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Topic Title: What is trade capture?
Created On Mon Aug 22, 11 09:24 AM
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ScottyfromAussie
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Mon Aug 22, 11 09:24 AM
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Just looking for a simple defintion, I've googled it but seem to get a lot of info on products that do it but not what it is and involves

Is it where you take all of the trades made by your institution in one group and pass them through for clearance on the market?

Edited: Mon Aug 22, 11 at 09:25 AM by ScottyfromAussie
 
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rmax
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Mon Aug 22, 11 09:56 AM
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I have only really seen this in technical architectures of banks. I.e. Trade Capture is where the trade details are booked (booked is a little specific though, hence the preference for the term Capture). Normally it is separated from Valuation, Risk etc from an FO perspective. Also key to note that one may book a trade twice: once in the "official booking system" where it will feed Valuations, Risk, Finance etc, and then another where the trader will manage his book.
 
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hayes
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Tue Aug 23, 11 01:52 PM
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Trade capture is the process of booking (or capturing) the trade into the systems used within a financial organisation. As Rmax has already pointed out, this may sometimes have to happen multiple times depending on the complexity of the trades and the ability of the systems to be able to capture the economic, non-economic and static details surrounding the deal.

The ideal situation is to STP (Straight through process) these deals from the point of execution through to all of the banks systems with no manual touch points. Obviously the more vanilla the product, and the greater the volume, the more automated it will be. FX and cash equity for example, is highly automated, with only "exceptions" manually handled. Listed equity derivative trading is now heavily automated/ STP, although not entirely. One of the expected outcomes of increased regulation/ standardisation of credit/rate trades will be not only to force them onto clearing houses and exchanges, but also to increase the opportunity for STPing these deals into the risk systems of the financial institutions. In fact, it will almost certainly be expected and required.

Some types of trade may never be STP'd. It is quite common that the organisation will have systems that cannot cope with newer, more complex or bespoke trades and often these will need to be manually booked, often in multiple parts or involving regular amendments/ updating throughout the life of the trade.

In the case of being unable to automate your trade capture process, other controls must be put in place in order to identify human errors that will occur. Such controls include reconciliations between the institutions position and the external counterparty/ exchange, 4-eyes controls where someone else checks the booking, finance/risk management monitoring and requiring signed documentation. As well as checking your positions against external sources, it is also important to reconcile your positions internally, against different systems, internal entities and interbook deals. None of these controls are perfect but when used properly, together should be sufficient enough to capture most errors quickly. Almost every "rogue trader" event has taken place because these controls have been insufficient or non-existent.

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Edited: Tue Aug 23, 11 at 01:57 PM by hayes
 
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