Trade Activity
Table of Contents
1. Summary
An activity is something that happened to a trade. It is the third of three things a lifecycle discussion routinely conflates, and trade classification separates them:
| It is a | What it is | Where it is covered |
|---|---|---|
| Classification | What the trade is, fixed for its life | Trade classification |
| State | Where a trade has got to | Trade lifecycle, operational authorisation and confirmations |
| Event | Something that happened to a trade | This document |
Every activity answers four questions at once, and they are independent. Does it move a version? Does it change the trade's state? Does it withdraw the operational authorisation? Does it require a new confirmation? The taxonomy below exists so that each activity answers all four in one place.
2. The four axes of an amendment
An amendment is classified on four orthogonal axes. They are not values of one enumeration, and an amendment sits on all four at once.
| Axis | Values | What it decides |
|---|---|---|
| Economic | Economic / non-economic | Whether the deal must be revalued |
| Confirmable | Confirmable / non-confirmable | Whether a new confirmation is issued |
| Real | Real / null | Whether anything at all feeds downstream |
| Customer-visible | External version moves / does not move | Whether the customer sees a change |
Two combinations deserve a note.
A null amend is real on none of the axes. The value entered equals the value held, so nothing changed. The record of the attempt is worth keeping for the audit trail, but a null amend must not move the external version and must not raise a confirmation.
A misbooking correction is real and economic, and it is confirmable, even though it is not a change of mind. It corrects an error in the original booking terms, so the confirmed terms change, and the customer must agree them again.
Trade versioning covers what a version is and how the two move.
3. The activity categories
Activity types are used for P&L attribution and trade activity reporting. They are classified into five categories.
3.1. New Activity
New Activity events require legal confirmation. They produce a trade record
that is live from the moment it is booked, carrying an operational
authorisation flag reading unauthorised until Operations releases it, and a
confirmation status reading unconfirmed where the trade faces a
counterparty.
| Activity Type | Description | Status Effect |
|---|---|---|
| New | A new legal contract. Trade exists today but did not exist yesterday. | New trade → live |
| Close-Out | Equal and opposite trade to close an existing open position. May include a value-transfer deal (buyout, buy-back). | Original trade → cancelled; new close-out trade → live |
| Early Termination | Trade terminated before its scheduled maturity. Covers close-out, tear-up, and compression (netted swap elimination). | Original trade → cancelled; termination trade → live if applicable |
| Restructure / Roll | Terms of an existing trade renegotiated: components added, removed, or heavily modified. Requires new confirmation. | New temporal version of trade → live |
| Partial Close-Out | Notionals of an existing trade reduced. Also known as tear-up or downsize. Requires new confirmation. | New temporal version of trade → live |
| Upsize | Notionals of an existing trade increased. Requires new confirmation. | New temporal version of trade → live |
| Novation | Trade counterparty changed (assignment). Bank may step in/out with or without risk change. New confirmation required. | New temporal version of trade → live |
| Funding Roll | P&L from new funding tickets rolling a book balance from day T to T+1. Includes interest paid/received on the position. | New trade → live |
| Contra Revenue | Revenue reduction (expense-like): brokerage, agency commissions, bullion fees, sales credits, transfer pricing. | New trade → live |
| CVA / WWR | Credit Valuation Adjustment or Wrong-Way Risk trade. Captures counterparty default risk and correlated credit exposure. | New trade → live |
3.2. Life-Cycle Events
Life-Cycle Events are changes to the value of the trade specific to the terms of the original contract. No legal confirmation is required.
| Activity Type | Description | Status Effect |
|---|---|---|
| Rate Reset | Daily fixing impact: actual rate versus previous day's projected rate, for floating-rate products such as IRS. | None |
| Floating Reset | Floating rate reset per the terms of the trade; similar to Rate Reset but may also include spread changes. | None |
| Fixings | A fixing has been published; cashflows referencing the fixing are updated. P&L captured between day-0 and cash trade. | None |
| Notional Reset | Notional changes per contract terms (e.g. resettable notional). Not an upsize or downsize; no confirmation needed. | None |
| Strike Reset | Strike reset per contract terms. Supported for resettable call/put and resettable double-digital barriers. | None |
| Expired | Trade status changed because it expired out of the money, referenced against an expiry fixing. | live → expired |
| Exercised | Trade status changed because it was exercised in the money, referenced against an expiry fixing. | live → expired |
| Physical Delivery | Physical settlement during the life of the trade or at expiry. | None |
| Cash Settlement | Cash payment during the life of a trade or at expiry. Includes option rebates. | None |
| Maturity | Contract ceases after its last fixing or payment. Trade has passed its maturity date. No confirmation required. | live → expired |
| Unexpire | An expiry recorded in error is reversed, usually because the fixing it referenced was itself corrected. | expired → live |
| Triggered | Trade amended due to a barrier trigger event. | Depends on trigger type |
| Corporate Actions | Action initiated by a company that impacts issued equity or debt. | None |
| Rebalance | Change to various components per a defined event within the original confirmation. | None |
| Amortisation | Change in notional per the terms of the initial trade. | None |
3.3. Misbooking
A misbooking is a change to a trade due to an error in the booking terms of the original contract.
