SEC Rule 10b-10 requires broker-dealers to send customers a written confirmation on or before the completion of a transaction. It also prescribes the type of information required, which varies with the circumstances of the transaction and the type of security.
What is a trade confirmation and why is it important?
A trade confirmation is a financial document or receipt, which reports the details of a trade sent to a client by their broker-dealer. A trade confirmation verifies that a transaction has taken place and is sent to a client after every trade. A trade confirmation also assists with accurate records for tax, helps verify transactions, spot errors and can ensure the broker-dealer is acting in the client’s best interest. Like a statement, trade confirmations can be sent by mail or electronically.
Although mail is an option, electronically is the preferred communication method. When speaking of secure global financial electronic communication, the name that springs to mind is SWIFT. Specifically, the Global Electronic Trade Confirmation (GETC) solution which enables the automation of confirmations of equity and fixed-income trades using SWIFT messages. The benefit of sending SWIFT messages is that they are secure, legally binding and fully auditable.
However, accessing the SWIFT network can be expensive, whether directly or via a SWIFT Bureau. Especially for small trading firms such as treasuries, family offices, high net-worth individuals and smaller buy-sides, all of which do not generate the volume or frequency of messages to warrant the investment.
So, what form of communication technology is secure, fully auditable and legally binding?
The answer is digital fax
OpenTextTM has over 30 years of experience underpinning the delivery of financial documentation via digital fax and today supports millions of trade confirmations each month across its global digital fax network.
So why would financial companies still use old legacy technology like fax and not email?
Although email has transformed business communication, it does have limitations. Email is a fire-and-forget technology, even with added receipt confirmation which is usually a manual intervention. If the recipient is a back-end or middle office system, then the verification may not happen or only come from the mail server. Add to this the possibility of the email being blocked by the firewall or becoming corrupted with a virus. Email is not the guaranteed communication channel we may think.
So, what are the key points that make digital fax such an important technology for mission-critical communications?
- Fax is a peer-to-peer connection, with each number unique and verifiable. Contrast that with email, which leverages the internet and is a fire-and-forget communication. Once sent, there is no way to confirm if the recipient received the email, or if it has become corrupted.
- The cost of infrastructure and sending a digital fax page internationally is extremely low, compared to that of connecting to the SWIFT network and sending a message.
- Utilizing an OpenText enterprise fax solution reduces risk and enables compliance and document governance by providing auditable records. These include fax number, time, date, confirmation of receipt and what pages were sent. All of this is music to the ears of the compliance team.
- Fax is also known as a legally binding communication channel, which supports signatures for legal documentation.
- OpenText Enterprise Fax Network automatically retries any busy fax number several times before disconnecting and will provide a report back to the sender. This enables the dealer-broker to contact their end user and find an alternative number.
Digital fax remains a powerful communication method within financial markets – highly secure, auditable and inexpensive. The greatest challenge companies are facing is digital transformation and cloud adoption. OpenText has a digital fax portfolio and expertise to help financial institutions with their cloud journey for digital fax.
OpenText™ Fax2Mail™ is a cloud service that simplifies digital faxing for the enterprise. With state-of-the-art security and unmatched reliability, Fax2Mail eliminates on-premises hardware or software.
OpenText™ RightFax™ is the world’s leading enterprise digital fax server. It enables users, applications and back-office systems to securely transmit paperless, digital faxes and automate business processes.