Trade Lifecycle

The distinction between draft and live is whether an agreement exists, and it is not the same as the distinction between unauthorised and authorised.

An unauthorised trade is an agreement that Operations has not yet released. A draft is not an agreement at all. Neither contributes to risk and P&L, but they fail to for different reasons, and only one of them is something a counterparty could hold the firm to.

A draft therefore carries no authorisation status. There is nothing to release until the agreement exists, which is why the composite in the diagram sits inside live and not around both.

Amend leaves draft, expired and cancelled unchanged. A draft being refined is still a draft; a trade that has ceased can still have its record corrected, and correcting it does not revive it. Reviving one is a different event, and the next section covers it.

Within live, amendment moves the authorisation flag rather than the state. An amendment to an authorised trade returns it to unauthorised, because the terms Operations released are no longer the terms on the book and the decision has to be taken again. An amendment to an unauthorised trade changes nothing but the version, since there is no release to withdraw.

The confirmation lifecycle behaves the same way, and for the same reason: a confirmable amendment returns a confirmed trade to unconfirmed. Both are agreements about terms that an amendment invalidates. Confirmations covers that side.

What an amendment produces is a version. Trade versioning covers what a version is and how the internal and external versions move, and trade activity classifies which amendments are economic, which are confirmable, and which are real.

A change that cannot be made in place is not an amendment. Cancelling and rebooking produces two trades, each with its own lifecycle.

Neither is terminal, because either may have been recorded in error: a cancellation booked against the wrong trade, an expiry driven by a fixing later corrected.

Unexpire and uncancel correct the record rather than revive an agreement, and a trade returning to live arrives unauthorised. The release it previously carried was a decision about a trade that was then taken off the book, so it does not survive the return.

A contractual event such as a fixing or a coupon payment produces a new version of the trade, and so appears in the reason for update enumeration, but it is not an event in this machine. The test is whether the event changes which state the trade is in. A fixing sets a rate on a trade that was live and remains live; a coupon payment discharges an obligation on a trade that stays live until its last one.

Expiry passes that test and they do not. A contract that has expired no longer accrues, no longer resets, and no longer contributes, so live can no longer describe it.

So the two vocabularies are different by construction. The lifecycle enumerates the transitions between states; the reason for update enumerates the causes of versions, of which state transitions are only one family. Trade activity holds the full taxonomy of causes.

An operational authorisation decision is metadata, so it is held as a flag on the trade rather than as a state in this machine. A version produced by authorising would itself require authorisation, without end, so authorising states something about a trade rather than changing it.

The composite in the diagram places the distinction without modelling it. Two substates are drawn because two are what a reader needs in order to see where contribution comes from; the flag itself carries four values, whose transitions are set out in the operational authorisation queue.

Drawing it inside live is deliberate. The flag is meaningful only while a trade is live: a cancelled trade's authorisation history remains on the record, but there is nothing left for it to release.

This lifecycle is one of three, and the other two are not states of the trade but decisions and agreements about it.

Neither of the other two is a transition here. Operational authorisation is metadata: a version produced by authorising would itself require authorisation, without end, so authorising states something about a trade rather than changing it. Confirmation is an agreement with a counterparty, which confirmations covers, and trade classification decides whether a trade has one at all.

Contribution follows from the combination rather than from any one of them. A trade contributes to risk and P&L when it is live and its operational authorisation flag reads authorised; an unauthorised live trade exists and contributes to nothing. That is why contribution is a derived predicate and not a state, a point trade classification makes at length.