Securities Operations: A Guide to Trade and Position Management

18

Pre-Value Date Settlement Instruction Statuses

18.1 INTRODUCTION

Following the transmission of a settlement instruction to and the acknowledgement of receipt by the custodian, the next steps in the trade lifecycle are:

• the custodian's attempt to match the STO's instruction with the counterparty's instruction;
• the attachment of the current status of the instruction;
• the investigation and resolution of non-matching instructions;
• the updating of the current status within the STO's books and records.

Pre-value date settlement instruction matching is a very important component of the trade lifecycle, as in most cases settlement (the actual exchange of securities and cash) cannot take place without it.

Furthermore, STP can be achieved where the detail of the seller's and buyer's settlement instructions match first time, on or very shortly after trade date. Although STP is the objective, the reality is that a large number of settlement instructions typically remain unmatched at the end of the trade date; the reasons for this will be explained throughout this chapter.

18.2 TRADE MATCHING AND SETTLEMENT INSTRUCTION MATCHING

The processes of:

• matching trade details shortly after trade execution (as described in Chapter 14), including trade matching with other STOs (for example via Trax) and trade affirmation (for example via Oasys Global), and
• matching settlement instructions at custodians ...