Anatomy of a Trade
A trade ticket is the combination of all details relating to a trade. In order to discuss the lifecycle of a trade, we begin by looking closely at the components of a trade ticket. These will vary according to the type and asset class of the trade being transacted.
7.1 THE UNDERLYING
This is the basis for the trade. It is the fundamental unit upon which the trade is constructed. The actual underlying will depend upon the asset class. The underlying could be:
• a particular share traded on an exchange (equity);
• a bond (fixed income);
• two different currencies for exchange (foreign exchange);
• one currency for future exchange or swap (interest rate);
• a particular measure (size, weight, volume) of a real substance (commodity);
• some other financial instrument.
We will divide the ticket into the major subcategories that apply to most trades and give a specific example to illustrate the concepts. As an illustration, details of the example deal are set out at the end of each section below.
Suppose My Trading Bank bought 20 000 Cadogan Petroleum ordinary shares quoted on the London Stock Exchange from The Bank Next Door on 3 June 2009.
Some features are required by all parts of the trade process and hence do not fall into any one subcategory. Among these are the identification details. These ensure that all processes know which trade they are acting upon and the status of the trade, so that it is clear where the trade currently sits.