Effective Product Control

CHAPTER 8System Feeds, End of Day Rates and Profit and Loss Estimates

Before product control can commence reporting the desk's P&L, they require access to complete, timely and accurate data. In this chapter we will look at three sets of data which are critical to reporting the P&L. These are system feeds, end of day rates and the front office P&L estimate.

System Feeds

Successful and timely feeds of data from upstream systems into the P&L reporting system is critical for product control to be able to report the P&L. In Figure 8.1 I have illustrated an optimal flow of trades and data which will be used for P&L reporting.

The starting point in Figure 8.1 is the capture of trades booked by sales and trading staff into a trade booking system (also known as a trade capture system). Banks may have multiple trade booking systems to suit the needs of each business.

Once a trade is captured in the booking system it then feeds the risk management system (RMS) which values the trade and quantifies its risk using end of day rates and financial measurement and risk models. A bank may use several RMSs such as Murex, Calypso, OpenLink, Wall Street or in-house software.

The RMS then feeds the general ledger (GL) (usually via an accounting rules engine), where the data is converted into financial accounting entries which generate a P&L and balance sheet for each business.

The P&L reporting system then takes this data and prepares reports for product control to use for P&L reporting. The P&L ...