FIRMA 2006 Audit and Risk Management Seminar Trading Desk Risks Sell Side vs Buy Side Considerations

Presented By: Danny Hirce

April 12, 2006

Trading Desk Risks

Understanding the Desk Sell Side

Proprietary Market/Credit Risk Pricing/P&L Determination

Non-Proprietary Sales Suitability Structured Products

Clients Individuals Institutions

Securities Traded Equities Fixed Income Derivatives Commodities

Locations/Exchanges Americas Europe Asia Emerging Markets

Clients/Securities/Locations

Buy Side

Clients Funds Individuals Institutions Pension/Retirement

Products 40 Act/2a-7/Pools Separate Accounts Foreign Products Alternative Investments

Securities Traded Equities Fixed Income/FX Money Markets Derivatives

Locations/Exchanges Americas Europe Asia Emerging Markets

Clients/Products/Securities/Locations

Trading Desk RisksUnderstanding the Risks Associated with the Desk

Market Credit Operational - (Allocation, Confirmation, Settlement,

Reconciliation, Cash Management, Performance, Reporting) Regulatory Compliance Client - (AML/OFAC, Suitability, Credit, Contractual Obligations) Disaster Recovery/Contingency Planning/System Security Chinese Walls/Information Barriers/Side by Side Management Compensation/Incentives