SD-06.6 — Derivatives & OTC Trade Management

Business Domain: BD-06 Trading & Execution (Front office) · Applies: BOTH

Purpose

Executes OTC derivatives and manages the clearing path that distinguishes a derivative trade from a cash-instrument trade. A derivative does not simply execute and settle: it is executed by request-for-quote on a swap-execution facility or by voice, it may be routed to central clearing, it is given up to a clearing broker, and it sits under an ISDA master agreement. SD-06.6 owns that OTC-and-clearing path. Listed-derivative execution on an exchange is part of SD-06.2’s order-driven mode; SD-06.6 owns what is specific to the OTC and cleared world.

Service Operations

Execute OTC derivatives — request-for-quote on a swap-execution facility or organised trading facility, or by voice.
Determine clearing eligibility and route — decide whether a trade is centrally cleared and route it to the clearing broker.
Process give-ups — give the executed trade up to the clearing broker that will clear it.
Reference the ISDA master agreement — confirm the trade falls under the master agreement and its credit support annex.
Set up margin at execution — initiate the initial- and variation-margin arrangement, handed to BD-11 for management.
Determine the regulatory reporting obligation — establish the trade-reporting requirement the trade carries.

Inputs and outputs

Inputs: the derivative orders from SD-06.1; swap-execution-facility and OTF connectivity; the clearing arrangements; the ISDA agreements.
Outputs: the executed derivative trades, the clearing instructions and the regulatory reports — consumed by BD-12 (clearing processing and settlement) and BD-11 (margin and collateral).

Entities

Consumes: the derivatives specialisation entities — Listed Derivative, OTC Derivative (DR-02), Master Agreement (DR-03) — Legal Entity (E-01, counterparties and clearing brokers); the SD-06.1 derivative orders.
Owns: the execution facet of the OTC Derivative (DR-02); the post-trade lifecycle of the contract is owned by SD-12.14.

Standards

Dodd-Frank (the swap-execution-facility and central-clearing mandates), EMIR (clearing, reporting, risk mitigation), MiFIR (the trading obligation), and the ISDA master-agreement framework. OpenIM positions ISDA CDM as the complementary transaction-layer standard below the model.

Open extensions

The boundary with SD-06.2 — listed-derivative execution is SD-06.2’s order-driven mode; SD-06.6 owns the OTC and clearing-path specifics.
The boundary with SD-12.14 Derivatives Lifecycle Processing — SD-06.6 brings the contract into being; SD-12.14 processes its post-trade life.