TRADE LIFE CYCLE

EXCHANGE TLC

WHAT INSTRUMENTS TRADE ON THE EXCHANGE?

CASH EQUITY
OPTIONS
FUTURES
COMMODITTIES
BONDS

WHAT DOES A TRADE MEAN?

PROCESS OF BUYING OR SELLING A FIN. INSTRUMENT

WHAT DOES LIFE CYCLE MEAN?

THE PROCESS A TRADE GOES THROUGH FROM BEINING TILL END.

TRADE LIFE CYCLE

IT IS A PROCESS A TRADE GOES THROUGH FROM TRADE INITIATION TO TRADE SETTLEMENT.

STEPS IN TRADE LIFE CYCLE

FII PRESPECTIVE - FOREGIN INST. INVESTOR PRESPECTIVE

CLIENT: ALPHA FUND - BASED IN THE USA

DIRECTION: BUY
QTY: 15,000 SHRS
SCRIPT NAME: EICHER MOTORS
CURRRENT MAKRET PRICE (CMP): RS. 2395.15

BROKER: JP MORGAN - MUMBAI (INV. BANK)

STEPS IN TRADE LIFE CYCLE

FRONT OFFICE
SALES CLIENT ACQUISITION & REVENUE GENERATION
TRADE INTIATION PLACEMENT OF ORDER ALPHA FUND WILL CALL/EMAIL/BLOOMBER CH
TRADE EXECUTION AGREEMENT OF ORDER THE BROKER WILL PLACE THE ORDER ON THE EX
TRADE CAPTURE RECORD THE DETAILS OF THE TRADE IN THE RMS - RISK MGT. SYSTEM

MIDDLE OFFICE - OPERATIONS

TRADE ENRICHMENT ADD THE ECONOMIC & NON ECONOMIC DETAILS TO THE TRADE
ECONOMIC DETAILS - YOU WILL CALCULATE THE COMMISSION FOR THIS TRADE
NON-ECONOMIC DETAILS - ADD THE DELIVERY INSTRUCTIONS TO THE TRADE
TRADE VALIDATION CHECK TRADE, TRADER, CLIENT/COUNTER PARTY FOR THE TRADE
TRADE CHECK - MO SYSTEM VS. RMS SYSTEM
TRADER CHECK - CHECKING IF THE TRADER HAS CROSSED THEIR LIMITS FOR THE DAY OR
CLIENT CHECK - YOU ARE GOING TO CHECK IF THERE IS ANY NEGATIVE NEWS REGARDIN

TRADE VERIFICATION COMPARE THE TRADE DETAILS WITH A TRADE/TERM SHEET

TRADE/TERM SHEET - EMAIL OR AN EXCEL FILE SENT FROM FRONT OFFICE TO ENSURE TH

CORE OPERATIONS - OPERATIONS

TRADE CONFIRMATION SEND OUT THE ECONOMIC & NON-ECONOMIC DETAILS OF THE TRADE TO THE CLIENT - T
TRADE SETTLEMENT EXCHANGE OF SECS. VS. CASH
RECONCILIATION COMPARE THE LEDGER WITH THE STATEMENT LEDGER - BOOK ENTRIES (INTERN

JPM - BROKER ALPHA - CLIENT

SALES SALES
TRADE INTIATION TRADE INTIATION
TRADE EXECUTION TRADE EXECUTION
TRADE CAPTURE TRADE CAPTURE

TRADE ENRICHMENT TRADE DATE TRADE ENRICHMENT

TRADE VALIDATION TRADE VALIDATION
TRADE VERIFICATION TRADE VERIFICATION

TRADE CONFIRMATION TRADE CONFIRMATION

TRADE SETTLEMENT T+2 TRADE SETTLEMENT
RECONCILIATION T+3 RECONCILIATION

HOMEWORK:
TRADE LIFE CYCLE
EQUITY 5
FUTURES 5
OPTIONS - LC/SC LP/SP 3

SUNDAY 6.00 PM
/EMAIL/BLOOMBER CHAT ETC. CONTACT JPM-M TO PLACE AN ORDER
E THE ORDER ON THE EXCHANGE (NSE) - PRICE FIRST & THEN QTY

ECONOMIC DETAILS NON-ECONOMIC DETAILS (SS

OR THIS TRADE QTY PRICE GROSS VALCOMMISSION BANK A/C NO.
THE TRADE 15,000.00 2,395.1526 ### ### CUSTODIAN A/C NO.
BPS - BASIS POINTS 30 BPS
 1% - 100 BPS
0.25% - 25 BPS
MITS FOR THE DAY OR NOT
ATIVE NEWS REGARDING THE CLIENT

