Trade Life Cycle

This post is strictly for those who work in Finance domain.

Someone in a common forum asking for brief information on “Trade
Life Cycle”, feel like helping her and to others who may be in need, so spend
few hours late night to write down the below. It’s 4 in the morning, weekend n
badminton awaiting. Trade Life Cycle such a huge topic where few days not
enough to discuss, finally managed to put it down in 3 pages.

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Hi,

I am going to correlate Trade (aka Deal) Life Cycle
with a real life example. Throughout this explanation assume that you are “Owner
of Electronics Shop”, I will explain “Trade Life Cycle” from your perspective.

FRONT OFFICE

A customer (assume me)want to buy Television, searching for
better shop on the street, when I am near your shop, Few people invite me in, making me comfortable in the shop,
finding my requirements, showing different Tv’s etc.. I keep asking for price
by changing my inputs like TV model, screen size, resolution etc, Obviously
your people will give me different price based on my inputs.

---------------- FINDING VALUE OF TV (UNDERLYING) BY VARYING
MY INPUTS IS PRICING. Few people
involved here are SALES PEOPLE (Who just arrange transaction with some
margin) or TRADERS who work for your shop

Now I have finalized my TV, informed my choice, your people will
enter the transaction in your system (TRADING SYSTEM). ----- This is DEAL
BOOKING

MIDDLE OFIFCE

You will arrange your people such that one person will give price,
another senior verify it before final confirmation, this is to avoid any misuse
either by chance or choice. People arrangement process here is “Validation”
process. (If you don’t have validation and if sales person is my friend, I may
get IPAD for 15 Dollars).

Quite often you will hear something called 4 EYES
Principle, means one person (2 eyes) will give the price and another person
(another 2 eyes) will verify/validate/Reject. This verification can go up to
many levels depending on the amount or complexity of the transaction.

(Here your people need some reports for better risk
management and validation, like ‘average price selling for different TV’s’,’
today’s market rate’,’ customer transaction history’ etc..) – ALL THIS
PROCESS IS RISK MEASUREMENT AND MANAGEMENT

BACK OFFICE

After your people validate the deal, they confirm to me by
giving me automated “Bill(Confirmation, some times invoice also together)” in paper form- This process
is called “Confirmations Generation(HTML,ISDA,SWIFT)”

I will verify everything mentioned in the invoice and will acknowledge
the transaction (This case just nodding my head). After receiving my acknowledgement,
then only this transaction is fully confirmed.

I will pay money and you will deliver TV set. (Delivery
Vs Payment). -Payment process.

This is not the end of “Transaction”. Your shop
have exchange/replace/return policies as well right?

Market Operations:

I went home and no one at home likes the TV, so I come back to
your shop and wanted to “CANCEL” the transaction. (Or)

I want to give TV back and buy another TV --- CANCEL AND
REISSUE (Or)

After few days, I have technical problems with TV set – RESTRUCTURE
(Or)

I want to sell it off to you after some time – EARLY TERMINATION
(Or)

Warranty is reached and you don’t want to entertain any
activities related to this TV –EXPIRY (Or)

Suppose if I buy many other items along with TV and sold
some of old stuff, you will net all of them and will give me final amount to
pay, instead of individual bills- NETTING

Depending on the underlying transaction, you will have many
market operations

OTHER
IMPORTANT MODULES OF DEAL LIFE CYCLE(OR SYSTEM LIFE CYCLE)

Accounting:

Accounting is ledger maintaining all the payments happening (or
going to happen [Mark to Market]) by department wise or for entire shop
(Entity) and it comes as part of back office.

Your business has grown and you want to manage Tv’s accounts
separately, TV department is one Accounting Section , like that you may
have multiple accounting sections for different units.

Fixings and Payments:

Suppose if you sell TV in installments, amount to be
received for every installment is dynamic and is based on the interest rate of
that month, so every month you have to FIX the interest for that deal,
so that corresponding payment will be generated. Fixing is part
of back office process.