| Activity Type | Description | Status Effect |
|---|---|---|
| Misbooking | Correction of an erroneous booking. Creates a correction trade with successor_trade_id referencing the original trade. |
Original → cancelled; correction trade → live |
3.4. Valuation Changes
Valuation Changes are changes to the value of a trade that are not specific to the terms of the contract. They represent changes in analytics, models, or static data inputs. No confirmation is required. These are treated as amendments — they do not change the trade's operational status.
| Activity Type | Description | Status Effect |
|---|---|---|
| Model / Model Parameters | P&L from changes within valuation models impacting trade value. | None (amend) |
| System Release / Analytics | P&L from changes within valuation models due to a system or analytics upgrade. | None (amend) |
| Static Data | Amendments to static data inputs to the trade (e.g. counterparty change affecting funding curves). | None (amend) |
| Script Changes | Change to the valuation script for structured trades, impacting trade value. | None (amend) |
3.5. Cancellation
| Activity Type | Description | Status Effect |
|---|---|---|
| Cancel | Trade removed from the book. Leads to reversal of historic ledger postings. | live → cancelled |
| Uncancel | A cancellation recorded in error is reversed. Corrects the record rather than reviving the agreement. | cancelled → live |
A trade returning to live arrives unauthorised. The release it
carried was a decision about a trade that was then taken off the book,
so it does not survive the return.
4. Activity to state, authorisation and confirmation
Four columns, one per question. Authorisation says what an activity does to the operational authorisation flag: an amendment to an authorised trade withdraws the release, because the terms Operations approved are no longer the terms on the book.
| Activity | Category | Trade state | Authorisation | New confirmation |
|---|---|---|---|---|
| New | New Activity | (init) → live |
n/a: new trade | Yes |
| Close-Out | New Activity | original → cancelled; new trade → live |
n/a: new trade | Yes |
| Early Termination | New Activity | live → cancelled |
Withdrawn | Yes |
| Restructure / Roll | New Activity | unchanged | Withdrawn | Yes |
| Partial Close-Out | New Activity | unchanged | Withdrawn | Yes |
| Upsize | New Activity | unchanged | Withdrawn | Yes |
| Novation | New Activity | unchanged | Withdrawn | Yes |
| Funding Roll | New Activity | (init) → live |
n/a: new trade | Yes |
| Contra Revenue | New Activity | (init) → live |
n/a: new trade | Yes |
| CVA / WWR | New Activity | (init) → live |
n/a: new trade | Yes |
| Rate Reset | Life-Cycle Event | unchanged | Kept | No |
| Floating Reset | Life-Cycle Event | unchanged | Kept | No |
| Fixings | Life-Cycle Event | unchanged | Kept | No |
| Notional Reset | Life-Cycle Event | unchanged | Kept | No |
| Strike Reset | Life-Cycle Event | unchanged | Kept | No |
| Expired | Life-Cycle Event | live → expired |
Kept | No |
| Exercised | Life-Cycle Event | live → expired |
Kept | No |
| Physical Delivery | Life-Cycle Event | unchanged | Kept | No |
| Cash Settlement | Life-Cycle Event | unchanged | Kept | No |
| Maturity | Life-Cycle Event | live → expired |
Kept | No |
| Triggered | Life-Cycle Event | Depends on trigger type | Kept | No |
| Corporate Actions | Life-Cycle Event | unchanged | Kept | No |
| Rebalance | Life-Cycle Event | unchanged | Kept | No |
| Amortisation | Life-Cycle Event | unchanged | Kept | No |
| Misbooking | Misbooking | original → cancelled; correction → live |
n/a: new trade | Yes |
| Model / Model Parameters | Valuation Change | unchanged | Kept | No |
| System Release / Analytics | Valuation Change | unchanged | Kept | No |
| Static Data | Valuation Change | unchanged | Kept | No |
| Script Changes | Valuation Change | unchanged | Kept | No |
| Cancel | Cancellation | live → cancelled |
Withdrawn | No |
| Uncancel | Cancellation | cancelled → live |
Withdrawn | No |
| Unexpire | Life-Cycle Event | expired → live |
Withdrawn | No |
Most activities leave the trade state alone. That is the point of the taxonomy rather than an accident of it: an amendment moves a version and may withdraw an authorisation, but a trade that is live stays live.
5. See also
- Trade — the structure note that orders this cluster, and where to read this page in it.
- Trade Lifecycle — the states an activity may move a trade between.
- Trade Versioning — what a version is, and which activities move which one.
- Confirmations — which activities require the counterparty to agree again.
- Trade Classification — the classification an activity never changes.
- Knowledge — the hub of all knowledge notes.