In order for a trade to be successfully executed and accurately recorded, a number of checks and balances must be made. Back office, middle office and front office employees on both the buy-side and the sell-side must validate every stage of the trade life cycle respectively if a trade is to be fully processed.

This, unsurpisingly, is a hugely time-consuming and inefficient process. Countless work-hours can be wasted by inputing the same information over and over again and manually checking whether or not a transaction has been properly executed. This is precisely why a comprehensive trade life cycle management and straight through processing solution is a must-have for modern firms.

Our trade life cycle management (TLM) and straight-through processing (STP) solution does exactly that. Our PATH platform simplifies and automates the entirety of the trade life cycle process, allowing for seamless sharing of data between all relevant parties.

This page provides an in-depth explanation of our trade life cycle and straight through processing solution. 

The following ten steps make up the entire lifecycle of a trade.

1. The Order

The trade life cycle begins when the investor informs the firm that they wish to either buy or sell a particular instrument or product. The investor will include information on the product and the bid/ask price in this order.

2. The Front Office Action

The investor’s order is received by the front office traders at the firm. The order is then passed to risk management experts in the firm’s middle office.

3. Risk Management

The risk management team will check the order and estimate the level of risk. This process will determine whether or not it is safe to complete the proposed order.

4. The Execution Venue

Once the order has been accepted and validated by the risk management team, it will be sent to the relevant execution venue.

5. Matching the Orders

The execution venue then looks for a sell order which matches the buy order placed by the investor or, in the case of a sale, looks for a corresponding buy order.

6. Trade Completed

Once a matching order has been found, the trade is completed. Once this step has taken place, the post trade process begins. The firm’s front office team will now inform the investor that the trade has been completed.

7. Confirmation 

The brokers on each side of the trade will then confirm that their respective clients agree to the conditions set forth. These conditions include the price at which the instrument has been traded, the settlement date, and any number of other variable factors.

8. Reconciliation 

The reconciliation stage of the trade life cycle ensures that all accounts of the trade which has taken place are consistent and accurate. Reconciliation can be performed in a number of ways, but generally speaking it involves the act of comparing ledgers against statements from both sides of the trade. This sures up any records made and avoids the possibility of fraud or inaccurate record keeping.

9. Clearing

Once confirmation has taken place, the clearinghouse will make the necessary calculations to determine what is needed from the buy-side and sell-side respectively.

10. Settlement

Finally, the back-office staff will ensure that the relevant payments are made on time, that they are documented, and that they are reported correctly. Pending the completion of these three tasks, the trade life cycle is completed.