T OFFICE TO ENSURE THAT THE DETAILS ARE CORRECT IN M.O,

RADE TO THE CLIENT - TO CONFIRM - EXCEL/PDF OR VIA ELECTRONIC PLATFORM

BOOK ENTRIES (INTERNAL) STATEMENT - BANK/CUSTODIAN ENTERIES (EXTERNAL)

RIFICATION

ONFIRMATION
NON-ECONOMIC DETAILS (SSI's)
BANK A/C NO.
CUSTODIAN A/C NO.
ECONOMIC DETAILS
TRADE DATE SETTLEMENT DATE DIRECTION QTY PRICE
3/23/2022 3/25/2022 BUY 15,000.00 2,395.15

BUY TRADE YOU WILL ADD GV+COMM+TAX = NET VALUE

SELL TRADE YOU WILL SUBTRACT GV-COMM-TAX = NET VALUE

TRADE DATE SETTLEMENT DATE DIRECTION QTY PRICE

3/23/2022 3/25/2022 SELL 15000 2395.15
GV. COMMISSION TAXES NET VALUE
35,927,250.00 107,781.75 53,890.88 36,088,922.63 <---- CLIENT HAS TO PAY TO THE BROKER
GOES TO CLEARING GOES TO BROKER

GV. COMMISSION TAXES NET VALUE

35,927,250.00 107,781.75 53,890.88 35,765,577.38 <---- CLIENT WILL RECEIVE FROM THE BROEKR
RECEVED FROM CLE GOES TO BROKER
M THE BROEKR
 TRADE D
TRADE INTIIATION TRADE EXECUTION

ALPHA FUND - INST. INVESTOR INVESTMENT BANK

USA JPM - MUMBAI
BUY - 15,000 SHRS. EICHER MOTORS BROKER
RS. 3915.00 TRADE CAPTURE

T+1

CUSTODIAN A/C CUSTODIAN DOES A 3-WAY MATCHING PROCESS

HSBC MUMBAI 1. CLIENT VS. BROKER
FX DEAL - CONVERT USD TO INR 2. BROKER VS. CLIENT
3. BROKER VS. CLEARING HOUSE

TRANSFER MONEY TO CLEARING HOUSE

T+2
MONEY- GROSS VALUE
SHRS.

15,000 SHRS OF EICHER

WILL BE GIVEN TO
DEPOSITORY - NSDL
NSDL - WILL ADD ALPHA FUND AS A SHR. SHRS.
WHAT IF THERE IS A SHORTAGE OF SHRS IN THE MARKET?
THE CLEARING HOUSE WILL DELIVER - WHAT THEY CURRENTLY HAVE
11,000 SHRS OF EICHER MOTORS

THE PENDING 4,000 SHRS

WILL GO INTO AUCTION MARKET - THE PRICES OF THE STOCK TRADES 2-3% HIGHER THAN THE NORMAL MARKET

THE CH WILL BUY THE 4,000 SHRS AND TRANSFER THAT TO THE BUYER
AND THE COSTS ASSOCIATED WITH THE PURCHASE OF THE 4000 SHR + PENALTY WILL BE TRANSFREED TO THE SELLER WHO D

COMMISSION + TAX WILL GO TO THE BROKER

EXCHANGE SETTLEMENTS
1. CLEARING HOUSE SETTLEMENT
2. BROKER SETTLEMENT THE BROKER WILL BE LEGALLY OBLIGATED TO SETTLE THE TRADE WITH THE CLEARING HOUSE

BUY TRADE - BROKER WILL PAY FOR THE SHARES, ONCE RECEIVED INTO BROKERS DEPOSITOR
BROKER WILL FOLLOW UP WITH THE CLIENT AND ASK THEM TO PAY FOR THE SHARES
ONCE THE CLIENT PAYS FOR THE SHARES THEN ONLY THE BROKER WILL TRANSFER THE SHRS

SELL TRADE - BROKER WILL TALK TO THE CLIENT TO ENSURE THAT THE SHARES ARE IN PLACE
AND CUSTODIAN WILL RELEASE THE SHARES TO THE DEPOSTIORY
CASH WILL BE DIRECTLY CREDITED TO THE CLIENT'S CUSTODIAN
 TRADE DATE
ADE EXECUTION TRADE EXECUTION TRADE INTIIATION
NSE
STOCK EXCHNAGE INVESTMENT BANK BETA FUND - INST. INVESTOR
B - 15K - EM @ 3915.00 GS - MUMBAI UK
NSE - WITH MATCH THE BUYER BROKER SELL - 15,000 SHRS. EICHER M
WITH A SELLER
PRICE, QTY, TIME

T+1

3-WAY MATCHING PROCESS

RING HOUSE

T+2
MONEY
SELL SIDE SETTLES FIRST

NSCCL
CLEARING HOUSE
SECURTIES ARE DELIVERED
INVENTORY MGT.
1 BUY ORDER - 15,000 15,000 SHRS OF EICHER
1 SELL ORDER - 15,000 WILL BE GIVEN TO
DEPOSITORY - NSDL
CASH IS PAID SHRS. NSDL - WILL REMOVE BETA F

NOVATION
NORMAL MARKET

FREED TO THE SELLER WHO DID NOT DELIVER THE 4,000 SHRS

E WITH THE CLEARING HOUSE AND THE CLIENT.

