Not having a comprehensive risk management and trade order management system can cause extensive problems. Consider a celebrated case back in the mid 1990s, when a spirited trader was able to book complex trades as far as seven months forward without the immediate scrutiny of audit and oversight managers. The firm was relying on "after the fact" reports, not online and immediate trade verification and authorization to tell them if the activity was valid.
In another case of unauthorized trading, a bond trader, using a paper ticket system, engaged in illicit and unauthorized trades for 11 years before he was exposed. Losses to the firm exceeded $1 billion dollars and led to the closing of their NY trading operation. Official records clearly pointed to a failure in risk control as well as unauthorized trades.
While no trade order management system can guarantee to stop fraudulent activity, having one that requires immediate scrutiny of transactions by management, as well as immediate warnings when trading limits are violated, will give a firm a fighting chance at identifying illicit trades before severe damage can be done. Once profitable trades make their way into the core of the division's revenue, it is difficult for persons to begin to question the authenticity of such trades because a sense of ownership across the division has already set in.
SS&C's Lightning, is a trade order management system that requires immediate trade entry by the originator, and a subsequent workflow routing to the appropriate person for review, approval or follow-up. An event-driven workflow system powers a flexible set of house rules that insist each trade is processed according to its merits and unique characteristics. Exceptions are dealt with immediately. Risk management is online and immediately available to managers.
Lightning provides integration with security data sources so that correct terms and conditions for each security are available and utilized. Also integrated into Lightning are real-time trade reporting (RTTM) to regulatory agencies, and straight through processing that includes clearance and settlement at Fed or other depositories.
With Lightning, you have a chance to get in front and stay in front of your producers.