Banking & Banking & Financial ServicesFinancial Services

Securities & Investment Securities & Investment ManagementManagement

ByBy

Makarand DiwanMakarand Diwan

ContentsContents Business Entity, Equity and DebtBusiness Entity, Equity and Debt Financial InstrumentsFinancial Instruments Financial Market PlayersFinancial Market Players Investment Management & Security AnalysisInvestment Management & Security Analysis Securities TransactionsSecurities Transactions Securities related Systems & ComponentsSecurities related Systems & Components Financial Systems-Design ConsiderationsFinancial Systems-Design Considerations Securities Systems-Issues/Pain PointsSecurities Systems-Issues/Pain Points An Example of Investment Accounting An Example of Investment Accounting

SystemSystem

Business EntityBusiness Entity

IndividualIndividual

VsVs

Business EntityBusiness Entity Separate Legal Separate Legal

ExistenceExistence Going ConcernGoing Concern Limited LiabilityLimited Liability

There are only two ways of raising There are only two ways of raising moneymoney

Your own pocketYour own pocket

Somebody else’s Somebody else’s pocketpocket

How to raise Money?How to raise Money?

Equity and DebtEquity and Debt

When business entities want to raise When business entities want to raise money there are two options:money there are two options:

EquityEquity Shareholders’ (Owners’) Investment Shareholders’ (Owners’) Investment

DebtDebt Borrowing from Banks & Financial Borrowing from Banks & Financial

InstitutionsInstitutions Issue of Debt InstrumentsIssue of Debt Instruments

EquityEquity

Shareholders’ Shareholders’ FundsFunds

RiskRisk Limited LiabilityLimited Liability Change of Change of

OwnershipOwnership No Maturity DateNo Maturity Date Dividend IncomeDividend Income AppreciationAppreciation

DebtDebt

Bank LoansBank Loans Issue of Debt Issue of Debt

SecuritiesSecurities RepaymentRepayment Long/Short TermLong/Short Term Secured/Secured/

UnsecuredUnsecured Interest CostInterest Cost

Types of Types of Instruments/SecuritiesInstruments/Securities

CurrencyCurrency Local & ForeignLocal & Foreign

Equity SharesEquity Shares Common StockCommon Stock

DebtDebt Discounted InstrumentsDiscounted Instruments Fixed Income BondsFixed Income Bonds Variable IncomeVariable Income

Convertible Convertible InstrumentsInstruments Preferred StockPreferred Stock Convertible BondConvertible Bond

Mutual Fund UnitsMutual Fund Units

Equities: Common StockEquities: Common Stock For definition see For definition see

http://www.investorwords.com/986/common_stohttp://www.investorwords.com/986/common_stock.htmlck.html

Usually Listed on the Usually Listed on the Stock ExchangeStock Exchange

Buy/sell transactions Buy/sell transactions can be done easilycan be done easily

Prices move up/down Prices move up/down Pays dividend Pays dividend Capital Appreciation Capital Appreciation

through appreciation in through appreciation in stock pricestock price

Risk of Loosing capital Risk of Loosing capital due to depreciation in due to depreciation in stock pricestock price

$10

$12

$15

$0.50 Bought 100 shares of

XYZ at $10 per share in Jan 2005.

Company paid $0.50 per share as dividend in Dec 2005.

Sold 100 shares of XYZ in Dec 2006 at $15 per share.

The investor earned an income of $50 as dividend in 2005.

The investor earned a long term capital gains income of $500 in 2006.