ED INTO BROKERS DEPOSITORY A/C

PAY FOR THE SHARES
ER WILL TRANSFER THE SHRS TO THE CLIENTS CUSTODIAN.

AT THE SHARES ARE IN PLACE ON T+2

ADE INTIIATION

BETA FUND - INST. INVESTOR

SELL - 15,000 SHRS. EICHER MOTORS AT RS. 3915.00

CUSTODIAN A/C
SCB MUMBAI
INVETORY CHECK
15,000 SHRS OF EICHER IS THERE OR NOT

SELL SIDE SETTLES FIRST

15,000 SHRS OF EICHER

WILL BE GIVEN TO
DEPOSITORY - NSDL
NSDL - WILL REMOVE BETA FUND AS A SHR. HOLDER
RETAIL INVESTING - IN INIDA
SHRS HELD? - NSDL
CASH HELD? - BROKER
OTC - TRADE LIFE CYCLE

OVER THE COUNTER

WHAT INSTRUMENTS/PRODUCTS TRADE IN THE OTC MARKET?

FORWARDS
SWAPS
OPTIONS
EQUITY
STRUCTURED PRODUCTS - CUSTOMISED INSTRUMENTS FOR CLIENTS.
FX
UNSPONSORED DRs

OTC - DERIVATIVES
OTC - DERIVATIVES - RETIAL INVESORS ARE NOT ALLOWED TO TRADE!

OTC MARKET - IS ONLY FOR FIN. INSTUTIONS, HNI, INVESTORS.

WHY ARE RETAIL INVESTORS NOT ALLOWED TO TRADE OTC MARKET?

TICKET SIZE IS BIG - THE VALUE OF THE TRADES AER VERY HIGH.

INST. INVESTORS, INV. BANKS, PF, HF, HNI'S ETC - ALL THE "INVESTORS"
THEY NEED TO BECOME A MEMBER OF AN ORGANISATION CALLED
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION (ISDA)

OTC MARKET - WHAT IS THE BIGGEST RISK? - DEFAULT RISK

HOW DO YOU MINIMISE DEFAULT RISK? - CREATE REGULATION

1985 - THE IB COMMUNITY CAME TOGETHER - WE LOVE TRADING AND TRANSACTING IN THE OTC MARKET BUT THERE TO

THE INV. BANKS CAME TOGETHER CREATE - ISDA

WHAT IS THE ROLE OF ISDA?

IS TO STANDARISE/FORMALISE THE TERMS AND CONDITIONS OF TRADES IN THE OTC MARKET.

ISDA - CUSTOMISE THE TRADES ANYWAY YOU WANT HOWEVER, IN TIME OF SETTLMENT WE WILL STANDARDISE IT.

www.isda.org

founded in 1985 - HQ - NYC

how do you become a member of isda?

your company has to have a net worth of USD 1 BILLION AND ABOVE.

EXAMPLE - FORWARD CONTRACT

 EICHER MOTORS - 100,000 SHRS AT RS. 3915.00
OTC - TLC DIRECTION - BUY, PHYISCAL SETTLMENT, 10 MONTHS CONTRACT

FRONT OFFICE
SALES CLIENT ACQUISTION/REVENUE GENERATION
TRADE INTIATION PLACEMENT OF ORDER
TRADE EXECUTION AGGREMENT OF ORDER
TRADE CAPTURE RECORD THE DETAILS OF THE TRADE IN R.M.S.

