A trade confirmation sets out the terms of the trade in detail. The firm compares the confirmation it receives from the counterparty with its own records; if they do not match, it investigates the cause and resolves the mismatch, and it obtains a new confirmation when the parties agree to correct the terms. Confirmations are sent and received by a department independent of the one that made the trade1.

Under the US swap rules, a legally binding confirmation is created when the receiving party signs the record of terms (acknowledgment) sent by the other party2. In Japan, reports of OTC derivatives trade data also include whether the trade has been confirmed3.

Notes

  1. Board of Governors of the Federal Reserve System, "Trading and Capital-Markets Activities Manual," Section 2060.1 "Operations and Systems Risk (Back-Office Operations)" (February 1998), "Confirmations," pages 3–4. ↩

  2. 17 CFR 23.500(a) (Acknowledgment) and 23.500(c) (Confirmation). ↩

  3. Financial Services Agency, "店頭デリバティブ取引等の規制に関する内閣府令第４条第１項で定める作成・保存・報告事項 ガイドライン" (Guidelines on the items to be prepared, retained, and reported under Article 4, paragraph 1 of the Cabinet Office Order on the regulation of OTC derivatives transactions, our translation) (December 2022), item 19, "Confirmed（コンファメーションの有無）" (Confirmed (whether a confirmation exists)), in the table of reporting items (in Japanese). ↩