What is Trade Reconciliation
Reconciliation is essentially a process wherein an accountant examines two distinct records and assesses the agreement's accuracy. It is a way of verification to make sure that the trading process is accurate, secure, and consistent in practise.
Verifying daily deals against trade tickets, internal systems, external systems, etc. is the essence of trade reconciliation. The reconciliation process guarantees that every trade is accurately reviewed and certified, resulting in the right impact on the P&L and balance sheet.
The regulation requires trade reconciliation.
Investment firms must put plans in place to guarantee the accuracy and completeness of their transaction reports. These arrangements must include regular reconciliation of their front-office trading records with data samples provided to them by their competent authorities to that purpose and testing of their reporting process.
Why is it important?
A typical project begins with a high-level examination of the client's requirements for reconciliation. This makes it possible to determine which requirements are satisfied by the add-on components' basic functionality or current iterations, and which further modules might need to be created or customised to fulfil particular customer requirements. The project plan for the design and deployment based on the system, including any configuration and custom work, is then approved by the service provider and the client.
We can spot a variety of reporting issues, such as recognising rejections or finding records being missing, by comparing the number of transactions sent vs. the number of transactions accepted by the regulator. To resolve the problems, a field-by-field comparison is frequently necessary. A straightforward illustration of this is a problem with the trade size. In a client's trading system, there may be X shares exchanged in a specific transaction, and this X may change for a variety of reasons as the transactions move through various systems and vendors on their way to the regulator.
The regulator would still approve the transaction because there is no way for them to know that this is an incorrect figure; nevertheless, a problem with the reporting can only be found by comparing the transaction size field.
The trade reconciliation team works to correct any discrepancies found between balances in various accounts.
The trade reconciliation team works to supplement the initial transaction information with all pertinent details.