Broker-Dealer Operations Bootcamp

Price: $1695   Register now

Recommended that you register at least two weeks in advance.

Course Features

  • Course date:05/07/2020
  • Course Duration: 2 Day
  • Level: Beginner-intermediate
  • Prerequisites: Knowledge of BD
  • Method: Live & Virtual
  • Venue: 115 Broadway, NY, NY 10006
  • Time: 9:30 am – 5:00 pm
  • Dress Code: Business Casual
  • Category:
  • Certificate: Yes
  • CPE Credits: 14
  • Course Code: 215

Broker-Dealer Operations Bootcamp

This program provides an intensive analysis of the middle and back-office operation functions and requisite controls for Broker-Dealers. A detailed overview of these functional building-blocks encompasses the trade lifecycle process from order execution through trade clearance and settlement. Custody and control topics include a description of stock record, margin, stock loan, and asset services.

Participants will gain an understanding of the organizational infrastructure of a broker/dealer. Process flows that support these functional areas are a major focus of the program, but attention is also given to potential gaps and exposures that create Operational Risk for Broker/Dealers.  The program content examines the interdependencies of operation functions among entities such as investment managers, broker/dealers, introducing and clearing firms, custodians, clearinghouses, and depositories.

Course content includes a variety of interactive exercises and case study material.  The course instruction will promote discussion of real-life “war stories” involving operational Key Risk Indicators (KRI’s), such as concentrations, exceptions, limits trade breaks, failed trades, stock record breaks, suspense entries, DK’s, and cancels/corrects.  Participants will learn how these events, if not properly managed and reported, can have a negative impact on Broker/Dealers and their clients.

 

Course Objective

By the end of this course, participants should be able to:

  • Identify mission-critical functions within the lifecycle of a trade, from the inception of an order through settlement, as well as the follow-up required for the effective management of failed trades
  • Explain the critical functions of New Account and Product reference or (static) data set-up
  • Gain perspective on the interactions between the internal operation of a Broker/Dealer and the industry infrastructure, including confirmation/affirmation service providers, clearinghouses, depositories and settlement systems.
  • Evaluate Key Risk Indicators (KRI’s) of operational risk and the source of the information in the firm
  • Analyze metrics related to the control of trade activity, including fails, breaks, cancels/corrects, STP levels, and the cost per trade.
  • Compare the roles of broker/dealers, investment managers, clearing firms, prime brokers and custodians
  • Describe the impact of operational risk on Corporate Action processing
  • Evaluate the importance of books and records, including how a broker/dealer uses a stock record to demonstrate possession and control of firm and client assets, 15c3-1, and 15c3-3 compliance
  • Distinguish the areas of operational support for margin and stock loan businesses within broker/dealers
  • Examine the use of firm policies and procedures, internal controls and audit coverage, as well as governance
  • Describe the internal operational processes of a fund manager

 

DAY 1

Session 1:  Introduction to the Broker/Dealer

By the end of the session, participants will be able to:

  • Explain the role of the broker/dealer in the financial industry
  • Recognize different types of investors and clients: retail, institutional, hedge funds
  • Identify key components of the industry infrastructure to set the stage for Operations: the markets, the clearinghouses, and depositories
  • Discuss the role of clearing firms, custodians and prime brokers
  • Describe how the Middle- and Back-Office operation is organized
  • Describe how new accounts are set up and the information required for different types of account
  • Identify the functions supporting due diligence, Know Your Customer (KYC), Anti-Money Laundering (AML), FATCA and suitability issues related to customer accounts
  • Define necessary authorizations, approvals, disclosures documentation to set up a new account

 

Session 2:  Product Types and Characteristics

By the end of the session, participants will be able to:

  • Describe each of the major product categories characteristics, including equities, fixed income products, and derivatives
  • Define the set-up and maintenance of product reference information for each and the controls necessary to maintain the integrity of this data on a Product Master File

 

Session 3: Marketplaces for Securities

By the end of the session, participants will be able to:

  • Describe the overview of the marketplaces where equity and fixed income products are traded
  • Compare the differences in market structures for listed vs. OTC
  • Contrast principal vs. agency trading
  • Identify the interfaces between the business units of the Firm and the marketplaces

 

Session 4: Order and Trade Management

By the end of the session, participants will be able to:

  • Identify the origination of client orders, order capture, and routing
  • Highlight the importance of edit, validation, and compliance checks for orders
  • The capture of trade execution detail and its relay back to the firm and the client
  • Describe the current state of electronic trading platforms
  • Describe how trade information needs to be enriched with information related to net money, delivery instructions, and clearance and settlement information
  • Identify where trade information is booked and the importance of the Middle Office as a control function
  • Discuss interfaces to the firm’s books and records

 

LUNCH BREAK

 

Session 5: Trade Confirmation and Affirmation

By the end of the session, participants will be able to:

  • Identify the importance of trade enrichment: trade figuration
    • Calculation of final money on a trade
    • Price X Number of Shares or Principal Amounts
    • Accrued Interest on Bonds
    • Commissions and Fees
  • Compare the confirmation process for retail vs. institutional trade
  • Review the type of information on a confirmation
  • Highlight how the confirmation process protects clients and counterparties and manages risk
  • Describe the transaction flow for confirmation/affirmation activity
  • Discuss the allocation process for investment managers
  • Understand the importance of delivery instructions
    • SSI (Standing Settlement Instruction) Databases
  • Appreciate the role of the global and local custodian in the confirmation process
  • Identify confirmations required for non-trade and third-party activity notices
  • Describe confirmation/affirmation services such as Omgeo
  • Evaluate reasons for trade breaks or discrepancies and DK’s, as well as their resolution
  • Explain how the cancellation/correction or trade amendment process works, and risks associated with these

