EDI in action in trading operations and earlier developments

EDI (Electronic Data Interchange) has become an important tool to optimize external activities through a process of collaboration between buyers and sellers and financial intermediaries like banks and financial institutions. In fx options trading, it has become an important tool in reducing cumbersome filing procedures.

The information and document flow in the securities trading operations before the implementation of ‘EDI’ was a tedious one. The flow of securities and funds from the seller to the buyer and the various entities passed through various checkpoints. Most of these were manual operations. EDI led to a virtual revolution in options trading.

Consider the trade in earlier times. It can be summarized as follows:
1. The seller of ‘securities’ calls on his ‘broker A’ to sell his securities (step 1).
2. The broker checks the securities before acceding to the seller’s request. The seller gives his ‘bid’ to the broker who goes back to the stock exchange and negotiates the order at the ‘pit’ (step 2) with the ‘broker B’.
3. The seller receives the confirmation of the deal (step 3) and the details of the settlement date.
4. The ‘broker A’ takes the securities (share certificates and the transfer deeds to the stock exchange on the settlement date for exchange of the securities for payment (step 4).
5. At the clearing house of the stock exchange, the broker delivers the securities and receives the payment (step 5).
6. Finally, he sends the sale proceeds of the securities to the seller by cheque (step 6).
7. The buyer of the ‘Securities’ calls on his ‘broker B’ (step 7) to buy the specific securities.
8. The buyer gives his ‘offer’ to the ‘broker B’ who goes to the stock exchange and negotiates the order at the ‘pit’ (step .
9. The buyer receives the confirmation of the deal (step 9) and the details of the settlement date.
10. The ‘broker B’ receives the purchase price from the buyer and goes to the stock exchange on the settlement date to take delivery of the securities against payment (step 10)
11. At the clearing house of the stock exchange the ‘broker B’ receives the securities (share certificates along with the transfer deeds and makes the payment (step 11).
12. ‘Broker B’ sends the securities with the transfer deeds to the R & T (Registrar and Transfer) agent of the company for registration of the securities in the name of the buyer (step 12).
13. The R & T agent returns the securities after registration to the ‘broker B’ (step 13).
The broker delivers the securities to the buyer (step 14).