecycle (1)......Page 412
28.5 Accounting Entry Lifecycle (2)......Page 420
28.6 Marking to Market......Page 425
28.7 P&L Calculation Conventions......Page 427
28.8 Realised P&L......Page 429
28.11 Summary......Page 430
29.1 Trade Processing Related Objectives......Page 432
29.2 Initiatives in Pursuit of Trade Processing Objectives......Page 437
29.3 Corporate Actions Related Objectives......Page 450
29.4 Initiatives in Pursuit of Corporate Actions Objectives......Page 452
29.5 Workflow......Page 455
29.7 Summary......Page 456
Glossary of Terms......Page 458
Recommended Reading......Page 478
C......Page 480
D......Page 481
I......Page 482
P......Page 483
S......Page 484
T......Page 486
Z......Page 487