Post-trade processing is all the work that a broker, wealth firm or fund does after a trade is made: confirming the trade, settling it, keeping the records and servicing the client's account. It is also called back-office processing, because clients never see it.
Here are the main jobs. First, confirmation. Both sides check that they recorded the same trade: the same share, quantity, price and time. Second, settlement. The firm makes sure that the shares and money are ready, and follows the results of clearing and settlement. Third, records and charges. The firm updates each client's holdings and works out the charges on every trade. Fourth, reconciliation. The firm compares its own records with those of the depository and the bank, and investigates every difference. Fifth, servicing. This covers dividends, bonus shares, statements and reports to the regulator. Running shareholder votes through proxy voting is also a servicing job.
Take, for example, a broker in Chennai whose clients make 2 lakh trades in one day. That evening, the broker's back office receives the executed trades from its order management system. For every trade, it calculates the brokerage, the securities transaction tax, the stamp duty, the exchange's fees and the GST. It emails 2 lakh contract notes. A contract note is the official statement of a trade, which brokers in India must send within 24 hours. Overnight, it receives the clearing house's file of what the broker owes, and it compares its client holdings with the depository's records. It finds three mismatches. By 9 a.m., these are on an operations employee's screen for investigation.
Funds and wealth firms have the same needs on a larger scale. A fund sends its positions to investment accounting and reporting, and its records are checked by data reconciliation software. A wealth firm updates each client's account on its wealth management platform.
Why does this matter? A mistake in the back office means a client is charged wrongly, or a trade fails to settle. With T+1 settlement, the firm has only one night to find and fix each problem.
Post-trade processing is different from clearing and settlement. Clearing and settlement are done by market institutions for the whole market. Post-trade processing is each firm's own work on its own records.