What Is Post-Trade Processing?

Post-trade processing occurs after a trade is complete. At this point, the buyer and the seller compare trade details, approve the transaction, change records of ownership, and arrange for the transfer of 澳洲幸运5官方开奖结果体彩网:securities and cash. Post-trade processing is especially imp💙ortant in markets that are not standardized, such as the over-the-counter (OTC) markets.

How Post-Trade Processing Works

Post-trade processing is important in that it verifies the details of a transaction. Markets and prices move fast; 澳洲幸运5官方开奖结果体彩网:transactions are executed quickly, often instantaneously. Many securities trades are done over the phone; the ability f✤or mistakes is inherent, despite traders’ skill. Increasingly trades are executed at high frequency by🉐 computers only. The chance for small mistakes to compound remains high.

Post-trade processing allows the buyer and seller of securities to root out and rec𝐆tify these errors. In addition to matching the details of the buy and sell orders, post-trade processing includes shifting records of ownership and authorizing payment.

Trade Clearing and Settlement

After a trade is executed, the transaction enters what is known as the 澳洲幸运5官方开奖结果体彩网:settlement period. During settlement, the buyer must make payment for the securities they purchased while the seller must deliver the security that was acquired. Depending on the type of security, settlement dates will vary. As an example of how settlement dates work, let's say that an investor buys shares of Amazon (AMZN) on Monday, June 3, 2024. The broker will debit the investor's account for the total cost of the order immediately after it's filled, but the status as a shareholder of Amazon will not be settled in the company's record books for the investor until Tuesday, June 4. At that time, the investor would become a 澳洲幸运5官方开奖结果体彩网:shareholder of record.

Once the trade has settled, and the funds in any sale of stock or another type of security have been credited to your account, the investor may choose to withdraw the funds, reinvest in new security, or hold the amount in cash within the account. For those looking to cash out some of the profits (or what's left from a loss), check to see if your broker offers transfers to your bank account using the Automated Clearing House (ACH) or by using a wire transfer.

Clearing is the process of reconciling purchases and sales of various options, futures, or securities, as well as the direct transfer of funds from one financial institution to another. The process validates the availability of the appropriate funds, records the transfer, and in the case of securities ensures the delivery of the security to the buyer. Non-cleared trades can result in 澳洲幸运5官方开奖结果体彩网:settlement risk, and if 𒆙trades do not cleꦗar accounting errors will arise where real money can be lost.

An 澳洲幸运5官方开奖结果体彩网:out trade is a trade that cannot be placed because it was received by an exchange with conflicting information. The associated clearinghouse cannot settle the trade because the data submitted by parties on both sides of the 澳洲幸运🍃5官方开奖结果体彩网:transaction is inconsistent or contradictory.

Examples of Post-Trade Processing

On the NYSE Bonds Platform, following trade completions, all Depository Trust & Clearing Corporation (DTCC) / National Securities Clearing Corporation (NSCC) Regional Interface Organization (RIO) eligible bond trades are sent to NSCC in order to match trade details of both buyers and respective sellers. Details are transmitted through the RIO.

Post-trade services have come to the forefront as a means for financial firms to diversify their revenue streams. Due to a combination ꩲof heightened regulations, standardization of derivatives, and increasingly complex processing measures to accommodate the growth of alternative assets, post-trade services are an🥀 area in which some firms have a chance to outstrip competitors.