MIDDLE OFFICE
TRADE ENRICHMENT ADDING ECONOMIC & NON-ECONOMIC DETAILS TO THE TRADE
TRADE VALIDATION CHECK TRADE, TRADER, CLIENT/COUNTERPARTY CHECK (MEMBERS OF ISDA OR
TRADE VERIFICATION COMPARE WITH TRADE SHEET/TERM SHEET
AFFIRMATION SEND OUT THE ECONOMIC DETAILS TO THE CLIENT VIA EMAIL/ELECTRONIC PLA

CORE OPERATIONS
TRADE CONFIRMATION DRAFT THE ISDA AGREEMENT (2-10 DAYS) AND SEND IT TO THE CLIENT FOR SI
TRADE SETTLEMENT EXCHANGE OF SECS. VS CASH
RECONCILIATION COMPARE THE LEDGER WITH THE STATEMENT

SALES
TRADE INTIATION
TRADE EXECUTION
TRADE CAPTURE
MIDDLE OFFICE
TRADE ENRICHMENT TRADE DATE
TRADE VALIDATION
TRADE VERIFICATION
AFFIRMATION
CORE OPERATIONS
TRADE CONFIRMATION 2 - 10 DAYS
TRADE SETTLEMENT AS PER THE CONTRACT
RECONCILIATION THE NEXT DAY AFTER SETTLEMENT
TC MARKET BUT THERE TOO MANY ISSUES WITH DEFAULTS, SETTLMENT RISK, COLLATERAL RISK ETC.

LL STANDARDISE IT.
10 MONTHS CONTRACT

CK (MEMBERS OF ISDA OR NOT)

IA EMAIL/ELECTRONIC PLATFORM - AFFIRM THE TRADE EICHER MOTORS - 100,000 SHRS AT RS. 3915.00
DIRECTION - BUY, PHYISCAL SETTLMENT, 10 MONTHS CO
5 DAYS TO CREATE THIS CONTRACT
D IT TO THE CLIENT FOR SINGATURE/LEGALIZING THE CONTRACT
RS AT RS. 3915.00
TTLMENT, 10 MONTHS CONTRACT
 TRADE D
TRADE INTIIATION TRADE EXECUTION

ALPHA FUND - INST. INVESTOR INVESTMENT BANK

USA JPM - MUMBAI
BUY - 15,000 SHRS. EICHER MOTORS BROKER
RS. 3915.00 TRADE CAPTURE

CUSTODIAN A/C

SETTLEMEN
WHAT IF THERE IS A SHORTAGE OF SHRS IN THE MARKET?
THE CLEARING HOUSE WILL DELIVER - WHAT THEY CURRENTLY HAVE
11,000 SHRS OF EICHER MOTORS

THE PENDING 4,000 SHRS

WILL GO INTO AUCTION MARKET - THE PRICES OF THE STOCK TRADES 2-3% HIGHER THAN THE NORMAL MARKET

THE CH WILL BUY THE 4,000 SHRS AND TRANSFER THAT TO THE BUYER
AND THE COSTS ASSOCIATED WITH THE PURCHASE OF THE 4000 SHR + PENALTY WILL BE TRANSFREED TO THE SELLER WHO D

COMMISSION + TAX WILL GO TO THE BROKER

EXCHANGE SETTLEMENTS
1. CLEARING HOUSE SETTLEMENT
2. BROKER SETTLEMENT THE BROKER WILL BE LEGALLY OBLIGATED TO SETTLE THE TRADE WITH THE CLEARING HOUSE

BUY TRADE - BROKER WILL PAY FOR THE SHARES, ONCE RECEIVED INTO BROKERS DEPOSITOR
BROKER WILL FOLLOW UP WITH THE CLIENT AND ASK THEM TO PAY FOR THE SHARES
ONCE THE CLIENT PAYS FOR THE SHARES THEN ONLY THE BROKER WILL TRANSFER THE SHRS

SELL TRADE - BROKER WILL TALK TO THE CLIENT TO ENSURE THAT THE SHARES ARE IN PLACE
AND CUSTODIAN WILL RELEASE THE SHARES TO THE DEPOSTIORY
CASH WILL BE DIRECTLY CREDITED TO THE CLIENT'S CUSTODIAN
 TRADE DATE

SETTLEMENT DATE
NORMAL MARKET

FREED TO THE SELLER WHO DID NOT DELIVER THE 4,000 SHRS

E WITH THE CLEARING HOUSE AND THE CLIENT.

ED INTO BROKERS DEPOSITORY A/C

PAY FOR THE SHARES
ER WILL TRANSFER THE SHRS TO THE CLIENTS CUSTODIAN.

AT THE SHARES ARE IN PLACE ON T+2

RETAIL INVESTING - IN INIDA
SHRS HELD? - NSDL
CASH HELD? - BROKER
AANCHAL
ABHIJEET
AKSHADA
AMEV
ARAVIND
ANUSH
KRUSHIT
MADHAVI
MANISH
MANPREET
MEGHA
MOHITH
NAMAN
NIVEDITA
PRAKHAR
PRIYANKA K
PRIYANKA S
RUSSEL
SAKSHI
SANGEETHA
SARITA
SAVITA
SHAUNAK
SIDDHANT
SRIPATHI
TANYA
VISHAL
VITEHSH

HOMEWORK
OTC TLC - 5 EXAMPLES
MONDAY - 6.00 PM