Månedsarkiv: august 2014

post trade processing

Importance of Efficient Post Trade Processing

Post trade processing occurs right after a transaction wherein all the details of the deal are being examined and approved by both parties. The process helps in finding faults of the trade and validating that the conditions are met. If all is well, transfer of assets will then be arranged and records of ownership are sealed accordingly. The whole process is not so secure considering that the trading has no clearing houses, which is the most common scenario of over the counter derivatives and other non-standardized markets.

Human mistakes are undeniable and since there are many cases of trading done with both parties using only a phone to communicate, the risks of miscommunication may arise which could result to conflicts between both parties. During a post trade processing, everything is carefully inspected by both parties to know that the other party complied with the conditions. If there are mistakes, both parties can try to sort things out before pursuing the deal or cancel it if the risks are high.

If you are an operations manager, it is one of your duties to ensure an efficient post trade processing when engaging a trade settlement. You have to look for opportunities on how to reduce the cost of the trade while maximizing profit. Since human errors have no room for such an important process, automated tools are your best bet for computations, reports and assessment of the deal. Automated post trade processing helps you minimize the risks and make it easier to spot a fault in the trade. It also helps you decide on how to address settlement problems.

Automated post trade processing minimizes manual operations and automates workflow which in turn minimizes operational risks. Every step in the post trade process is automated thereby increasing efficiency and speeding up processes. This cuts the operational costs caused by errors in the settlement of trade. There are many available post trade processing you can choose from. Pick one that offers the needed benefits of automated post trade processing

dodd frank

Dodd Frank Derivatives Regulations and new Policies

Over the counter derivatives has been accused by many as one of the major players that caused the most recent financial crisis affecting many nations. It triggered devaluation of assets resulting in massive losses in various industries. The USA addressed the issue by implementing the Dodd Frank Act to protect private financial institutions, local businesses, investors and regular tax payers from abrupt changes in the economy. The Dodd Frank derivatives regulations was one of the provisions included in the Dodd Frank act that aims to introduce a more centralized way of clearing over the counter derivatives.

The new Dodd Frank Derivatives regulations is a bold move as it may not defeat the very reason why over the counter derivatives is popular. As to why this is the case, we need to point out two important factors that needs to be taken into consideration to entice traders to try the new Dodd Frank derivatives system. These are convenience and security.

We cannot deny the fact that over the counter derivatives is fast and requires fewer processes than having a clearing house as an intermediary for a trade which is the proposal of the Dodd Frank derivatives regulations. Both parties will need to find a way of communicating the terms of the trade and if both parties agree, the trade will commence and will end up with a bilateral form of clearing. Both parties are not required to pose a public report regarding the details of the trade which is the very reason why it poses a threat to the international market. No proper accountability could cause devaluation of assets and can trigger chain of financial threats to securities. Since Dodd Frank derivatives regulations aims to increase transparency, providing the same convenience of trade will prove to be a challenge since additional legal actions will be added to the process especially upon transferring custody of assets from one party to the other party. Both parties will also follow a set of guidelines imposed by the clearing house which could cause delays of the trade.

The only saving factor of the new Dodd Frank Derivatives is the security that it offers. Since everything is done through a clearing house, values of underlying assets can be assessed well and fraudulent transactions will be prevented. It also increases the confidence of traders increasing the frequency of trade which eventually results to higher economic growth. Although at present, the new Dodd Frank derivatives regulations and policy are still yet to be fully implemented, investors are still hopeful that the system will improve and become a major go to when it comes to trading derivatives.