What Is a Blotter?
A blotter (also known as a deal blotter or trade blotter) is a physical or digital record of all trades made over a specific period (commonly one trading day) along with their critical details.
Key Insights
- A blotter chronicles detailed trading activity and history.
- Clearing firms and regulatory bodies like the SEC utilize trade blotters to manage corrections and identify illegal trades.
- Traders use blotters to analyze and evaluate positions post-trading day.
Understanding a Blotter
The primary role of a trade blotter is to meticulously document trades for review and confirmation by traders or brokerage firms. This tool serves multiple markets, including stocks, forex, bonds, options, and commodities.
Trade details typically captured include time, price, order size, and whether it was a buy or sell order, acting as an invaluable audit trail for evaluating trading strategies.
While historical blotters were handwritten on boards or paper, modern blotters are software-based, autonomously capturing trades via data feeds. Brokers provide these software programs, detailing securities traded, trade timing, quantity and price, the executing market, and order type.
The blotter also flags whether a trade was settled correctly, including canceled orders, making it crucial for maintaining comprehensive transaction records. Traders often customize their blotters to display relevant details.
Blotter Usage
A blotter can complement or replace a trading journal, beneficial for traders aiming to refine their techniques and strategies. At the end of trading, blotters serve as tools to assess performance, highlighting areas for improvement such as entry and exit timing.
Compliance departments and regulators like SEC use blotters to scrutinize for illegal activities by revealing any trading discrepancies. During SEC audits, firms present trading blotters sorted by investment type, aiding transparency and accountability.
Blotters also help detect concerted instances like insider trading or portfolio manager bias, by analyzing patterns and discrepancies in trade execution among client accounts, pricing anomalies, or preference for high commission accounts.
Example of a Blotter Template
To illustrate, consider investment firm ABC preparing for an SEC audit, segmenting trades by investment type to generate a detailed trading blotter within Excel. It would encompass details such as:
| Client Name | Trade Name | Settlement Date | Buy/Sell | CUSIP | Security Symbol | Security Desc. | Quantity | Unit Price | Principal/ Proceeds | Total Commission | Fees | Net Proceeds | Broker |
|---|
For fixed-income securities like bonds, an “Accrued Interest” column is often included to provide comprehensive details.
What Are the Blotters of Original Entry?
Blotters of original entry record new information, encompassing types such as securities receipt and delivery, securities purchase and sale, and cash disbursements.
What Does a Trade Blotter Do?
A trade blotter records trading activities, creating a historic trail. Information typically includes client name, trade name, settlement date, buy/sell status, CUSIP, security symbol, quantity, unit price, and much more.
What Triggers an Insider Trading Investigation?
Investigations into insider trading by the SEC can be triggered by unusual activity around significant events such as mergers or acquisitions, aiming to spot unusual securities movements.
In Conclusion
Blotters serve as organizational records of trades, crucial for adjustments, updates, and identifying unlawful trading practices. They are versatile, with designs suitable for varied financial contexts and requirements.
Related Terms: investment strategy, audit trail, insider trading, ECN market, compliance, trading journal
