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The Eight Steps of Pre-Trade Processing

Updated: Jul 7, 2022

Interested in The Trade Life Cycle?

From the point a securities order is placed in a digital channel, there are several operations applied on the order and these operations depend on the asset you are trading...

This paper will walk through the operations after the securities are placed in the digital channels.

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After completing the order details and submitting the order to the banks, the pre-trade check will be performed.
Which includes a variety of validations for order integrity, compliance, and risks, such as investment suitability, credit limit and exposure, buying power, Anti-Money-Laundering.

< Figure 1: The Flow of Pre-Trade Check >

The checking process is divided into eight steps;

1. Collect the trade details from the order capturing module

2. Validate the trade details

3. Retrieve relevant data from different data sources

4. Conduct pre-trade check

5. Generate order attributes

6. Generate order interface message

7. Route order to the securities brokers

8. Route the execution result back to calling modules

The pre-trade check functions are normally provided by an independent and centralized engine for orders placed from different channels. The cost and time for pre-trade check maintenance and implementation could be reduced with this system topology.

Axisoft COMPASS Pre-Trade Engine and Investment Suitability Assessment is one of the pre-trade check systems. In addition to its functionalities, they come with key compliance rules from major regulators and markets.

< Figure 2: Suitability Assessment >

Lastly, after passing all of the pre-trade checks, the order is regarded valid and accepted by securities brokers. The Pre-Trade stage has come to an end.

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