Trading Paperwork?
You read in all the books how s&t people call each other and trade this that or the other, but is there paperwork or something like that? How do things "offically" switch hands from one party to the other?
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Pretty simple actually. Normally, do the trade. Then send the trade off, normally to a back office. Trade then heads to the custodian bank which in turn will then send out the security or take in the security for you. Normally that goes through either DTC or Fed Wire depending on the security etc. It also gets booked through accounting and compliance, normally though the trade has already gone through compliance before it is done. It's a very boring process that traders normally should never deal with. They should just call up, do the trade or do it online on a platform (market access, tradeweb etc) and then the back office takes care of all the other stuff.
When it comes to more complex trades, lets say anything structured really, the "paper work" can become a real pain in the ass. With all the approvals and so on...
2 traders will discuss the trade via phone and then get an email/IM confirmation. This is then followed by a deal confirm or broker confirm -- this depends on if the deal was direct or was done via a broker. You will probably pay the broker 2 pts for the transaction, but it's well worth it if you bought the product at or below the market (depends on the market outlook). Deal confirm is then entered into the risk management system via mid-office while front office schedules this product out to its proper destinations. The accounting department then sends a wire or ach to send payment for the trade. All of the bank paperwork should be well established via one's accounting department -- unless you want to piss off your counter party and not pay them for 10 days. Also, most transactions tolerate a net 10 unless otherwise stated -- all boils down to the terms and conditions. Let me know if you have any other questions in regards to this.
Physical fuel -- and you are paying 2 points to the broker as compensation for putting the buyer and seller together.
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