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Securities Operations: A Guide to Trade and Position Management by Michael Simmons

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10

The Trade Lifecycle and Straight Through Processing

10.1 THE TRADE LIFECYCLE

All the steps involved in a trade, from the point of order receipt (where relevant) and trade execution through to settlement of the trade, are commonly referred to as the ‘trade lifecycle’.

The management of all STOs require that trades are processed in the most proficient manner, and this is reflected in their desire to achieve STP. This is only achievable if the trade lifecycle is begun by recording the details of each trade in a timely and accurate fashion within the front office, and is handled efficiently, cost-effectively and within the various deadlines in the operational areas of the STO.

A problem created early on in the trade lifecycle will cost more to correct the further it flows through the operational process, the effect of the error being replicated and magnified.

The trade lifecycle can be regarded as a series of logical steps, which are represented in Figure 10.1 (however, it should be noted that some of these steps can occur in parallel, or in a different order to that stated).

The following 11 chapters, beginning with Chapter 11 and ending with Chapter 21, focus on each major step in the trade lifecycle.

As the reader completes each chapter, a logical sequence of steps should become apparent.

10.2 STRAIGHT THROUGH PROCESSING

STP is a securities industry-wide term to describe the objective of managing trades throughout the trade lifecycle automatically and without human intervention. ...

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