Securities Operations: A Guide to Trade and Position Management

487 Pages·2002·13.09 MB·English

by  Michael Simmons

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Library of Congress Catabging-in-PublieationD ata
Simmons, Michael.
Securities operations / Michael Simmons.
p. cm. --(wiley finance series)
Includes index.
ISBN 0-47 1-49758-4 (a&. paper)
1. Securities industry. I. Title. 11. Series.
HG4521 .S574 2001
332.63’2’0684~21
2001055777
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Iibrary
ISBN 0 471 49758 4
Typeset in I0/12pt Times by Laserwords Private Limited, Chennai, India
Printed and bound in Great Britain by Biddles Ltd, Guildford, Surrey
This book is printed on acid-free paper responsibly manufactured from sustainable forestry,
in which at least two trees are planted for each one used for paper production.
I
To A1
‘The Author of Securities Operations, occasionally refers to well-known organisations
within the financial community in order to illustrate the context of typical trading sce-
narios. The scenarios created, and the relationships and transactions referred to, are for
illustrative purposes only and have no factual basis.’
Foreword xv
In traduct ion xvii
Acknowledgements xxi
I Essential Trading and Settlement Concepts
1.1 Introduction
1.2 Terminology
1.3 Differences in Terminology
1.4 Differences in the Exchange of GoodslSecurities and Cash
1.5 Methods of Exchanging Securities and Cash
1.6 Remaining in Control
1.7 Recording Details of Individual Trades
1.8 Summary
2 The Securities Marketplace 9
2.1 Introduction 9
2.2 Securities 10
2.3 Participants 16
2.4 Regulators 27
2.5 Custodians 27
2.6 Other Participants in the Securities Marketplace 29
2.7 Globalisation 29
2.8 Summary 31
ringing Securities to the Marketplace 33
3.1 Introduction 33
3.2 Methods of Issuing Securities 33
3.3 Bond Issues via Syndication 35
3.4 Equity Issues via TPO and Public Offer for Sale 40
3.5 Post the Launch of Securities 44
3.6 Settlement of Trades in the Secondary Market 44
3.7 Further Issues of Equity 44
3.8 Summary 45
...
Vlll Contents
Structure of a Securities Trading 47
4.1 Introduction 47
4.2 The Group of Companies 47
4.3 Companies within a Group 48
4.4 Divisions within a Company 49
4.5 Departments within Divisions 49
4.6 Departments Independent of Divisions 64
5 Transaction Types 71
5.1 Introduction 71
5.2 Securities Transaction Types 71
5.3 Cash Transaction Types 80
5.4 Overview of Transaction vpes 86
5.5 Automation 87
5.6 Summary 88
6 Security Forms 89
6.1 Introduction 89
6.2 Registered Securities 89
6.3 Bearer Securities 91
6.4 Methods of Transfer of Registered and Bearer Securities 93
6.5 Registered and Bearer Securities: Similarities and Differences 99
6.6 Summary 99
7 Security Types 101
7.1 Introduction 101
7.2 Equities 101
7.3 Bonds 103
7.4 Grouping of Securities 110
7.5 Derivatives 111
7.6 Summary 111
Trade Cash Value Calculation 113
113
8.1 Introduction
114
8.2 Gross Cash Value Calculation
116
8.3 Additional Trade Amounts
126
8.4 Net Settlement Value
127
8.5 Summary
Static Data 129
129
9.1 Introduction
130
9.2 Trading Companies
130
9.3 Counterparties
134
9.4 Trading Books
135
9.5 Currencies
135
9.6 Securities
Contents ix
9.7 Security Groups 137
9.8 Timing of Static Data Set-Up 139
9.9 Sources of Static Data 140
9.10 Management of Static Data 142
9.11 Summary 144
de Lifecycle and Straight rough Processing 145
10.1 The Trade Lifecycle 145
10.2 Straight Through Processing 145
10.3 Summary 147
11 Trade Execution and Capture 149
11.1 Introduction 149
11 .2 Orders From Institutional Clients 150
11.3 Trade Execution 151
11.4 Trade Capture (Front Office) 152
11.5 Trade Capture (Settlement System) 162
11.6 Summary 163
12 Trade Enrichment 165
12.1 Introduction 165
12.2 Trade Enrichment Components 166
12.3 Determining Factors in Trade Enrichment 167
12.4 Static Data Defaulting 170
12.5 Failure to Apply Static Data Defaults 172
12.6 Enrichment of Counterparty Custodian Details 172
12.7 Summary 174
13 Trade Validatioii 175
13.1 Introduction 3.75
13.2 Straight Through Processing 176
13.3 Fundamental Risks 177
13.4 Basic Trade Validation 177
13.5 Additional Trade Validation 179
13.6 Methods of Trade Validation 181
13.7 Sununary 184
14 Trade Agreement 185
14.I Introduction 185
14.2 Reducing the STO’s Risk 186
14.3 Trade Agreement Methods 187
14.4 Outgoing Trade Confirmations 188
14.5 Incoming Trade Confirmations 194
14.6 Trade Matching with STOs 195
14.7 Trade Affirmation with Institutional Investors 198
14.8 Summary 201