Surya, yes this will also apply to the Indian market. As you may know financial markets are highly regulated now. Each region will have the equivalent of a broker, clearing house and custodians but you have to check locally which company represents these players in India
Mahesh Hi! Thanks alot for your feedback. That's really great to hear. If you have any suggestions for follow up videos please let me know and I will put it on a to do list
CCPs and CSDs are different animals, although they are both included under the term “post-trade infrastructures”. CCPs or central clearing counterparties intervene between the trading layer (on the stock exchange, another trading platform or OTC) and the settlement layer. Because they act as a buyer to every seller and as a seller to every buyer, they play a key role in managing counterparty credit risk. CSDs, on the other hand, intervene at the final layer when ownership of the securities is transferred. CSDs are primarily concerned with operational risk.
For point 7, don't the payment instructions to the custodian go FROM the broker, to the custodian, not from the investor to the custodian? I don't think the investor communicates with the custodian/CSD at any point?
Reconcillion deals with post trade discrepancies which could be the result of IT glitches or operations errors. They are normally picked up in the settlement process.
It follows a similar process but there is no central clearing authority. The rules laid out by ISDA are normally followed in the case of OTC trades and trade matching settlement and reconcilliation is conducted between the two parties directly with the legal basis covered by ISDA agreements
1. At step 1, the person on the right places a sell order. When the broker buys from that seller, does the broker buy at the bid or ask price? 2. Does the broker buy from the seller before forwarding the order to the exchange or after step 4? 3. Also at step 1, the person on the left places a buy order. When the broker sells to that buyer, does the broker sell at the bid or ask price?
1. Nowadays every process is online, then why does it take T+2 days for settlement? 2. What if I book a trade and exchange could not find the matching trade?
1. The systems is use today on the settlement side are still dated and there are initiatives to accelerate this though it requires massive upgrades to many systems all round the world 2. Unless there is a match the order is not created in the front end and will be on hold until filled
For every trade a CCP (Clearing House) executes and clears, it requires additional funds known as margin. This is usually requested at the end of every day, although in volatile stock markets when prices are moving quickly, the CCP will not wait and will request the funds immediately. Margin is sometimes referred to as collateral, but the principle is the same: the CCP has the funds to use in the event of a member being unable to meet its various obligations to the CCPs. When this happens, the clearing member will be deemed in default, at which point the CCP will try to close out all of the member's open positions by buying securities in the market with the margin it has collected
I’m giving you a hi-5 from 8 years ago , great job ... I hope you’re up to amazing things these days ....
Best video on trade life cycle available on RUclips!
Yes indeed the best instructional video for newbies!
Thanks for the tutorial. Very well presented. Looking forward to any more you may be releasing in the future.
This tutorial is indeed a great instructional video for newbies!
Lorien, thanks for taking time to comment. much appreciated
This is very useful tutorial . thanks for sharing knowledge and posting some important information relating to investment banking
Appreciate the comments Phani Raj
Surya, yes this will also apply to the Indian market. As you may know financial markets are highly regulated now. Each region will have the equivalent of a broker, clearing house and custodians but you have to check locally which company represents these players in India
That can't be so tedious because they always like to skip some processes, people are like that
Very simple yet very informative
Thanks for the comments Prashant!
Can you explain how an investment bank fits into this cycle and if you could depict on the diagram that would be very useful.
Thank you!!!!!!
Nice and simple. Thanks. Like to know more about trading.
At very end looks like you said deregistered buyers and reregistration for seller, which is actual wrong. Should be opposite. correct me if I am wrong
Understanding and learning is the most important part of investing
is this trade life cycle for indian equity markets?
Nice Presentation, simple to understand.
Mahesh Hi!
Thanks alot for your feedback. That's really great to hear. If you have any suggestions for follow up videos please let me know and I will put it on a to do list
Anyone can do it, but in practice there are a lot of problems.
Nice one
Hello man
Any way you could make a video explaining how this would work with blockchain technology?
Thanks for the tutorial. Is there a second part showing how this is working in practice?
Parham Hi,
Happy to put something together. Is there something particular that you might be interested in?