Debt: Discounted Debt: Discounted InstrumentsInstruments

There is no periodic There is no periodic interest paymentinterest payment

An investor buys at a An investor buys at a discounted value to discounted value to receive a fixed amount at receive a fixed amount at a future time (maturity a future time (maturity date)date)

Price varies based on the Price varies based on the remaining time to remaining time to maturity and expected maturity and expected interest rateinterest rate

ExamplesExamples Certificate of Deposit (CD)Certificate of Deposit (CD) US Treasury Bill (TBILL)US Treasury Bill (TBILL) Commercial Paper (CP)Commercial Paper (CP)

P $100

If i is the rate of interest then:

P + P * i = $100

P (1 + i) = $100

P = $100/(1 + i)

04/01/07 04/01/08

Debt: Fixed Income BondDebt: Fixed Income Bond Buy at a Market Price.Buy at a Market Price. Price quoted as a Price quoted as a

percentagepercentage Each bond has a PAR Each bond has a PAR

valuevalue Interest Rate and Maturity Interest Rate and Maturity

Date is FixedDate is Fixed Periodic Interest Periodic Interest

Payments are received Payments are received until maturityuntil maturity

At the time of maturity the At the time of maturity the principal amount is principal amount is receivedreceived

Price fluctuates with the Price fluctuates with the interest rate expectationsinterest rate expectations

6% US Treasury Bond 2010

Current Date 4/16/2007

Coupon Pays every 4/16 and 10/16

Maturity date 10/16/2010

P = Present value of all future cash flows discounted at an interest rate which is the expected market interest rate or yield.

$3

$3

$3

$3

$3

$3

$103

P

4/07 10/07 4/08 10/08 4/09 4/1010/09 10/10

Debt: Variable IncomeDebt: Variable Income

Same principles as Fixed Income Bond Same principles as Fixed Income Bond but Interest Rate changes from time to but Interest Rate changes from time to timetime

Interest Rate can float with a benchmarkInterest Rate can float with a benchmark Interest Rate can change based on time Interest Rate can change based on time

periodperiod E.g. ARM, Step-up Bond, Step-Down E.g. ARM, Step-up Bond, Step-Down

Bond, Treasury Inflation Protection Bond, Treasury Inflation Protection BondsBonds

Financial Market Financial Market ParticipantsParticipants

InvestorsInvestors BanksBanks Federal Reserve SystemFederal Reserve System Automated Clearing House (ACH)Automated Clearing House (ACH) IssuersIssuers Credit Rating AgenciesCredit Rating Agencies Registrars & Transfer AgentsRegistrars & Transfer Agents DepositoriesDepositories Stock ExchangesStock Exchanges BrokersBrokers Market MakersMarket Makers Portfolio Managers/Mutual FundsPortfolio Managers/Mutual Funds CustodiansCustodians

InvestorsInvestors Investors are the key players in any Investors are the key players in any

marketmarket

More the investors and more money More the investors and more money available for investment means better available for investment means better depth and efficiency of the marketdepth and efficiency of the market

Individual InvestorsIndividual Investors

Institutional InvestorsInstitutional Investors

BanksBanks

A Bank mobilizes savings of the community A Bank mobilizes savings of the community through deposits made in checking, savings through deposits made in checking, savings and CDsand CDs

Holds money in an electronic form thereby Holds money in an electronic form thereby simplifying movement of moneysimplifying movement of money

Provides loans for personal and business Provides loans for personal and business purposespurposes

Provides services such as remittance, Provides services such as remittance, currency exchange, Commercial Bills currency exchange, Commercial Bills Collection and discounting, Issue of Credit Collection and discounting, Issue of Credit CardsCards

Federal Reserve SystemFederal Reserve System The The Federal Reserve SystemFederal Reserve System

(also the (also the Federal ReserveFederal Reserve; ; informally informally The FedThe Fed) is the ) is the central banking systemcentral banking system of the of the United StatesUnited States..

The Federal Reserve System is a The Federal Reserve System is a quasi-governmental banking quasi-governmental banking system composed of (1) a system composed of (1) a presidentially-appointed presidentially-appointed Board of GovernorsBoard of Governors of the Federal of the Federal Reserve System in Washington, Reserve System in Washington, D.C.; (2) the Federal Open Market D.C.; (2) the Federal Open Market Committee; (3) 12 regional Committee; (3) 12 regional Federal Reserve Banks located in Federal Reserve Banks located in major cities throughout the major cities throughout the nation; and (4) numerous private nation; and (4) numerous private member banks, which own member banks, which own varying amounts of stock in the varying amounts of stock in the regional Federal Reserve Banks. regional Federal Reserve Banks. Ben Bernanke serves as the Ben Bernanke serves as the current Chairman of the Board of current Chairman of the Board of Governors of the Federal Reserve Governors of the Federal Reserve System.System.