 

Session 6: Street-Side Trade Reporting, Comparison, and Clearance

By the end of the session, participants will be able to:

  • Describe how street-side trades are reported and compared
  • Identify Contract Sheets, Locked-in Trades, Advisories
  • Understand the purpose of Clearing Houses in supporting the safety and soundness of the financial markets
  • Evaluate clearing relationships with clearing firms, clearing banks and collateral requirements
  • Highlight issues related to how collateral is held
  • Describe the structure of the NSCC and the FICC
  • Understand the calculation of settlement date obligations as a result of clearing
  • Appreciate the role of a Central Counterparty (CCP) and its role in settlement risk management.
  • Review the CNS process and multilateral netting as well as its impact on liquidity management for self-clearing firms

 

Session 7: Settlement, Cashiering, and Custody

By the end of the session, participants will be able to:

  • Evaluate the settlement process for the exchange of assets to complete the trade lifecycle on the contractual settlement date
  • Describe how settlement occurs at DTC and the Federal Reserve Bank.
  • Understand the role of the custodians and their interactions with broker/dealers and RIA’s in the settlement process
  • How securities and cash settlement is handled for retail clients
  • Identify the updates and data requirements for the settlement process
  • Recognize when a fail has occurred and evaluate fails as a source of risk and exposure, their financial impact to the firm’s regulatory net capital, and to the market as a whole
  • Identify what needs to occur to clean up fails, claims, and the buy-in process
  • Describe the support required by technology deployed to support the operation of a broker/dealer and an RIA
  • Explain how third-party asset verification and custodial reporting are performed
  • Define the reconciliation processes for settlement and custody
  • Review the reasons for and changes associated with the upcoming acceleration of settlement schedules to T+2

 

DAY 2

Session 8:  Stock Record of a Broker/Dealer

By the end of the session, participants will be able to:

  • Describe how a Stock Record is structured and its purpose
  • Identify issues of possession and control related to firm and customer position
  • Compare long and short positions and understand what they indicate
  • Understand what is a stock record break and illogical position, what it indicates and how it must be resolved
  • Describe the role that stock record plays in protecting customer assets and how reconciliations provide verification of assets

 

Session 9:  Stock Loan and Repo

By the end of the session, participants will be able to:

  • Understand the motivations of stock loan participants: who borrows and why, who lends and what they hope to achieve
  • Highlight the operation needed to support this and sources of operational and credit risk
  • Review short sale requirements, including locating and borrowing securities
  • Describe the opening and closing legs of a stock loan transaction, how contracts are compared and settled
  • Review the recall process and what happens in the event that stock is not returned
  • Identify the importance of collateral management and mark-to-market capability for stock loan transactions
  • Analyze the impact of a dividend or corporate action event while a loan is open
  • Understand how and why rebates are paid to borrowers
  • Define what a repo is and how it is used by broker/dealers and fund managers
  • Explain how a tri-party repo works

                 

Session 10:  Customer Margin

By the end of the session, participants will be able to:

  • Discuss margin teams for both the business and risk management
  • Understand how credit risk is a factor in margin approvals and limits
  • Describe what is Reg T Margin and what it provides
  • Understand the functions of a margin department in brokerage operations
  • Identify what is covered by the margin and rehypothecation agreements
  • Review the requirements of seg for customer securities
  • Analyze the areas of risk posed by margin businesses and the role played by Operations in managing these risks
  • Understand how initial, maintenance and house margin requirements are calculated

 

LUNCH BREAK

 

Session 11:  Cash Accounting

By the end of the session, participants will be able to:

  • Describe cash transaction types and required journal processing
  • Understand the entries that are made as a result of both trade and non-trade-related activity
  • Describe how cash balances are maintained for clients, interest paid on balances and sweep accounts
  • Identify what occurs in relation to suspense, break and wash account entries and how they are resolved
  • Review the feeds from sub-ledgers to General Ledger
  • Define required cash reports and reconciliations with cash agents and correspondent accounts

 

Session 12:  Asset and Position Services

By the end of the session, participants will be able to:

  • Identify the various types of both mandatory and voluntary corporate actions and re-org activity (Mergers, acquisitions, tender offers, bond calls, bankruptcies, rights and warrants exercises, convertible issues, etc.)
  • Describe the steps related to income distributions and entitlements in the form of dividends and interest
  • Understand the role of the Issuer, corporate trustee, transfer agent, broker/dealer, custodian, and depository in corporate action
  • Review voting issues and the proxy process
  • Examine the flow of shareholder communications
  • Evaluate the key areas of operations risk associated with handling corporate action events, included miscommunication to account holders, missing deadlines for event elections and incorrect payables/receivables
  • Understand the role of market data vendors, how information related to corporate action events is “scrubbed”, and storage of the “the golden copy” of an event

 

Session 13:  Regulatory and Financial Reporting

By the end of the session, participants will be able to:

Identify the source information used to produce key financial and regulatory reports:

  • FOCUS reports
  • Net Capital (15c3-1)
  • Customer Protection (15c3-3)
  • Profit and Loss
  • Examine areas of risk related to the production of these reports

 

Review and Questions

Instructor

  • Charlotte is a broadly accomplished financial services executive with over 25 years of comprehensive experience in delivering innovative and cost-effective operations and technology training solutions for equities, derivatives and fixed income product lines.  Her successful career as a senior-level manager in Operations at Credit Suisse, Paine Webber and Bankers Trust furnishes the industry expertise that …
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