In reconciliations, the mechanism used to correct an exception by creating an adjusting entry (e.g. trade adjustment, cash adjustment)
An option with no profit opportunity for its holder. With a call or put option, the option is at the money when the price of the underlying is the same as the exercise price of the option
Automated reconciliation processes can incorporate machine learning and artificial intelligence algorithms to further improve accuracy and speed. The integration of these technologies ensures a faster and more accurate reconciliation process that helps organisations to save time and money while minimising the risk of errors and fraudulent activities
A type of option that can be exercised before and at expiration
Grouping of financial instruments with similar attributes e.g. equities, cash commodities, currency
Back-office control is made up of administration and support who are not client facing. Back-office functions include settlements, clearances, record maintenance, regulatory compliance and IT services
In reconciliations, a mismatch between two sets of data (eg trade breaks, position breaks, price breaks). A Break are treated as an issue which needs ‘fixing’
A person or company that acts on behalf of another in buying or selling a financial instrument
A contract that gives the holder of the option, the right but not the obligation to buy the underlying instrument at a certain price by an agreed date
Verification of opening and closing balances; and cash movements related to transactions, positions and other cash activities such as fee rebates, interest payments; between internal and external systems
Also known as clearing corporation or central clearing party (CCP) is an intermediary that facilitates derivatives settlement and mitigates risks between parties involved in the transaction. A clearing house is different from an exchange – an exchange provides the platform for buyers and sellers to trade whereas a clearing house ensures the settlement or execution of the trades placed on an exchange
Close Out report is a report that provides a view of open positions and is used to identify the positions that may need to be closed before contract expiry
A kind of application that is designed to take advantage of all the elements of the cloud. IDC defines “new cloud-native applications” as development and deployment of applications marked by the use of all four of: Microservices, Containers, Container Orchestration Frameworks, and DevOps
Regulation and enforcement of the laws and rules in finance and the capital markets
The entity at the opposite side in a financial transaction
Process of improving the accuracy and reliability of raw customer data, by supplementing missing or incomplete data
When normalising a data set, you are recognising it to remove any unstructured or redundant data to enable a superior, more logical means of storing that data. The main goal is to achieve a standardised data format across entire system
Checking the accuracy and quality of the source of the data. Using a set of rules, it checks whether the data is within the acceptable values defined for the field
A measure of the condition of data based on accuracy, completeness, consistency, reliability, and whether it’s up to date. Risk management and regulatory compliance both are impacted by the quality of data
A financial instrument whose value or price depends on the price of another asset. Examples of derivatives include options, futures and forwards
Derivatives refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark
A marketplace where commodities, derivatives, securities and other financial instruments are traded
A security with a standardised financial contract that trades on a regulated exchange
In reconciliations, same as breaks
This is the end date of a contract. This is also known as maturity date
The price at which the underlying security including futures contracts may be bought or sold by the option holder. Strike price is also known as the strike price
The premium to buy the option is paid when the option is traded. Equity style options are also known as equity style options
A type of option that can be exercised only at expiration
An agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future. Although forward contracts are similar in definition to a futures contract, they are different in how they are traded and negotiated. Forward contracts are privately negotiated whereas futures contract are traded on an exchange
Standardised legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other. The asset transacted is usually a commodity or financial instrument
A futures commission merchant (FCM) solicits and accepts trading for future contracts with customers. FCMs must be registered with the National Futures Association (NFA) and must be accredited by the Commodity Futures Trading Commission (CFTC)
A legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future
A marketplace where future contracts are traded
A type of option where the premium is paid when the option is exercised or on expiry
Verification of currency-pair transactions and positions between two or more systems which hold the records
Transaction order that is allocated by an executing firm to be cleared and processed by another
A collateral payment or deposit required from a trader or customer when opening an account . This is usually set by the exchange
An option that provides an opportunity for a profit by its holder. For example:
– With a call option, if the price of the underlying is higher than exercise price, the holder of the option stands to make a profit
– With a put option, if the price of the underlying is lower than the exercise price, the holder of option stands to make a profit.
This is the product that is bought and sold between two parties on an exchange or over the counter
Same as Exchange Traded Derivatives – a security with a standardised financial contract that trades on a regulated exchange
Risk that the holding of an asset can not be sold quickly
Quantity of contracts or units of an instrument traded
This is the end date of a contract. This is also known as expiration date
The daily revaluation of a financial instrument in an open position so that margin accounts are credited or debited based on the closing price of the instrument. This is usually done for futures and options contracts and is set by the exchange
A software that can be decomposed into smaller components
A software that can be decomposed into smaller components
The total number of positions that are remaining (or open) in a futures contract
The net of unrealised gain or loss on open derivatives positions. Put differently, OTE is the theoretical gain or loss represented by the current market value and the price paid (or received) for a position. Once the position is closed, the gain or loss will become realised
Typically a contract (buy/sell) is carried directly between two parties out without the use of an exchange or market place
The ability of financial services firms to prevent, adapt, respond to, recover, and learn from operational disruptions
The right but not the obligation to buy or sell the underlying instrument an agreed price or date
An option contract where the holder stands to make a loss at exercise. For a call option, the option is out of the money when the price of the underlying is lower than exercise. For a put option, the price of the underlying is higher than the exercise price
The total number of “lots” or units in an account at a point in time (normally at the end of the day). Long means net positive, Short means net negative
A type of option where the premium to buy the option is paid when the option is traded. Premium paid upfront options are also known as equity style options
Evidence from a trial run to demonstrate an idea or product is feasible
This is the delivery or fulfilment date for a commodity contract. In the options world, this is the expiration date of the option. Prompt date is also known as settlement date
A contract that gives the holder of the option, the right and not the obligation to sell the underlying instrument an agreed price or date
Software that verifies the accuracy of account balances by comparing a company’s internal records with those in its external system. Can gain real-time visibility of cash flows through dashboards and detailed financial reports
Same as reconciliaton software
Same as reconciliaton software
An organisations adherence to regulations, laws, guidelines, and specifications relevant to its business processes. Violations of compliance can result in legal punishment and federal fines
Involves sending financial and non-financial information to government agencies and other organisations that oversee financial markets and institutions
The delivery of securities or cash from one party to another following a trade
This is the delivery or fulfilment date for a commodity contract. Settlement date is also known as prompt date
Settlement prices are the fair market value of a commodity or financial derivatives as determined by buyers and sellers in a market at a particular point in time known as the settlement period
The goal of standardisation is to enforce a level of consistency to certain practices or operations within the selected environment
The price at which the underlying security including futures contracts may be bought or sold by the option holder. Strike price is also known as the exercise price
A derivative agreement between parties to exchange the cash flows from two financial instruments based on pre-agreed rule. Examples of swaps include interest rate swap, currency swaps and commodity swaps
Smallest price fluctuation on a traded instrument
This is the sum of the open trade equity (the unrealised profit and loss from open positions) and cash balance
Verification of the different components of the total equity between various systems
Verifying daily derivative product transactions against trade tickets, internal systems, external systems etc
Information that is captured from the transactions. Records time of transaction, the place, the price points, payment methods etc
This is the contract that an option is priced against
Ensuring that the data set relating to futures and options trades and positions meet the set criteria set by the data handling system
Is the measure of the frequency and size of price movements for a financial instrument. When the price of a financial instrument experiences frequent and large changes, it is said to be highly volatile
The quantity of a financial instrument transacted between buyers and sellers daily. Volume is also known as volume of trade or trading volume
