Work - STP Workflow for a Buy id 356 created 2009-02-25 modified 2009-02-26

This model describes a general STP workflow model for a Buy Side Institution (Fund Manager, Mutual Fund, Private Wealth Manager). For purposes of simplicity it is described for a Buy transaction only.

It is a generic model, and not representative of how all Buy Side firms operate, but should give a general overview. It is based, loosely on an equity transaction, but of course would vary to a degree depending on instrument type, market, etc.

For further information on this model, and how to implement this model in your organisation (including system selection) please contact paulchas1@hotmail.com

Diagram

Inputs Delivery of Cash Delivery of Stock Bank Statements

Work STP Workflow for a Buy Asset Allocation Rebalance and Order Initiation Compliance Order Routing Order Fill Executed Order Transaction Allocation Confirmation Match Instruction Reconciliation Confirmation Instruction

Outputs Delivery of Cash Delivery of Stock

Steps

This work unit is decomposed into the following Work units, Events and Decisions

Asset Allocation Roles Portfolio Manager

Used to refer to how an investor distributes his or her investments among various classes of investment vehicles (e.g. stocks or bonds)

Rebalance and Order Initiation Roles Portfolio Manager

Rebalancing is the action of bringing a portfolio of investments that has deviated away from ones target asset allocation

back into line.

Order Initiation usually follows hand in hand with a rebalancing. It describes the commitment of an order to the market

for execution.

Compliance Roles Portfolio Manager

Ensuring that all rules , regulations etc are met such that the Order Initiation can proceed.

Order Routing Roles Dealer

Routing the order on to the Sell Side for execution, depending on best prices, research, relationships, etc.

Order Fill Roles Sell Side

Confirmation by the Sell Side that part, or all, of the requested order has been executed/filled.

Partial Fill - Part of the Order is filled.

Fully Filled - All of the Order is filled.

Executed Order Roles Dealer

Buy Side in full possession of the filled order.

Transaction Roles Back Office

Conventionally the executed order flows from a Front Office System to a Back Office System (which may be one and the

same). Here, often its 'form' changes from an Order to a Transaction. A Transaction being an executed order.

Allocation Roles Back Office

Means by which a trade is divided or 'portioned' to a particular fund/portfolio/account.

Confirmation Roles Sell Side

Middle/Back Office Function of the Sell Side whereby they send - usually by electronic means - a record (confirmation)

of their understanding of the trade previously done, to the Buy Side.

Match Roles Back Office

Process whereby the Buy Side compares their record of the trade (allocations) against the confirmations as sent in by the broker.

Instruction Roles Back Office

Message to the Custodian indicating that in 3 days time (for a UK Equity) a given amount of stock will be received against a a Cash payment for that stock.

Reconciliation Roles Back Office

Process of matching and comparing figures from accounting records against those presented on a bank statement.

Confirmation Instruction Roles Custodian

The custodian can provide some indication that an instruction to settle message has been received, and will confirm

receipt of the message some kind of Instruction Confirmation.

Inputs

This Work uses the following Objects as inputs

Delivery of Cash

Where the transaction is a Buy the Investment Firm will deliver Cash to the Sell Side , or its designated Agent ,

usually via its Custodian . This, in the UK market usually takes place 3 days after trade date (t+3)

Delivery of Stock

Where the transaction is a Buy the Investment Firm will receive the bought Stock from the Sell Side , or its designated Agent ,

usually directly to its Custodian . This, in the UK market usually takes place 3 days after trade date (t+3)

Bank Statements

Delivered by the Custodian to the Buy Side to describe account balances and underlying transactions (Credit and Debits)

This Work steps use the following Objects as inputs

Outputs

This Work produces the following Objects as outputs

This Work steps produce the following Objects as outputs

Tools

This Work is uses the followingt Tools

Objectives and indicators

This Work is measured by the following Indicators for which the following States have been set as goals

People carrying out this work

This Work is carried out by Roles assumed by the following Person(s)

Back Office

Custodian

Dealer

Portfolio Manager

Sell Side

Element data, outgoing and incoming relations

Properties and outgoing relations	Incoming relations
Element properties and relations with other elements	Other elements that have a relation with this element
Inputs: Delivery of Cash Delivery of Stock Bank Statements Roles: Back Office Custodian Dealer Portfolio Manager Sell Side Steps: Asset Allocation Rebalance and Order Initiation Compliance Order Routing Order Fill Executed Order Transaction Allocation Confirmation Match Instruction Reconciliation Confirmation Instruction

Alerts and notifications

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