Principles of Quantitative Development

3.7 POST-TRADE ACTIVITIES

Once the trade is terminated, either early (through trigger, target or exercise conditions) or at maturity, it flows into the hands of the massive accounting apparatus of the bank. All the accounting after the termination of the trade is handled by the finance department. They keep track of the general ledger (GL), the statements and reports, which will end up in annual reports and other public disclosures.

The post-trade accounting calculations, although done independently of the trading platform, do impact the staff involved in the trade life-cycle management from inception to termination. The impact is through performance-based compensation and incentive schemes. Such schemes are managed by the human resources (HR) department, who think up many clever means of aligning the employee's financial interests with the bank's performance in the stock market. For instance, HR may offer incentives in the form of employee share options with long vesting periods or may come up with employee share purchase plans with attractive terms.