Trade lifecycle
In this chapter: Order management, matching, confirmation · Pay-in, pay-out, novation by clearing corp
A trade goes through six stages: order entry (client→broker), order routing (broker→exchange), order matching (exchange engine matches buy/sell), trade confirmation (exchange→broker→client), clearing (clearing corp computes obligations), settlement (funds and securities move). The clearing corp's "novation" means it becomes the counterparty to both buyer and seller, eliminating bilateral default risk.
Order types affect the lifecycle: Limit orders queue at price; market orders execute at best available; stop-loss orders convert to market when triggered; bracket orders bundle entry, target, and stop. Trade confirmations are pushed to the broker via exchange APIs in milliseconds; client SMS/email confirmations follow within minutes. T+1 settlement: trades on day T are netted by the clearing corp (across the broker), and pay-in obligations (funds for buyers, securities for sellers) are settled by 12:30pm on T+1. Pay-outs (funds to sellers, securities to buyers) follow by 1:30pm. Operations teams handle reconciliation of client-level obligations vs broker-level CC obligations.
Subtle point: the broker has two settlement obligations — one to the clearing corp (broker-level netted) and one to the clients (client-level gross). The broker funds the gap from its own working capital. Operations risk arises when client default (failure to fund pay-in by client) cascades into broker default with the clearing corp. The 2019-20 SEBI norm of upfront margin collection from clients addresses this — brokers can no longer absorb client risk to themselves. Daily client-level margin shortage reports go to SEBI.