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

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29

Objectives and Initiatives

The prior chapters in this book are intended to set the scene for the fundamental operational aspects of the industry. The intention of this chapter is for the reader to be made aware of the objectives and initiatives currently shaping the industry's operational characteristics.

The topics within this chapter are approached with the focus on two main areas of operational activity, namely:

  • trade processing and
  • corporate actions.

Whilst the objectives and initiatives of both have common elements, the lifecycles of each and the application of initiatives to each will have differing impacts and emphasis.

29.1 TRADE PROCESSING RELATED OBJECTIVES

29.1.1 Introduction

At the start of the 21st century, in an operational sense, the securities industry recognises the need for continued evolution, in order to address the objectives of:

  • minimising risk,
  • minimising operational cost,
  • servicing clients,
  • managing increasing trading volumes, and
  • maximising internal efficiency.

Minimising Risk

Different types of risk exist as a result of trading and holding securities positions; not all of these risks are settlement or operations related. Examples of non-settlement risks are market risk (the risk that the value of a security falls due to market forces) and issuer risk (the risk that the issuer goes into liquidation and the securities become worthless, or freezes obligations, for example).

Another type of risk is counterparty risk, the risk that the counterparty to ...

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