C4. The Middle Office Practice Flashcards
what are the ways to do trade surveillance
a. automated alert systems to flag behavior likely to trigger suspicion of market manipulation
b. trained trade surveillance staff to detect unfair/manipulative trading patterns
c. Procedures on reporting such unfair practices to the relevant authorities must be put in place
what are the procedures for independent checking of MTM positions?
a) The data is calculated correctly as per the conditions under which the estimates were constructed.
b) Ensure that they provide the data consistently and reliably to institutions.
c) Where possible, the voice broker should let their middle office function, which is independent of the broker, to supply the data.
d) Ensure that the required procedures are followed when exchanging data electronically.
is it right for front office to convey the data to the middle or risk management offices that perform the MTM?
no. whichever sources of external data are chosen by the institutions for valuation purposes, it has to be separated from the front office
what is Prime brokerage?
a bundled package of services offered by investment banks and securities firms to hedge funds and other professional investors needing the ability to borrow securities and cash.
Among the bundled packages are:
a) Global custody
b) Securities lending
c) Financing (to facilitate leverage of client assets)
d) Customised technology
e) Operational support
who should settle the dispute between the prime brokers and the customers?
the prime brokers must be the one to settle the disputes governed by the agreements between the parties involved.
Can prime brokers share customers’ information?
if it could materially benefit the customer, the customer should be informed and their written approval received before any information is shared.
If there are any disputes between the prime brokers and the customers, who should settle it?
If there are any disputes between the prime brokers and the customers, the prime brokers must be the one to settle the disputes governed by the agreements between the parties involved.
what bodies give advice on professional disagreements?
The Committee for Professionalism of the ACI (CFP)
what are the basic principle of claims?
no market participants should be unduly enriched or unjustly penalized by the action/error of another market participant.
when should a claim be sent and what is the maximum time limit? what is the timeline for objection and acceptance?
claim should be sent to the counterparty as soon as possible but within 30 days after the claim has been ascertained. The maximum time limit should be 60 days with objection and acceptance of the claim confirmed within 15 days after receipt of the notice of claim.
