The role of the confirmation/documentation team in the context of
OTC settlement is, therefore, vital.
The post-trade environment
There are many processes in the post-trade environment that are
common to all transactions. These include:
• Trade capture and verification
• Position keeping
• Profit/loss analysis
• Confirmations and documentation
• Settlement
• Customer services
• Reconciliation
• Collateral management
• Risk management.
Trade capture and verification requires considerable details to be
input to the system. From a risk and control point of view the system
must be capable of handling certain key information about a trade
such as:
• Title of instrument traded
• Buy or sell (FRAs, options), pay or receive (swaps)
• Currency or currencies
• Amount or number of contracts (option) notional amount (FRAs,
swaps)
• Exchange rate, price, rate of premium (two rates in the case of a
fixed/fixed rate currency swap)
• Floating rate basis/bases
• Exchange rate agreed for conversions of principal (currency swap)
• Strike price or rate (options)
• Trigger level (barrier option)
• Trade date and time
• Underlying asset (option, equity swap, etc.)
• Effective date
• Period (FRA)
• Settlement date(s)
• Maturity date
• Expiry date (option)
106 Clearing and settlement of derivatives
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