Clearing HousesClearing Houses

Banks are members Banks are members of clearing house(s)of clearing house(s)

Checks are cleared Checks are cleared electronically by electronically by the clearing house the clearing house through the through the member banksmember banks

ACH-Automated ACH-Automated Clearing HouseClearing House

Check21Check21

How is a check clearedHow is a check clearedPaye

r Paye

e

Payer’s

Bank

Payee’s

Bank

Issues a check

Deposits the check

Clearing House

Sends the check for collection

Central Bank

Receives check for payment

Bank account of Payer’s Bank with the Central Bank is Debited

Bank account of Payee’s Bank with the Central Bank is Credited

Payer

sees his

Payee

sees his

Balance

go up

Balance

go

down

IssuersIssuers Issuers of Equity or Issuers of Equity or

Debt InstrumentsDebt Instruments

Types of IssuersTypes of Issuers Federal GovernmentFederal Government State GovernmentsState Governments MunicipalitiesMunicipalities CorporateCorporate Foreign IssuersForeign Issuers

SEC-Regulatory SEC-Regulatory AuthorityAuthority Registered SecuritiesRegistered Securities

Credit Rating AgenciesCredit Rating Agencies Credit Rating Agencies Credit Rating Agencies

provide ratings to provide ratings to issuers’ and the debt issuers’ and the debt instruments issued by instruments issued by themthem

S&P, Moody’s and Fitch S&P, Moody’s and Fitch are the three prominent are the three prominent Credit Rating AgenciesCredit Rating Agencies

S&P Credit Ratings S&P Credit Ratings definitions are available definitions are available at at http://www2.standardandpoors.com/portahttp://www2.standardandpoors.com/portal/site/sp/en/us/page.article/l/site/sp/en/us/page.article/2,1,3,0,1148442391999.html2,1,3,0,1148442391999.html

Registrar & Transfer Registrar & Transfer AgentsAgents

Issuers are required to keep Issuers are required to keep track of current owners/holders track of current owners/holders of the financial instruments of the financial instruments issued by themissued by them

To achieve this they must record To achieve this they must record transfers due to purchase/sell transfers due to purchase/sell transactions or due to death/ transactions or due to death/ inheritance, gifts, etc.inheritance, gifts, etc.

A register of current holders is A register of current holders is maintained and is used to payout maintained and is used to payout dividends/interest or record dividends/interest or record stock splits, mergers, stock splits, mergers, redemptions, etc.redemptions, etc.

Companies appoint independent Companies appoint independent Registrar & Transfer Agents or Registrar & Transfer Agents or have their own in-house have their own in-house department to do these functions department to do these functions

Example: Boeing’s R&T Example: Boeing’s R&T information is available on its information is available on its website at website at http://www.boeing.com/companyhttp://www.boeing.com/companyoffices/financial/transfer.htmloffices/financial/transfer.html

Stock ExchangesStock Exchanges It is an association of its It is an association of its

members brokersmembers brokers Stocks are listed on the Stocks are listed on the

Stock ExchangesStock Exchanges An organized market to An organized market to

buy and sell securitiesbuy and sell securities Stock Exchange ensures Stock Exchange ensures

settlement of tradessettlement of trades Provides necessary Provides necessary

depth and sophistication depth and sophistication to the marketto the market

Provide liquidityProvide liquidity

DepositoriesDepositories

Through depository Through depository participants, participants, securities holdings securities holdings of investors are held of investors are held with depositories in with depositories in an electronic form.an electronic form.

The Trades are The Trades are cleared and settled cleared and settled through through depositories depositories electronically.electronically.

