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I'm looking for a clearly articulated description of the difference between trade matching (e.g. Omgeo's CTM) and trade affirmation (e.g. Omgeo's Oasys). From what I understand, they both involve electronic matching of trade details. So, what's the difference?

(For those who are just trying to follow the conversation, electronic matching of trade details refers to an automatic comparison of a buyer's version and a seller's version of a trade's attributes such as price, value date, etc in order to ensure a successful settlement down the road.)

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Trade matching is the process of 2 investment banks electronically inputting their respective trade details into an electronic trade matching platform; it is called trade matching because both parties are equal in this relationship. Conversely, where an investment bank has executed a trade with a buy-side firm (e.g. pension fund, insurance company), part of the service provided by the investment bank to its clients is the speedy and accurate communication of a trade confirmation; where this is achievable electronically, it is called trade 'affirmation' because the investment bank is required to be proactive and input the trade details for the buy-side firm to 1) check and 2) respond to via the affirmation platform - by so doing the buy-side firm is reactive....hence the term 'affirmation', meaning to affirm (agree with) the information presented to you. I hope this helps.

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They essentially perform the same function, but CTM is newer (Oasys Global is being retired at the end of 2012). According to Omgeo's FAQ:

What is the difference between this [CTM] workflow and the OASYS Global Contract-Level workflow?

The OASYS Global Contract Level workflow requires investment managers and broker/dealers to send and receive allocations manually, often times in an un-automated and non-standard means. These allocations are matched, locally, by both parties. This new workflow looks to automate the allocation piece so both sides can code to a standard message format and centrally match the transactions. Both parties can also proactively manage exceptions and view the status of the allocations as they go through the matching process.

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  • $\begingroup$ Okay. However, apart from these two Omgeo products (which I mentioned only as an example) the trading literature seems to distinguish between trade matching and trade affirmation. So, I'm still hoping that someone can explain the difference. $\endgroup$
    – Puneet Lamba
    Apr 21, 2011 at 14:32
  • $\begingroup$ The terms are often used interchangeably, but it may be helpful to think of matching (confirmation of order details) as one step in the broader post-trade affirmation (verification) process. $\endgroup$
    – michaelv2
    Apr 21, 2011 at 16:02
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I found this SEC article that attempts to clarify the distinction between trade affirmation and trade matching.

"The confirmation/affirmation process refers to the transmission of messages among broker-dealers, institutional investors, and custodian banks regarding the terms of a trade executed for the institutional investor. Because the trades of institutional investors involve larger sums of money, larger amounts of securities, more parties, and more steps between order entry and final settlement, institutional trades are usually more complex than retail transactions."

"'Matching' is the term that is used to describe the process whereby an intermediary compares the broker-dealer's trade data submission (step 2 of Figure 2) with the institution's allocation instructions (step 1 of Figure 2) to determine whether the two descriptions of the trade agree."

http://www.sec.gov/rules/interp/34-39829.htm

I hope this helps.

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