Collateral Management

CHAPTER 28OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Capture

The Post-Trading section of the OTC Derivative Collateral Lifecycle covers one-off activities that should be performed by a firm following trade execution and prior to activities that must occur repeatedly throughout the lifetime of the trade.

 

This chapter focuses on the requirement to capture individual trade details, and the associated risks. The management of collateral within a firm will be adversely impacted if executed trades are not captured accurately or in a timely fashion.

All OTC derivative trades executed by a firm must be recorded formally, within the firm’s books & records, without delay.

28.1 TRADE CAPTURE: INTRODUCTION

This critical step following trade execution is achieved by the firm’s trader capturing (recording) the basic detail of each trade immediately. This is necessary in order to:

• record the firm’s commitments without delay
• trigger operational trade processing
• initiate the trade confirmation or trade affirmation process with the counterparty
• prompt the mark-to-market process
• activate the collateral management process.

For example, an interest rate swap (IRS) trade will contain the details listed in Table 28.1

TABLE 28.1 Trade capture: detail of an interest rate swap trade

Trade Component	Example Trade Detail
Transaction Type ...