BrokersBrokers Brokers are members of Brokers are members of

one or more stock one or more stock exchangesexchanges

Brokers are depository Brokers are depository participantsparticipants

We maintain our stock We maintain our stock related accounts with related accounts with brokersbrokers

We trade on various stock We trade on various stock exchanges and in various exchanges and in various types of securities types of securities through brokersthrough brokers

Sometimes Brokers also Sometimes Brokers also provide investment adviseprovide investment advise

Market MakerMarket Maker A market maker makes a market in one or A market maker makes a market in one or

more securitiesmore securities He is always ready to buy or sell a security in He is always ready to buy or sell a security in

which he makes the marketwhich he makes the market A two-way quote is given by the market A two-way quote is given by the market

makermaker Bid – Price at which the buyer is ready to buyBid – Price at which the buyer is ready to buy Ask – Price at which the seller is ready to sellAsk – Price at which the seller is ready to sell

The difference in the Bid and Ask price is the The difference in the Bid and Ask price is the spread that market maker earns as his profit.spread that market maker earns as his profit.

If a security is liquid, the spread is usually If a security is liquid, the spread is usually less and if the security is illiquid the spread less and if the security is illiquid the spread is usually high.is usually high.

Portfolio Managers/Mutual Portfolio Managers/Mutual FundsFunds

Portfolio Managers provide Investment Portfolio Managers provide Investment Management Services to Individual Management Services to Individual Investors and Institutional InvestorsInvestors and Institutional Investors

Usually Portfolio Managers will provide Usually Portfolio Managers will provide their services to High Net-worth individualstheir services to High Net-worth individuals

Mutual Funds also perform investment Mutual Funds also perform investment management functions for a large number of management functions for a large number of small investors. They pull together financial small investors. They pull together financial resources of small investors and then invest resources of small investors and then invest those in various financial instruments. They those in various financial instruments. They usually offer a better rate of return than the usually offer a better rate of return than the novice investor would have got had he/she novice investor would have got had he/she invested on his/her own.invested on his/her own.

CustodiansCustodians Custodians offer Custody Services to:Custodians offer Custody Services to:

Institutional CustomersInstitutional Customers Portfolio ManagersPortfolio Managers Mutual Fund ManagersMutual Fund Managers

Custodians maintain the safe custody of Custodians maintain the safe custody of their clients’ investmentstheir clients’ investments

Custodians execute clients instructions Custodians execute clients instructions for settlement of tradesfor settlement of trades

Custodians ensure collection of income Custodians ensure collection of income due on their clients’ investments due on their clients’ investments

Investment ManagementInvestment Management Risk vs. RewardRisk vs. Reward

Higher the expectation of reward higher the Higher the expectation of reward higher the riskrisk

DiversificationDiversification Not to put all eggs in one basketNot to put all eggs in one basket

Asset AllocationAsset Allocation 10% Gold, 40% US Equities, 25% Fixed 10% Gold, 40% US Equities, 25% Fixed

Income, 20% Real Estate, 5% Foreign Income, 20% Real Estate, 5% Foreign Equities, Equities,

Objective: Growth vs. IncomeObjective: Growth vs. Income LiquidityLiquidity

Financial Market Financial Market PerformancePerformance

Political StabilityPolitical Stability Government PoliciesGovernment Policies Economic indicators, GDP, Balance of Payment, Economic indicators, GDP, Balance of Payment,

Inflation, UnemploymentInflation, Unemployment War, Natural CalamitiesWar, Natural Calamities Corporate PerformanceCorporate Performance Inter-linkages of World MarketsInter-linkages of World Markets Future OutlookFuture Outlook Consumer ConfidenceConsumer Confidence Expectation of YieldExpectation of Yield Investor SentimentInvestor Sentiment

Financial Market: RisksFinancial Market: Risks

Country/Currency RiskCountry/Currency Risk Market Risk Market Risk Credit RiskCredit Risk Counterparty RisksCounterparty Risks Settlement RiskSettlement Risk Operational RiskOperational Risk Proper Setting up of Limits and Proper Setting up of Limits and

Monitoring of exposures is necessaryMonitoring of exposures is necessary

Corporate ResultsCorporate Results

Earnings StatementEarnings Statement IncomeIncome ExpenseExpense

Balance SheetBalance Sheet Assets – What business ownsAssets – What business owns Liabilities – What business owesLiabilities – What business owes Shareholders’ EquityShareholders’ Equity

Cash Flow StatementCash Flow Statement

Valuation of Stocks?Valuation of Stocks?