Market Data:

When I come to the shop for TV, your people giving me price
for TV. You sell so many goods and every day price may change for all of them.
No one come and by hard price every day morning right? , also for fixings etc…you
have to get data from somewhere before your shop opens, This is what called as Market
Data (Reuters and Bloomberg are the famous market data providers in finance)

Profit and Loss:

You don’t sell TV for fun right? You want to make some money
out of it. You would have bought TV somewhere at least few days before, it means

1. You
made investment,

2. Interest
on the investment,

3. Inventory
cost

4. Profit
for you

Everything you will include while selling TV. PnL,
its nothing but subtracting your total cost from the selling price.----------
Front office

Simulation:

If I have to say “Simulation” in technical terms, it’s like “Group
by” column of SQL queries n running “What If” scenarios on your
business. Some of the outputs of simulation are “PnL of TV Dept”, “PnL
of Sony Brand”, “what will happen if TV prices go down by 5%”, “if
you have loss which Hedge deal can cover your loss “etc,so on……., Recap “Monte
Carlo Simulation” of college days.—Front office activity

Reports:

Your frequent customer may want a report all the
transactions made in the last one year. You need reports to see the PnL of different
sub sections or Entire shop etc. You need reports for income tax , for
auditors, for risk management etc…--Mainly for Middle Office purpose.

Clearing and Settlement:

If you hire some third party organization to collect your
money from your customers and to pay your money on behalf of you. ---- It’s a Back
office process

Nostro Management:

Every month you need to have funds to pay salaries, to
maintain your shop, to purchase goods, to maintain inventory. TREASURY
department make sure that you have enough funds in your bank account (NOSTRO), keep
filling NOSTRO accounts to have enough money always in your bank accounts.

End Of The Day

For today end of the day is after 24 hours, similarly
trading system also has similar process. End of the day for trading
system means, preparing system for next working day. Similar to rearranging all
your shop after you close your business and making sure that market data etc…available
before customers comes to your shop next day ( Changing system dates and
copying market data to the next day etc….).

So Deal or Trade in the above entire episode is “SELLING
TV” from your perspective, from my perspective “BUYING TV”. Its very
important to understand the context while getting requirements or while
speaking, meaning completely changes depending on the context. While working on
a trading system, always look at the information in the system from “BANK’S
PERSPECTVE”.

Straight Through
Processing

Purpose of STP is reducing manual intervention and increase
the automation. Starting from the entering the deal in the system till its
expiry, we can automate many steps of life cycle using workflow managers .

Assume that you are have multiple shops in the same city
then expanded to another city, state wide, country wide and international
company. Now you have 1000’s of shops worldwide and you have to maintain all
the transactions happening in your shop. That’s where different Trading systems
come into picture to automate Deal Life Cycle, to Calculate risk, to put limit
checks make sure that you never encounter loss.

Understand basic trade life cycle, you can ask me any
questions of any complexity for any hybrid product in any area of deal life
cycle.

DEAL LIFE CYCLE PROCESS MAY
VARY BASED ON THE TYPE OF PRODCUT.

Salaries

Most of the discussions on or off the work place directly or indirectly related to salaries. Points of discussion vary from ‘he must be earning x amount of salary’ to ‘this fellow doesn’t deserve this much salary’ etc… most of the tea time discussions focused on earnings.

Everyone individual ranging from Anil Ambani to Anil Polineni is having their own struggled past to sustain at a certain level or to make a living .In most of the cases, after 10 to 15 years of persistent hard by the virtue of god, virtue of manager, virtue of market condition, virtue of company’s growth, virtue of colleague’s support and luck by chance, life may give an opportunity for an individual to start and continue to earn few rupees or dollars or whatever the form it has.

I have seen days where my villagers used to exchange grown crop for most of their needs and all the life’s requirements was managed very well with that exchange process, for education also we used to pay rice etc...Even if few had little money that was just static in their pockets, there was never a need for money around 18 years back in and around my villages. I clearly remember the transition from crop exchange to money exchange, reason for this transition was the brokers who came in between, now money needs has grown leaps and bounds even in villages and its obvious that money is the only medium of exchange for everything.(1) The point here is money itself was never there and it was never a requirement, it was just created by us to exchange requirements.

