CHAPTER 28OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Capture

The figure shows the OTC derivative collateral 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: Trading.
Step 3: Post-Trading.
Step 4: Throughout Lifetime of Trade. 
Step 5: Trade Termination.
This stage of diagram depicts the Post-Trading.
 

All OTC derivative trades executed by a firm must be recorded formally, within the firm’s books & records, without delay.

28.1 TRADE CAPTURE: INTRODUCTION

This critical step following trade execution is achieved by the firm’s trader capturing (recording) the basic detail of each trade immediately. This is necessary in order to:

  • record the firm’s commitments without delay
  • trigger operational trade processing
  • initiate the trade confirmation or trade affirmation process with the counterparty
  • prompt the mark-to-market process
  • activate the collateral management process.

For example, an interest rate swap (IRS) trade will contain the details listed in Table 28.1

TABLE 28.1 Trade capture: detail of an interest rate swap trade

Trade Component Example Trade Detail
Transaction Type ...

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