Trading

Letters of credit – or documentary credits – have long been used as a method of payment in international trade. In simple terms, a letter of credit (L/C) is a guarantee of payment by the importer's bank to the exporter, if certain terms and conditions stipulated are met. In essence, a L/C substitutes the credit of the bank for that of the buyer for the purpose of facilitating trade. This tutorial describes the basics of letters of credit and how they work. It also outlines their benefits and drawbacks as a trade finance instrument, and describes their risks from the point of view of importers, exporters, and participating banks.

Many of the products we buy and consume on a daily basis are traded internationally. In some cases, these items will have been transported half-way across the world before arriving in our shopping baskets. However, cross-border transactions present a number of potential difficulties for the parties – importers (buyers) and exporters (sellers) – involved. In addition to dealing with the practical problems arising from the movement of, and payment for, goods from one country to another, importers and exporters are simultaneously subject to numerous risks related to differing legislation, customs, and practices in these countries.

This tutorial takes a detailed look at the different types of commodity and the exchanges where they are traded. It identifies the main participants in the commodity markets and explains the fundamentals of commodities trading, including exchange trading and OTC trading as well as the trading of physical commodities.

payment terms that strike an appropriate balance between the risks of international trade. This tutorial looks at how exporters can offer flexible payment terms that strike a balance between their interests and those of importers. It builds on knowledge of basic trade finance tools (such as letters of credit) by exploring trade finance techniques that mitigate the risk of nonpayment and also provide funds to solve cash flow problems that can arise for exporters offering more flexible credit terms.

This tutorial provides a detailed introduction to the trade lifecycle, the different stages of that lifecycle, and its key participants. The tutorial also describes how trading can be categorized by asset class and whether a trade represents a cash or derivatives market transaction. Other topics covered by the tutorial include margin trading, securities lending, high touch versus low touch trading, straight through processing (STP), and settlement cycles.

This tutorial explores the activities that take place after a trade is executed. These activities, which are collectively referred to as clearing and settlement, include trade capture, trade enrichment, trade validation, trade confirmation/affirmation, trade reporting, and settlement instructions. The tutorial also describes the role of key participants in the clearing and settlement process, including clearinghouses, central counterparties (CCPs), central securities depositories (CSDs), and custodians

This tutorial explores trade execution, describing how execution systems work in practice and the process of order creation, order routing, and trade execution. The tutorial explains a variety of execution orders and the different types of execution market today, including exchanges, alternative trading venues/systems such as dark pools, and over-the-counter (OTC) markets.

This tutorial focuses on activities that occur pre-trade. It describes the client onboarding process, including the various regulatory and compliance checks to ensure that an institution is legally permitted to retain the client. The tutorial also explores various aspects of pre-trade planning, including client motivations for trading, view formation, transaction cost analysis, and pre-trade risk controls.

Algorithmic trading involves the use of computer algorithms to automatically make certain trading decisions, submit orders, and manage those orders after submission. A key attraction for traders is that it enables large orders to be broken up into smaller tranches to avoid moving the market against them. This tutorial describes the growth and development of algorithmic trading, discusses the main features and strategies, and outlines some of risks and concerns associated with this form of trading.

Objectives: Identify the key stages of the trade lifecycle, including pre-trade, trade execution, trade clearing, trade settlement, and ongoing position and risk managementRecognize that trading can be categorized by asset class, by whether it is a single position or an index position, and by whether it is a cash market or a derivatives market tradeIdentify the key participants in a trade; the role of front, middle and back offices, and market developments such as automation, straight through processing, and efforts to shorten settlement cyclesTutorial Overview This tutorial provides a detailed introduction to the trade lifecycle, the different stages of that lifecycle, and its key participants. The tutorial also describes how trading can be categorized by asset class and whether a trade represents a cash or derivatives market transaction. Other topics covered by the tutorial include margin trading, securities lending, high touch versus low touch trading, straight through processing (STP), and settlement cycles. Prerequisite Knowledge Financial Markets – An Introduction Tutorial Level: Introductory Tutorial Duration: 60 minutes

The extent of a custodian's role in the life of trade depends on the capacity in which the custodian is operating. In some cases, it may be operating purely in a custodial capacity - obtaining instructions from clients to receive/delivery securities versus cash and effecting the settlement of these instructions. In other situations, the custodian may be involved with the actual marketplace - executing and clearing trades, as well as effecting their settlement. This tutorial looks at the role played by custodians in the processing of trades, from trade execution right through to trade settlement.

This tutorial provides a detailed introduction to the trade lifecycle, the different stages of that lifecycle, and its key participants. The tutorial also describes how trading can be categorized by asset class and whether a trade represents a cash or derivatives market transaction. Other topics covered by the tutorial include margin trading, securities lending, high touch versus low touch trading, straight through processing (STP), and settlement cycles.

This tutorial explores the activities that take place after a trade is executed. These activities, which are collectively referred to as clearing and settlement, include trade capture, trade enrichment, trade validation, trade confirmation/affirmation, trade reporting, and settlement instructions. The tutorial also describes the role of key participants in the clearing and settlement process, including clearinghouses, central counterparties (CCPs), central securities depositories (CSDs), and custodians.

This tutorial describes ongoing position and risk management. It outlines the asset servicing solutions that custodians provide for their customers, including services related to corporate actions. The tutorial provides an understanding of counterparty credit risk and how it is reduced, before exploring trade reporting and reconciliation. Post-trade transaction cost analysis is covered in detail, including a discussion of the various types of transaction cost and the methods by which these costs can be measured. The tutorial concludes with a discussion of profit and loss (P&L) and risk reporting.

This tutorial focuses on activities that occur pre-trade. It describes the client onboarding process, including the various regulatory and compliance checks to ensure that an institution is legally permitted to retain the client. The tutorial also explores various aspects of pre-trade planning, including client motivations for trading, view formation, transaction cost analysis, and pre-trade risk controls.

This tutorial describes how the growth of automated trading and changes in market regulation have led high frequency trading (HFT) to the forefront of new and innovative trading system design and implementation. While such developments have undoubtedly had a positive impact on financial markets, some practitioners argue that they are nothing but a disaster waiting to happen in an already fragile marketplace. The tutorial also outlines some key algorithmic trading strategies, with a focus on liquidity provision and technical trading since these are the most commonly implemented strategies by HFT firms. A number of exciting developments and innovations in information technology, communications, and data processing that are required to meet the ever-developing HFT landscape are also discussed.

The nature and complexity of international trade has changed dramatically over the past generation or so. Emerging markets now play the most dynamic role in international trade and are the focus of global supply chain development. As large-scale projects and global supply chains reach deeper into emerging markets, the risk of non-performance and non-payment increases. These prevailing trends in international trade have created the need for financing solutions that are more robust and can mitigate most of the risks associated with complex trade initiatives involving riskier emerging markets. Structured trade finance has emerged to support these initiatives by addressing risks related to the performance or completion of a transaction, rather than more traditional reliance on the financial soundness of the parties to a transaction. This tutorial describes the concept of structured trade finance in detail and how it differs from traditional trade finance. You will also learn about the different types of structured trade finance solutions and the role of the different lending institutions involved.