Accounting Guide

Chapter 2 Broker-Dealer Functions, Books, and Records

Introduction

Overview

2.01 Accounting by broker-dealers for securities transactions is unique in that two sets of books — the general ledger and the securities record (commonly referred to as the stock record) — are maintained. The general ledger is used to record entries reflecting money balances, and the securities record is used to account for security positions.

2.02 This chapter discusses the flow of securities transactions, whether manual or automated, and standard departments and records ordinarily found within a broker-dealer. Many of the records and activities are automated, including the execution, clearance, and settlement of trades and the processing of transactions, balancing, and reconciliations of records both within the broker-dealer and with external entities such as the Depository Trust & Clearing Corporation (DTCC) and its subsidiaries, including the Depository Trust Company (DTC), the National Securities Clearing Corporation (NSCC), and the Fixed Income Clearing Corporation (FICC).

2.03 In addition, external service sources, such as market valuation services, provide information that is incorporated into the automated recordkeeping system. The extent of automation within the industry varies from company to company.

Original Entry Journals

2.04 Original source (trade) data are recorded onto original entry journals. These journals, which are often referred to as blotters, contain the following:

•     An ...