Post-trade services cover all of the middle office and back office action on a trade life cycle which occurs after a trade has been made…There’s quite a lot to be done!
The various stages of checks, collecting, reporting and exchanging information, and the eventual exchange of money and securities (asset being traded) are all post-trade stages and are mandatory parts of the trading process. They are carried out by a third party such as a clearing house, a post-trade services provider or clearing department of an investment bank (in this case known as a clearing firm).
Post-trade services: let’s clear this up…
A clearing house will act as a central third party hub for the buy-side and sell-side in a trade and will provide clearing and settlement services. Clearing includes all the credit cheque processes, gathering of the necessary details and netting procedures (check out the Infrastructure Jargon Buster for an explanation for ‘netting) that have to happen before a trade can be settled. Some banks are registered as clearing firms, so they are able to carry out these duties on behalf of their clients.
Settlement is when the actual transfer of the stocks, or whatever type of security being traded and the money from the sell-side and the buy-side of the trade takes place. There’s always a settlement date to consider – a deadline which states the time at which securities and money must have been exchanged. In the UK, the timeframe for this settlement period for securities and cash is usually around one to three days.
In the UK, all clearing houses and clearing firms have to be authorised and registered by the Financial Conduct Authority (FCA). This provides transparency and a dose of risk management in the world of trading. It’s the job of post-trade services providers to ensure elements of a trade contract are all fulfilled correctly and on time.
What could I do in post-trade services?
There are various roles available in post-trade services. You could work in a clearing house or investment bank, carrying out some of these post-trade processes or working to maintain the technologies that process some of these stages. At more senior levels, you could take on a role such as a post-trade implementation manager. These guys are in charge of the teams providing their post-trade services to the client; they ensure the clients get the best, most efficient services. Roles such as this require thorough understanding of the types of securities they are dealing with such as futures or derivatives and an in-depth understanding of trade life cycles…
There are also opportunities as a business oversight analyst, which has a client facing/customer services and analysis angle in the type of work. They conduct analysis of post-trade processes and produce reports on their findings, and provide update reports on the processes to clients (either the buy-side or sell-side of the trade). In-depth knowledge of the products and securities being dealt with to provide informed insight and updates for the clients is essential!
You could also work for an infrastructure institution like a stock exchange (in the UK there’s the London Stock Exchange, located in the City). There are various departments to potentially work in here, such as communications and investment relations, business analysis and market operations support and equities and derivatives markets, and even public relations, strategic planning, technology, marketing or primary markets (where new securities will be up for grabs for the first time).
The majority of post-trade services roles are at graduate entry level. Opportunities are open to any degree discipline, though sometimes degrees with a technical, mathematical or analytical focus are preferred.