I am sure everyone feels happy if we help a person with in our capabilities. Small example if someone is in very much need of a seat in train or bus while travelling, most of the people offer their seat, and the satisfaction we get after offering seat is enormous . (2)Everyone likes to help others if that helping process not impacting us in any way, there are exceptional people who compromise on themselves to help others.

Every human have their self defined lifestyle and all of us work only to fulfill defined life style. Life style of a beggar is eat food and sleep, so he just needs daily salary to eat food. Life style of common man is pay rent, fulfill the responsibilities of parents, brothers, sisters, dependants etc and save some money for future if possible. My life style is have enough money to live the life for next one month. So called rich also have their defined needs and pain is more if the rich life style is not fulfilled (3) Every life style requires monthly or daily salary to fulfill their defined minimum needs.

We see the people who don’t know anything that person’s back ground, his struggle in life, his responsibilities but cry or crib on his/her salaries on and off the work. Typical comments are ‘This guy earning that much without doing anything’,’ why should company pay this much for this stupid fellow’, ‘ what the hell he/she is doing sitting in that position’, ‘this manager just take huge perk without much work’. To find a group who sing chorus with these kind of comments is easy and start their actions to their possible limits. On personal front I saw people who forcefully ask salaries and start their consequent actions like pulling your legs if they believe that you don’t deserve that much or if they think that you are above them, showing too much interest in knowing others salaries. It even happens between own sisters and brothers who feel jealous of each other’s earnings. First thing most people want to know when you call abt a new job is earning capabilities, when I met a classmate after 10 years ,first two questions he forced me to answer was me and my wife salaries. When I asked few colleagues about the reason for showing interest to know others salaries weird answers like ‘want to know where I stand in the market’, ‘want to know my position in the company based on others salary’ etc…not even a single valid reason.

When it comes to myself I can assure that you never find me showing interest for others earnings, I don’t initiate a discussion about salaries to satisfy my ego, I don’t even clearly know my wife salary.

When I was in my previous company, 2 people felt that I am getting more than what I deserve and started a meeting in McDonalds , invited others for support to complain against me, if they use that time to clean toilets in McDonalds atleast they would have made some money to themselves. By chance if someone earning more least we may do is observe and learn from them rather than try to pull them down. If anyone try to pull others do remember that they are above us that’s why we are trying to pull down.

Everyone’s feelings in this world look valid to me except the people who discuss on others earnings or who pass sarcastic praising. Read points 1, 2 and 3 again, you agree with me that everyone is earning just to fulfill their defined minimal needs and everyone wants to help others. So discussing on others earnings is nothing but trying to take away others happiness or trying to push others into problems intentionally. We can enjoy the real happiness of appreciating others and opportunity to learn from others be it relatives of friends or colleagues if there is no place for others earnings in mind. By saying all this I am not excluding myself, I am also part of this jungle.

Missing

After my fifth standard I was forced to study high school at my mom's parents place. I still remember how much I cried for being away from parents.I used to go to lonely place, cry for an hour and come back to hell.It was mentally intoxicating to stay away from parents and village with the limited attachment I had with them.Today when I look back those memories are very funny.

Parents in-laws are here in Singapore from the last one month, wife had the best time with them. Starting from how to cross signal in foreign land till she gives sendoff at airport she took care of them like her children, wife's parents scolding her with pride for teaching even small things of life just like they did in her childhood. Long hours of discussion, late night sleeps, roaming around the city, movies , small fights in between ,theme parks anything and everything in Singapore most of the times three of them enjoyed, I was just providing my support to them and playing the role of audience. Today they just left to India, when I was observing wife's feelings at departure gate she was missing them just like me in my childhood but with more intensity.

Came back to home, home is full of silence,wife is hardly replying to me, she went to the room where they spent most of the time, crying alone, its reflecting my childhood days, all I am doing is letting her to drop down all the tears as she will treasure them forever, when she is still not stopping I entered into altercation for a small thing to divert her attention but thats not giving any result,now just sitting and talking to her some nonsense.

Being a husband I don't think I can ever replace parents love and affection, parents love is unconditional , where as husband's love start with need and grows with time depending on thinking of the person, it will take a life time to match with parents, will continue to understand and improve on this.

