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Trade Matching & Confirmation

Trade Matching

The process of trade matching is intended to ensure that transactions will not fail to settle once input into the security settlement system (SSS) at a CSD or ICSD because of mismatches between the instructions entered by or on behalf of counterparties. It is not good practice for counterparties to rely on trade matching at the SSS for the verification of the terms of transactions, as this usually reduces the time to correct mistakes or resolve disagreements about the terms of transactions and allows an unexpected build-up of risk. Once a transaction has been agreed counterparties should verify that they agree the terms of the transaction. A post-trade, pre-settlement, process of verification should be performed promptly after the execution of a trade, which means as soon as possible after the trade is executed and prior to SSS. All fields and Standard Settlement Instructions (SSIs) should be matched at the point of trade matching verification in order to mitigate the risk of a trade mismatching, or trades being set up with economic differences. (IBP-118 UNDER ISLA REVIEW)

Confirmation

Confirmation is the process of providing a complete record of the commercial terms of a transaction and settlement instructions to the other party. The provision of a Confirmation allows the recipient to cross-check the sender's record of the terms of a transaction against the recipient's own records. Confirmations can also be used during the life of a transaction to verify changes. Counterparties should clarify prior to undertaking any transactions if they intend to provide confirmations, in what timeframe, and any expectations they have in relation to confirmations, of the other counterparty. If counterparties agree not to use confirmations, it is strongly encouraged that a robust Trade Matching and post-trade Contract Compare process is in place between the parties in order to mitigate risk.

  (IBP-119 AGREED IN 2017)

SSI Confirmation

Structure

Market participants should confirm each transaction with their counterpart, and that confirmation should include SSI.

Note that a confirmation is required within CSDR Chapter III Article 6(2) Regulation (EU) No 909/2014 and although that part of the regulation does not specifically mention SSI, the ISLA Survey 2018 noted SSI communication as one of the largest causes of settlement fails.

In support of this practice, use of a vendor solution is recommended to enable pre-settlement matching of both matching fields and SSI. (IBP-290 UNDER ISLA REVIEW)

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