Fundamental Fundamental AnalysisAnalysis

Technical AnalysisTechnical Analysis EPSEPS PE RatioPE Ratio Projected EPSProjected EPS DividendDividend SplitSplit Ex-DateEx-Date

Fundamental AnalysisFundamental Analysis Company LevelCompany Level

Is the company’s revenue growing? Is the company’s revenue growing? Are company’s products and services of high quality?Are company’s products and services of high quality? Is it actually making a profit? Is it actually making a profit? Is it in a strong-enough position to beat its competitors Is it in a strong-enough position to beat its competitors

in the future? in the future? Is it able to repay its debt? Is it able to repay its debt? Is management team good? Is management team good?

Industry LevelIndustry Level What is the Market Share of the company?What is the Market Share of the company? What is the growth rate of the industry?What is the growth rate of the industry? How is the Competition within the industry and what How is the Competition within the industry and what

are the competitive advantages?are the competitive advantages? Is the Govt. Regulation likely to affect the company’s Is the Govt. Regulation likely to affect the company’s

growth and profitability?growth and profitability?

Technical AnalysisTechnical Analysis Technical analysisTechnical analysis is is

the study of past financial the study of past financial market data, primarily market data, primarily through the use of charts, through the use of charts, to forecast price trends to forecast price trends and make investment and make investment decisions. In its purest decisions. In its purest form, technical analysis is form, technical analysis is concerned only with the concerned only with the actual price behavior of actual price behavior of the market or instrument, the market or instrument, based on the premise that based on the premise that price reflects all relevant price reflects all relevant factors before an investor factors before an investor becomes aware of them becomes aware of them through other channels.through other channels.

How is Bond Price How is Bond Price Calculated?Calculated?

Yield CurveYield Curve

Yield Vs Price Yield Vs Price relationshiprelationship Price is inversely Price is inversely

proportional to yieldproportional to yield

Credit RatingsCredit Ratings Higher the risk the Higher the risk the

investor takes, investor takes, he/she expects he/she expects higher returnshigher returns

How is a Trade ExecutedHow is a Trade Executed

Buyer

Bank of Buyer’s Broker

Seller

Bank of Seller’s Broker

Stock Exchang

e

Depository

Buyer’s Broker

Seller’s Broker

Order

Order

Order

Executed Trade

Executed Trade

Clearing House

Pays cost of Buy

Receives Sell Proceeds

Security Balance reduced

Security Balance increased

Pays money

Gets shares

Gets money

Gives shares

Classification of MarketsClassification of Markets By Type/Maturity of By Type/Maturity of

InstrumentsInstruments Money Market-Instrument Money Market-Instrument

with maturity 1 year or lesswith maturity 1 year or less Capital Market-All other Capital Market-All other

instruments with > 1 year instruments with > 1 year maturitymaturity

Foreign Exchange or Local Foreign Exchange or Local CurrencyCurrency

Stock MarketStock Market Bond MarketBond Market

Based on How Trade is doneBased on How Trade is done Primary MarketPrimary Market Secondary MarketSecondary Market Inter-bank MarketInter-bank Market Over the Counter (OTC)Over the Counter (OTC)

Electronic Trading PlatformsElectronic Trading Platforms

Primary MarketPrimary Market New IssuesNew Issues

Initial Public Offering Initial Public Offering Private PlacementsPrivate Placements

Issuer sells the new securities for the first Issuer sells the new securities for the first time to Investors either directly or through time to Investors either directly or through Brokers Brokers

Investment BankerInvestment Banker ProspectusProspectus Subscriptions at the Issue Price fixed by Subscriptions at the Issue Price fixed by

the Issuer or Bids are submitted in an the Issuer or Bids are submitted in an AuctionAuction

Secondary MarketSecondary Market Subsequent trading of financial Subsequent trading of financial

instruments among investorsinstruments among investors Usually through an organized market, Usually through an organized market,

such as stock exchange, inter-bank such as stock exchange, inter-bank market, OTC market, etc.market, OTC market, etc.

