Trade Affirmation Vs Confirmation

trade affirmation vs confirmation

Trade affirmation and confirmation are two important processes in the financial industry, but they occur at different times. While trade affirmation is an agreement on a trade’s terms before it’s executed, trade confirmation happens after the fact. It is a formal notification that details a completed transaction and its terms, including price, commissions, fees, and settlement dates.

Trade affirmation vs confirmation is a process in which an institution’s operations group telephones or emails the operation group of another institution and lists the key economic terms and settlement addresses of selected transactions and any material changes to existing transactions. Affirmation binds both parties to the terms of their contractual agreement and is also critical for ensuring that transaction data in regulatory reporting and trading reports is accurate.

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As the market moves to a T+1 settlement environment, trade affirmation and confirmation will come under increased pressure to meet same-day deadlines. This will mean that investment managers will need to respond quickly to confirmations and validate signatures against mandates, and that broker-dealers will need to accelerate back-office functions such as the approval of trade allocations among customer accounts and standard settlement instructions. Fortunately, new technology and processes can help to reduce the risk of costly mistakes by streamlining operational processes.