London School of Operations

The London School of Operations has been designed to provide a comprehensive understanding of the operational aspects of the financial markets through the entire transaction life cycle. It covers the capital markets products and how and where they are traded and explains the different trading and investment strategies and how they are supported operationally. The course explains the market participants, how they interact and how they are structured. The concept of straight through processing (STP) is analysed through the life cycle of a trade and the course explains what can go wrong and the operations controls required to ensure efficient transaction processing and the avoidance of operational risk. Attend this intensive and highly practical five day course and learn: What are the capital market products; bonds, equities, derivatives and foreign exchange The new issue process How and where products are traded; OTC and on-exchange The basic trading and investment strategies; long, short, hedge and arbitrage and the operational impact of each one Operating in emerging markets Who are the market participants and how they interact The life cycle of a trade and transaction processing STP and why it can break down The clearing and settlement processes including CCPs, the (I)CSDs and global custodians What can go wrong and fails and fails management OTC and exchange traded derivatives and how they are processed The importance and economics of securities lending and repos What is collateral and how it is managed Corporate actions and how they are managed What are the risks in the international markets; market, credit and operational risk How to measure and manage operational risk The roles of the middle office and the operations department Product control; managing inventory and P&L The mark to market (MTM) process and the data providers The detection and reporting on money laundering The end to end control process and the importance of reconciliation Who should attend? Operations personnel from investment banks, broker/dealers, prime brokers, fund managers, pension funds etc. Middle Office and Risk Managers Product Controllers Internal and External Auditors IT Developers (focused on operations) Business Analysts and Consultants Compliance staff Regulators Graduate and Management Trainees Course background The School focuses on operations in the international capital markets and is intended to provide a thorough grounding for those who are embarking on or developing a career in operations in the financial industry. It will also benefit those who need to understand how the capital markets operate, what are the operational risks and how they can be controlled. You will be given a thorough and clear understanding of how transactions in international capital markets’ products are processed, what can go wrong and the measures required to ensure the highest level of STP. Teaching methods The teaching methodology used on this course combines formal theoretical instruction with frequent use of exercises and case studies. These are based on real situations experienced by the course director in his over thirty-five-year involvement in this business. The course is intended to be practical and interactive, with delegates encouraged to ask questions throughout. The course content is intended to give delegates an understanding that will be of immediate practical use in the workplace. The lecturer will be available throughout the duration of the course to offer additional help if required. Delegates will be divided into to small teams to work together on the exercises that will include some simple calculations for which a calculator will be required.
Day 1 Capital Markets Products Fixed income and FRNs Equities and ADRs Convertible bonds and warrants New Issues Primary and secondary markets Derivatives OTC and exchange traded derivatives products F/X Trading strategies-long, short, hedge, arbitrage Repos-sale and repurchase agreements Trading strategies and impact on operations Trading strategies and risk Established versus emerging markets Exercise: Delegates are asked, in their teams, to make recommendations for a new bond issue (see handout) Day 2 Capital Markets Trades Processing The market participants The sequence of a securities trade Static data Clearing - CCPs Settlement - CSDs - ICSDs - DvP, DfoP, etc - SWIFT Global custody What can go wrong? Fails and fails management Buy-ins Interest claims STP Exercise: Delegates are asked, in their teams, to analyse a fail report and recommend actions Day 3 Derivatives and Derivatives Processing Introduction The characteristics of OTC, cleared and ET derivatives The uses of derivatives-leverage and risk taking, hedging and arbitrage Leverage and the Basel Accord (Basel I, II and III) Regulation of the derivatives markets OTC and ETD The ISDA Master Agreement and CSA ETD Trade processing - Trade capture and execution - Confirmations - Exercise: Delegates are asked to draw a trade flow diagram for an ETD - The CCP - Margin-initial and variation OTC trade processing - Trade Capture - Matching - Settlement - Reconciliation - Netting Corporate Actions Corporate actions explained Rights issues Stock splits, bonus issues, etc Dividends Voting Coupons Corporate action processing What can go wrong Day 4 Securities Lending, Repos and Collateral Management Securities lending What is securities lending (SL) and what is its importance Who should lend/borrow The economics of SL and SB How the market operates What are the risks Case study: Securities borrowing in a convertible bond arbitrage transaction Cash and Collateral Management The importance of cash management How to manage cash Cash as collateral Collateral management Why collateral is needed Reconciliation of ‘Nostro’ Accounts Non- cash collateral and managing non-cash collateral Bi-lateral vs. tri -party arrangements Agreeing a collateral schedule Mark to market (MTM) Collateral risks Guest speaker: (TBA) an industry specialist will be invited to discuss an important topic affecting international capital market operations Day 5 Product Control and P&L Calculations Product control Responsibilities and reporting lines Position control and reconciliation Limit control and reporting Escalation of issues P&L MTM-mark to market Price feeds and the service providers Realised versus unrealised P&L Exercise: Using a day’s trade report (see handout), delegates will calculate realised and unrealised P&L ‘Dirty’ vs. ‘clean’ pricing Calculating accrued interest ‘Cum’ versus ‘ex’ dividend Inventory control and reconciliation P&L reconciliation Top line versus bottom line P & L Analyzing and allocating costs Control and Infrastructure Reporting lines and segregation of duties Escalation of issues Audit, Compliance, MLRO and Legal The ‘whistle blower’ The end to end control process - Pre-dealing / dealing controls / M.O. functions - Processing / position and payment controls - Reconciliation and accounting - Documentation, reporting and compliance Course summary and close