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Collateral Management by Michael Simmons

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CHAPTER 11Securities Lending & Borrowing and Collateral – The SL&B Trade Lifecycle

The diagram shows the Securities Lending & Borrowing Trade Lifecycle. It consists of a series of logical and sequential steps which should be experienced in order for a firm to process repo trades in a safe and secure fashion. The steps are as follows:
Step 1: Pre-Trading
Step 2: Trade Execution.
Step 3: Pre-Settlement.
Step 4: Settlement of Opening Leg. 
Step 5: Throughout Lifetime of Trade.
Step 6: Recall/Return of Securities.
Step 7: Settlement of Closing Leg.
Step 8: Settlement of Fees & Rebates.

Note #1: The contents of this chapter relate directly to the concepts described within the prior chapter, namely Chapter 10 ‘Securities Lending & Borrowing and Collateral – Principles of SL&B’; it is strongly recommended that readers firstly familiarise themselves with that chapter, so as to be able to successfully follow each step within this chapter.

Note #2: A variety of methods exist by which SL&B trades can be executed. However, to enable readers’ understanding of fundamental principles, in this chapter the trade characteristics and market practices are intentionally described from a generic (bilateral) perspective. A number of SL&B trade execution methods are described within Chapter 12 ‘Securities Lending & Borrowing and Collateral – Accessing the SL&B Marketplace’.

11.1 PRE- TRADING

 

The diagram shows the Securities Lending & Borrowing Trade Lifecycle. It consists of a series of logical and sequential steps which should be experienced in order for a firm to process repo trades in a safe and secure fashion. The steps are as follows:
Step 1: Pre-Trading
Step 2: Trade Execution.
Step 3: Pre-Settlement.
Step 4: Settlement of Opening Leg. 
Step 5: Throughout Lifetime of Trade.
Step 6: Recall/Return of Securities.
Step 7: Settlement of Closing Leg.
Step 8: Settlement of Fees & Rebates.
This stage of diagram depicts the Pre-Trading.

The actions that should be performed prior to trade execution are:

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