Wife's parents will be reaching India midnight Singapore time and she is not going to sleep until she hear their voice from India. The least I am doing is be with her, talk some nonsense and write this blog while she is watching the tv. I am off to India day after on business trip, has to do something tomorrow to bring back wife to mechanical life we have chosen profoundly.

India visit

One week visit to Bombay as part of work, excited about the trip as it was first time for me in business class travel and the best hotel facilities there. Requested wife to join me but she didn't accept.

Reached Bombay on Sunday morning, Me with three other colleagues went for a city trip in taxi, at most of the places there is huge difference in entry price for foreigners so colleagues didn't show much interest not that they can't afford, I didn't understand the logic behind this high price, when I asked the same to the people at the counter they also don't have any clue :-) With my memory I didn't remember any such price difference in any foreign land I have visited.Gandhi's museum, a good place to revisit my history knowledge and to take something back with me while leaving the place.

My father in law came to Mumbai all the way from Andhra for a day to see me, travel time to Bombay was 20 hours one way to him where it was 4 hours for me from Singapore, it was so touching, these are the precious moments one get through out the life if you don't take dowry,had good time with him.I can feel that he is missing his daughter too much more than me. Requested him to come to Singapore soon, he accepted.

At work, made so many good friends and met senior people of the country. Get opportunity to meet very talented people and the market makers.Not speaking much about the work as I am not supped to do so.While interacting with them came to know that all of them made entry to that place after clearing toughest exams and interviews of India. One woman who made impact one me was Sucharita mam, being a woman managing so many things and people effectively with passion. When I told the same to her, she just smiled.Mam I learned many things from you in this week. One week just passed like that, while leaving the place it was a bit painful to leave all the wonderful people, I do miss them.

Farewell to Uday yesterday who is leaving to UK for work. Uday, nice and intelligent guy, around three years back when he came to me for a suggestion about his work and career , I became the reason for him to enter into Murex consulting area ,at that time he took the bold decision of quitting high paid job and joined this for a lesser salary, he is going to enjoy the fruits of his risky decision now.


Wife booked badminton court for me and my friends by the time when I am back, had tiring badminton,now going for a telugu movie "maryada ramanna" as she decides and I follow:-), already started scolding for not getting ready.

Money-Phase2

After going through worst experiences with money, I told to myself that when I start earning, money savings should never control me-my thoughts-my actions. I wanted to enjoy every bit of life without thinking too much about so called security and with out loosing control on my responsibilities.Mine is a hyper active mind, always thinking about so many impossibilities and irregularities of life,never allow myself to think on savings. I do think abt earnings but never on savings, unfortunately most of the times pay is the parameter for judging the talent of an individual, I love to create too much wealth if possible for my capabilities with honesty but never earn just for saving. I have been working for 5 years,my wife scolding me literally for not having any savings for myself, giving everything to those who helped me or to dependents .Definitely I am not sacrificing anything here, I am spending the way I like.All that I need in life is prediction for next one month earnings and medical insurance, that itself is my savings, the moment I get monthly salary I disperse it everything on the first day itself keeping something for my next one month so that I utilize my time for better things in life.My dependents are of highest priority , today its family and known people urgent needs with out expecting returns, after sometime family and something else.

But its not easy to get acceptance for this kind of behavior from family that to after going through struggles for money, so lot of sweet arguments and suggestions from family which I pretend to follow.


After clearing all my loans, one day me and my friend was going on a bike,we stopped at a beggar in Bangalore, I gave him my ray ban glasses and around 8000 rupees, that beggar didn't understand whats happening,after few seconds he throw the glasses at us and ran away with the money. I broke those glasses recently when I fought with my wife :-), another fight going to happen after this blog if saps reads it, as I didn't tell this to her till now :-)...


Few days back when my uncle applying for my tax returns on behalf of me in India through an agent, that accountant told that "sir , I haven't seen this kind of person in my experience so far who doesn't have any savings for this pay and paying this much extra tax etc......"., another round of class from wife...

It's not that I don't care for money, I love money only till I earn but not to hide it. Create wealth not just for myself but for people who trust, may be I am going to end my life with this thought and its subsequent actions.

Now so called great friends and well wishers and their behavior after earnings and salaries .....coming soon :-)...

