Blog article
See all stories »

What is a Trade? No, When is a Trade?

When we define objects such as a book, a table, or a spoon, we usually only take into account three dimensions: length, width, and depth. These describe the object as it currently exists, yet overlooks the fourth dimension, which is time. The concept of time can also be used when describing a trade. It’s easy to define what you want to trade, for how long, and at what price, but we don’t account for when the trade is. Not what time the trade occurred (although that is important for our discussion here) but when is the trade from a perspective of state. This subject is important in terms of how to automate trade processing as well as in terms of use cases for Blockchain and DLT (Distributed Ledger Technology).

 So, let's first try to define time. Besides a general definition that time is a measurement of the sequence of events, I would like to propose two alternative definitions of how it relates to a trade, with the first considering time as a fourth dimension. We tend to ignore time (except for a timestamp of when the trade took place) and how it is associated with trade processing. However, in keeping with the concept of the fourth dimension of time, it is one of the more crucial aspects of a trader's life. As trades move through the workflow, they add information such as reference data and settlement instructions. We could also think of time as a section of infinity. One of the biggest problems in the trade processing world is the need for constant trade reconciliation, yet, if we knew the state and composition of the trade from inception to custody and regulatory reporting, we could create a good time line and therefore an audit trail of the trade. This becomes easier in the age of DLT, however the consumption of the trade state (Full state) is meaningful to reduce the need for reconciliation. Can these states be presented as a feed? Yes!

 The two pillars of the next generation platforms, AI & Blockchain/DLT, are big steps towards continued automation and cost reduction. However, I have yet to find a DLT project that couldn’t be replicated using the existing off the shelf technology, but it’s a stepping stone towards full DLT adoption. To do that, good governance, intelligent tracking, and the understanding of time as it relates to processing is essential.

 This gives the phrase “a brief history of time” a new meaning... :-)

 

a member-uploaded image
5849

Comments: (0)