Issuer is not affected in the process. Issuer is not affected in the process. Number of outstanding shares or debt Number of outstanding shares or debt does not changedoes not change

Issuer must record the change in Issuer must record the change in ownership to payout distributions/effect ownership to payout distributions/effect corporate actions corporate actions

Over the Counter (OTC)Over the Counter (OTC) OTCOTC trading is to trade financial trading is to trade financial

instruments such as stocks, bonds, instruments such as stocks, bonds, commodities, derivatives, etc., directly commodities, derivatives, etc., directly between two parties. It is the opposite of between two parties. It is the opposite of exchange trading which happens on an exchange trading which happens on an organized exchange, such as Stock organized exchange, such as Stock Exchange or Commodities Exchange.Exchange or Commodities Exchange.

An OTC Contract is a bilateral contract in An OTC Contract is a bilateral contract in which two parties agree on how a which two parties agree on how a particular trade or agreement is to be particular trade or agreement is to be settled in the future.settled in the future.

Securities TransactionSecurities Transaction

To Open a New PositionTo Open a New Position Buy-to open a Long PositionBuy-to open a Long Position Short Sell-to open a Short PositionShort Sell-to open a Short Position

To Close an existing positionTo Close an existing position Sell to close a long positionSell to close a long position Buy to Cover a short positionBuy to Cover a short position

Position-Exposed to RiskPosition-Exposed to Risk Due to price movements, Unrealized Due to price movements, Unrealized

Gain LossGain Loss

Settlement of Settlement of TransactionsTransactions

Happens on Happens on Settlement Date Settlement Date (T+3)(T+3)

Payment for TradePayment for Trade Buyer pays and seller Buyer pays and seller

gets moneygets money Delivery of SecuritiesDelivery of Securities Seller delivers and Seller delivers and

buyer receives buyer receives deliverydelivery

Delivery Vs. PaymentDelivery Vs. Payment

TransactioTransactionn

How settles?How settles?

BUYBUY Pay settlement amountPay settlement amount

Receive SecuritiesReceive Securities

SELLSELL Deliver SecuritiesDeliver Securities

Receive settlement Receive settlement amountamount

SHORT SHORT SELLSELL

Deliver Securities Deliver Securities (borrow securities from (borrow securities from the broker)the broker)

Receive settlement Receive settlement amountamount

BUY TO BUY TO COVERCOVER

Pay Settlement AmountPay Settlement Amount

Receive Securities (give Receive Securities (give back securities to the back securities to the broker to extinguish broker to extinguish the short position)the short position)

Corporate ActionsCorporate Actions

Corporate Actions Corporate Actions are actions of issuers are actions of issuers that usually result that usually result into benefits for the into benefits for the investorsinvestors

Some of the Some of the Corporate Action are Corporate Action are mandatorymandatory

In a Voluntary In a Voluntary Corporate Action the Corporate Action the Investor Investor

