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Trade Confirmations

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Published: 8th July 2009 by William Webster

Do trade confirmations still matter?

Have you heard much about deal confirmations recently? I haven’t. 18 months ago it was one of a number of topics that dropped off the radar. Why? Systemic risk changed priorities. Everything else was just unimportant. So do confirmations still matter?

When a dealer does a trade it goes into the front office system. The operations department then agrees it with the counterparty before it is released. Irrespective of whether manual or automated processes are used a few simple rules are necessary. 

  1. Segregation of duties must apply: dealers must not be involved in the confirmation process;
  2. Accuracy is crucial: when confirmation details don’t match they need to be investigated;
  3. Outstanding confirmations need to be resolved: they increase risk so you need an escalation process. 
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Nevertheless things still go wrong. Errors waste your time, cause losses and really shouldn’t happen. But the sad fact is they do. How do you know? You find out when you confirm the trade. That’s if the confirmation is done properly. That’s not all. 

Sometimes traders suppress confirmations. Fortunately this is rare. It’s usually associated with fraud and is the sort of thing you read about in newspapers and pray doesn’t happen to you.

Operations managers say to me one of their greatest concerns is “Getting staff to think beyond the process”. This is particularly true of repetitive tasks. Understanding why you do something and what can go wrong needs continual refreshment to be effective. But it also costs money!

Confirmations are just one topic in Barbican Learning. That’s learning across the web, it takes about 30 minutes and won’t break the bank. You can pick and choose what you need. There’s a full Learning Management System so you see what’s been done. 

With so much focus on systemic risk does operational risk fall between the cracks, sound familiar?

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Registration Requiredelearning > Confirmations 100% relevant

Learn about the following: What a confirmation is. The purpose of confirmations. The importance of accuracy in confirmations. How mistakes in confirmations can cost large sums. The issue of segregation and confirmations. Outstanding confirmations and escalation processes.

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