Why don't you choose to trade online? It's easy and fast.
What are complex securities and how to calculate differentials? Thank you!
A simple security is a piece of paper that represents a company's stock.
Great video. Can you do a similar one for investment banking trading lifecycle
If he wants to do it, he can do it.
Could you do a similar video for otc derivatives as well pls ?
What's the difference between a clearing house and a depository? are they synonyms?
CCPs and CSDs are different animals, although they are both included under the term “post-trade infrastructures”. CCPs or central clearing counterparties intervene between the trading layer (on the stock exchange, another trading platform or OTC) and the settlement layer. Because they act as a buyer to every seller and as a seller to every buyer, they play a key role in managing counterparty credit risk. CSDs, on the other hand, intervene at the final layer when ownership of the securities is transferred. CSDs are primarily concerned with operational risk.
Clearing houses liquidate stocks that have been delisted, and depositary receipts are the equivalent of pending sales
For point 7, don't the payment instructions to the custodian go FROM the broker, to the custodian, not from the investor to the custodian? I don't think the investor communicates with the custodian/CSD at any point?
No, it should be communicated with all of them as it is their own money
Hi Mitesh, why do you have only 1 video? You explain well.
Thanks for your comments Royden, I had plans to do more and am encouraged to do so with you feedback. Watch this space
Maybe he's still working on it, his videos are great for newbies
isn't there another part called 'trade reconciliation'? or is it the same thing as settlement? also, volume is soft.
Reconcillion deals with post trade discrepancies which could be the result of IT glitches or operations errors. They are normally picked up in the settlement process.
This situation is only between large companies, ordinary shareholders have no access to it at all
is the life cycle same when comes to OTC market?
It follows a similar process but there is no central clearing authority. The rules laid out by ISDA are normally followed in the case of OTC trades and trade matching settlement and reconcilliation is conducted between the two parties directly with the legal basis covered by ISDA agreements
The cycle is different for every market in every country.
3:30 Novation
1. At step 1, the person on the right places a sell order. When the broker buys from that seller, does the broker buy at the bid or ask price?
2. Does the broker buy from the seller before forwarding the order to the exchange or after step 4?
3. Also at step 1, the person on the left places a buy order. When the broker sells to that buyer, does the broker sell at the bid or ask price?
Could you please put something together to show operation within a broker?
You have certain ideas about stocks and you are an independent woman
1. Nowadays every process is online, then why does it take T+2 days for settlement?
2. What if I book a trade and exchange could not find the matching trade?
1. dont know, someone else might know.
2. Your order will be on hold as long as there isn't any match.
You can put a max/min value to buy/sell though.
1. The systems is use today on the settlement side are still dated and there are initiatives to accelerate this though it requires massive upgrades to many systems all round the world
2. Unless there is a match the order is not created in the front end and will be on hold until filled
So you need to go to buy T+0 gold spot is more convenient and faster!
Looks like ETD right? Not OTC life cycle. Correct?
Correcr
Nice one, but the role of the custodian is not explained properly.
The custodian is simply the regulated entity that holds the stock
Imagine A selling 100 shares and B buying these 100 shares. If B defaults, what happens to the 100 shares? Are they 'bought' by the clearing house?
For every trade a CCP (Clearing House) executes and clears, it requires additional funds known as
margin. This is usually requested at the end of every day, although in volatile stock markets when prices are moving quickly, the CCP will not wait and will request the funds immediately.
Margin is sometimes referred to as collateral, but the principle is the same: the CCP has the funds to use in the event of a member being unable to meet its various obligations to the CCPs. When this happens, the clearing member will be deemed in default, at which point the CCP will try to close out all of the member's open positions by buying securities in the market with the margin it has collected
Yes, but the price will be lower.
b
The settlement explanation is not i correct as per my understanding. Anyhow, the explanation is good
Hi Rajesh, let me know any suggestions for correction and thanks for the comments
Don't you think you're talking contradictory and incorrectly you, and you think it's still good?
Lorien, thanks for taking time to comment. much appreciated
Well, it'll help you find it until it does.