FIS Front Arena is a front-to-back cross asset trading platform and thus it supports all the fundamental activities necessary to manage the life cycle of a trade. In this article, I will give a glimpse of the activities involved. This article is going to be very helpful to those that are new to Front Arena.

Trade Entry

Let’s take a simple example of a deposit and walk through its life cycle.

Observations:
1. It is a 25-day deposit starting on 29 April 2022 and maturing on 24 May 2022.
2. Deposit amount is INR 159,000,000 and rate of interest is 4.225.
3. Depositor is receiving an interest of INR 460,119.86 at maturity along with the principal.

Trade Status => Simulated

Trade statuses play an important role in the trade life cycle management in Front Arena. It is recommended to save a new trade in Simulated status. This status helps to pre-analyse the impact this trade can have on the portfolio and PnL.

Pre-Deal limit checks can be performed at this stage.

Trade Status => FO Confirmed

Once you, as a trader, are satisfied with the outcome this trade will bring, you can agree to the terms with the counterparty and set it to FO Confirmed. Note this agreement is mostly on phone or email. Real confirmation will come next. From here, responsibility of this trade lies with the middle office.

Limit checks can also be performed at this stage.

Trade Status => BO Confirmed

Here middle office runs certain validations and also enriches the trade. Confirmation records are mostly generated at this stage. In Front Arena, confirmations are event based. As you can see below, this confirmation was triggered by “New Trade” event.

Confirmations have their own status transitions like Authorised => Released => Pending Matching => Matched.

Confirmations can either be SWIFT or Longform. Above is an example of a Longform confirmation.

Trade Status => BO-BO Confirmed

Once the confirmation is matched, trade can be moved to BO-BO Confirmed status either automatically or Manually.

Here back office is responsible for settling incoming and outgoing cashflows with the counterparty. Settlements records are generated at this stage. As you can see below, settlement of type premium has been generated.

Settlements too have their own status transitions like Authorised => Released => Acknowledged => Pending Closure => Closed.

Trade Maturity

When the deposit matures a confirmation must be sent to the counterparty before final settlement is made. Since this event cannot be captured by an Confirmation ATS, it can only be triggered through FConfirmationEOD script.

Once the confirmation is matched, final settlement can be released. Instead of sending two separate settlement instructions for nominal and interest, it is possible to send netted instruction.

Note: You can see that swift message type for cash inflow is 210 but for outflow it is 103. To know the difference you can either read Swift Solution FCA or take a look at the settlementMessageDict inside python module FSwiftMessageTypeCalculator.

History: While developing FA swift solution, we realized computing message type involved too many if else which made the code ugly and error prone. That is when my colleague at FIS, Sadanand Upase (https://www.linkedin.com/in/sadanand-upase/) came up with the “dictionary with dynamic keys” approach. I was really impressed with the idea and implementation. It made a huge difference in making the code readable and maintainable.

Trade Maintenance

Once the instrument expires and all trade cashflows have been settled, instrument and trade just lies in the system has a history. Over the time, these expired instrument and trades can clutter the database and adversely affect system performance. Using BDP instrument expiration script, these expired instruments and trades can be archived/deleted while still preserving the PnL.

Summary

Let’s summarize all the steps mentioned above with a flow chart.

Conclusion

I hope the text and flow chart would have given you a gist of how trade life cycle is managed in Front Arena. But remember we picked relatively simple example and discussed only good flow. We did not cover deposit adjustment, partial close, termination, etc. In case of interest rate derivatives, you will have to generates confirmations and settlements for various events during the life of the contract, for example cashflow resets. All these complex cases follow the same concept. For confirmations “qualify the event” and for settlements “qualify the cashflow”.