Money, PHASE 1

Everyone might have experienced the worst and best experiences with money. Through out my life I was bitten by money in many many ways.My first experience with money was when I am 9 years old and suffering from fever , my father asked my mom for money which he has given few days back.My mom used it for household expenses, dispute there, then we went to hospital with no money to the near by village and doctor treated us after assurance to pay soon.That was the beginning for my journey to money. I was around 10, me with friends found a half rupee coin at the bottom of a big iron pipe, we 4 friends worked on it for more than 4 hours and enjoyed 10 chocolates we got with that money.My needs with money were growing with my age, but I was unable to find any source for money.Once in a while relatives comes to my home and they give some change while leaving home, that happens very rare.My frustration levels going up, then I tried my own ways of getting money like selling books which my father buy at the beginning of academic year for me,doing some construction jobs without knowing at home,writing notebooks for seniors of nearby village so that they give some money etc etc. all these was not giving enough confidence for me.... Real pain with money started when I am 15,so many of my seniors and my batch mates discontinued their education as their parents cannot afford education expenses, my younger brother also one among them later I forced him to restart his studies where he left.A genius friend in my intermediate left his studies for the same money, I have to give a miss for Anna University and Regional colleges, the best colleges in India for the same money,I gave all my first 4 years of earnings to my uncle with 45% FOURTY FICE PERCENT -- interest rate just I don't have relatively small money at the right time,me and many mates like me were never concentrated fully on studies or job as money was always biting some way or other,lost relations for money,lied hell lot of times- again for the same money, friends fought for the same money.


All the money I was talking at each instance above is probably any layman in developed countries can earn from a an hour to a month odd job. In my life I have seen so many people decided their fate at the early age itself as there is no hope or support for the so called minimum money.Where is that god who is allowing others to ruin their fate for no reasons???


Poor people lives are badly effected by very very little money, not even money,just hope for money.God, jesus-allah or what so ever,its not just giving life but show some ray of hope for everyone man.....everyone actually not living the life u have given, just passing the days with pain, I am doing my efforts to reach u god,will question him when I meet him.

one of my lecturer who was in his 60's once told that "Anil, it will take one person's life time to bring up the family living standard's ", it was a statement come from life time experience, that one person in the family needs a vision and courage. I have seen and seeing so many families in my village itself who didn't find that one person in the family, still living the poverty life with half meals and no hope.

Will write in the next blog on what money means to me now....

Jewellery vs electronics

very hectic weekend ,shirt trip to Perth for just 2 days to validate wife's pr .Good news from friends, whom I know from the last 5 years are getting married , may be the best achievement of his life ,getting acceptance from one of the finest girl very happy for them,
should try my best to attend their marriage.

on this weekend bought an iPad for myself in perth after playing lot of dramas and pretensions to convince and to see smile on wife's face even after buying . Girls are ready to buy anything in the form of jewellery but not happy to spend on electronics.She was telling that gold at any point of time will give at least 90 percent of investment but not digital things . Then I argued that if u sell any of ur jewellery n bring back that 90% then I never buy anything... but no reply from wife.

Jewellery is the worst possible investment I have ever seen, the moment u start selling jewellery means bad phase of life has began , go to the same shop where u bought the jewellery u will see the difference in treatment, if ur circle knows this news then treatment differs , your consciousness treatment ......everything changes just with selling one jewellery . Also most of the times women buy jewellery to showoff in parties which obviously creates either jealousy or hatred feeling in many ways , will try for revenge with another showoff somewhere else and this process never ends .

Where as most of the electrons people enjoy sitting in a room through out it's durability ,electronics brings out lot of creativity , saves lot of time ,helps to do things faster,brings comfort for life, etcetcetc everything is positive about electronics ..where is with gold everything is useless reason......

Imagine few years down the line if gold available like stones or iron what will happen all these people's investment :-)
Some of these silly reasons I tried to convince my wife for buying iPad , after all these illogical reasons she convinced a bit and accepted. simple solutions are always there for complex things ...just right logic....

iPad , it seems to be replacement for laptop,no start n stop process, very handy...worth investment ....
Wrote blog with iPad