Processing swaps: controls, challenges, and considerations

摘要

Purpose – The aim of this paper is to discuss the business and operational considerations and controls involved when derivatives, specifically swap contracts, are used as investment vehicles. Overall, the paper attempts to provide the baseline for understanding swap processing requirements and guidance to professionals who have compliance and oversight responsibility for these investment products. Design/methodology/approach – The approach focuses on the core understanding of the swap investment vehicle and the procedures, controls, and operating environment required to process them correctly. Findings – Historically, firms have addressed the procedures and controls surrounding swap investment vehicles as a reaction to processing errors. Financial services companies and their service providers need to proactively review their portfolios, procedures, and controls in an effort to mitigate and manage the risks associated with the processing of swap contracts. Originality/value – Based on first-hand experience working at and/or with asset managers and service providers, the paper has endeavored to present current and thought provoking information for management consideration on this hot-button issue.