TypeType MandatoMandatoryry

VoluntaryVoluntary

EquitEquityy

DividendDividend

SplitSplit

MergerMerger

Spin-offSpin-off

RightsRights

Tender offersTender offers

DebtDebt Interest Interest PaymentPayment

MaturityMaturity

PutPut

Transaction Flow-Exchange Transaction Flow-Exchange Traded Traded

Buyer

Bank of Buyer’s Broker

Seller

Bank of Seller’s Broker

Stock Exchang

e

Depository

Buyer’s Broker

Seller’s Broker

Order

Order

Order

Executed Trade

Executed Trade

Clearing House

Pays cost of Buy

Receives Sell Proceeds

Security Balance reduced

Security Balance increased

Pays money

Gets shares

Gets money

Gives shares

Transaction Flow-OTCTransaction Flow-OTC

Buyer Seller

Buyer’s Custodian

Seller’s Custodian

Trade

Contract Confirmation

DI P

DI S

Broker

Trade Settlement

Securities Systems-Buy Securities Systems-Buy SideSide

RoleRole Example of SystemsExample of Systems

Front Front OfficOfficee

Fund Fund ManagementManagement

Trading Trading DecisionsDecisions

Market Data FeedsMarket Data Feeds

Trading SystemsTrading Systems

Order Allocation SystemsOrder Allocation Systems

MiddMiddle le OfficOfficee

AuditAudit

SecuritySecurity

ControlControl

Exception Exception RatificationRatification

Compliance SystemsCompliance Systems

Contract Confirmation MatchingContract Confirmation Matching

Trade Rate Reasonableness CheckingTrade Rate Reasonableness Checking

Exception ManagementException Management

Back Back OfficOfficee

SettlementSettlement

AccountingAccounting

Processing Processing

ReportingReporting

Reference Data ManagementReference Data Management

Settlement SystemsSettlement Systems

Accounting SystemsAccounting Systems

ReconciliationReconciliation

Client Reporting SystemsClient Reporting Systems

Securities Systems- System Design Securities Systems- System Design ConsiderationsConsiderations

Mission Critical SystemsMission Critical Systems Billions of dollars are involvedBillions of dollars are involved Errors can cause tremendous financial losses and damage reputationErrors can cause tremendous financial losses and damage reputation May involve PenaltiesMay involve Penalties

Availability & ReliabilityAvailability & Reliability Up TimeUp Time AccuracyAccuracy Disaster RecoveryDisaster Recovery

Secure EnvironmentSecure Environment User Access ControlUser Access Control Audit Trail-Log of Activities performed, Exceptions raisedAudit Trail-Log of Activities performed, Exceptions raised Pin-point responsibility to a single userPin-point responsibility to a single user 4 eyes principal4 eyes principal Log of Changes-Old Value and New Value, Change HistoryLog of Changes-Old Value and New Value, Change History

Scalability, Throughput and System PerformanceScalability, Throughput and System Performance Ability to handle large volume Ability to handle large volume Quick Response TimeQuick Response Time

Global UsageGlobal Usage 24 X 724 X 7 Support Multiple Time ZonesSupport Multiple Time Zones Multi-Currency ProcessingMulti-Currency Processing

Securities Systems-Pains & Securities Systems-Pains & OpportunitiesOpportunities

Legacy Systems on Main-frame in COBOL are difficult to replace and Legacy Systems on Main-frame in COBOL are difficult to replace and maintainmaintain

Disparate Systems make Integration DifficultDisparate Systems make Integration Difficult Separate Systems for Front, Middle & Back-officeSeparate Systems for Front, Middle & Back-office Specialized Systems for Equities, Fixed Income, FXSpecialized Systems for Equities, Fixed Income, FX Multiple Systems due to Mergers & AcquisitionsMultiple Systems due to Mergers & Acquisitions

Multiple Systems having same Reference DataMultiple Systems having same Reference Data Multiple Sources of dataMultiple Sources of data Differences and reconciliationDifferences and reconciliation

Integration with Multiple Market Data Feeds Integration with Multiple Market Data Feeds Dynamically Changing MarketsDynamically Changing Markets

GlobalizationGlobalization New Financial ProductsNew Financial Products

Use of changing TechnologyUse of changing Technology High level of Technological Sophistication is soughtHigh level of Technological Sophistication is sought Use technology for a competitive advantageUse technology for a competitive advantage Prefer proven systems but yet embrace the latest technology earlyPrefer proven systems but yet embrace the latest technology early

Big BudgetsBig Budgets Financial Market Players have big IT budgetsFinancial Market Players have big IT budgets They are first to hire in a good economy and first to fire when things go badThey are first to hire in a good economy and first to fire when things go bad Risk of failure when stakes are high and scope is vastRisk of failure when stakes are high and scope is vast