This paper analyses the complete lifecycle of an extended day US based mutual fund trade processing and the different financial intermediarie s involved . It focuses briefly on the information technology stack commonly used by the intermediaries for end-to-end processing of the trades.

1. Extended Trading ServicesExtended Trading Services
Vinit Sharma
www.niit-tech.com
NIIT Technologies White Paper

2. Extended Trading Services 1
Introduction 3
Financial Intermediaries 3
Financial Investors 3
Fund Companies 4
Bank and Trust Companies 4
Third Party Administrators (TPA) 4
Depository Trust and Clearing Corporation (DTCC) 4
Role of Information Technology 5
TPA Order Aggregation system 5
Order Management System (OMS) 5
Fund Accounting Platform 5
NSCC – Fund Serv 5
Settlement Platform 6
Industry Issues 6
Our Solution 6
Our Extended Day Trade Lifecycle 6
Conclusion 7
NIIT Experience and Benefits 7
About Author 9
About NIIT Technologies 9
CONTENTS

3. INVESTMENT
REVENUEREVENUE
INVESTMENT
INVESTMENT
INVESTMENT
FINANCE
FINANCE
FINANCE
FINAANCE
FINANCE
WEALTH
MARKET
MARKET
MATKET
CAPITAL
CAPITALCAPITAL
CARGO CAPITAL
ECONOMICS
ECONOMICS
BANKING
Traditionally, US-based open ended mutual funds are traded during
market hours from 9:00 a.m. to 4:00 p.m. Eastern Time (ET).
During these hours, the investor places an order via different
intermediaries and destinations to the respective fund companies.
Under the forward pricing rule, investment companies price their
entire buy and sell orders of fund shares according to the Next Net
Asset Value (NAV). The mutual funds calculate and report the NAV
once a day after trading closes down at 4:00 p.m. ET. Hence,
trades placed before trading closes for the day are priced at that
day’s NAV, while trades received after are priced at next day’s NAV.
Extended day trading in mutual funds refers to trades that are
placed after the closing but are priced at NAV for the same day.
Only a small subset of large investors such as HNIs, fiduciaries,
non-profit organizations, corporations, retirement plans, and
foundations are eligible to place extended day trades. This is
important as the sheer size and complexity of the transaction
warrants several processing steps to ensure adherence to U.S.
Securities and Exchange Commission (SEC) regulations and also
to make sure that the integrity of the financial data is maintained
and the end client’s investment is protected.
Trades submitted for extended day have at least two cut-off times
to be guaranteed the current day price. Firstly, the trades need to
be submitted to the trading destinations such as Depository Trust
and Clearing Corporation (DTCC) and Fidelity by respective
destination cut-off time (6:00 AM ET in case of DTCC). Also, trades
must reach the fund companies from the destinations before their
respective fund cut-off times. In either case, if the trades are
submitted after the cut-off time, they are priced at the following
day’s NAV.
Introduction
A financial intermediary is typically an institution that facilitates the
channeling of funds between lenders and borrowers indirectly. A
number of financial intermediaries are involved in the complete
lifecycle of trade - from order creation to trade settlement. The
intermediaries involved are:
• Financial Investors
• Mutual Fund Companies
• Banks and Trust Companies
• Third Party Administrators (TPAs)
• Brokers/ Dealers
• Destinations - Depository Trust and Clearing Corporation,
Schwab, Fidelity
This paper analyses the complete lifecycle of an extended day US
based mutual fund trade processing and the different financial
intermediaries involved. It focuses briefly on the information
technology stack commonly used by the intermediaries for
end-to-end processing of the trades.
Financial Intermediaries
These are investors (individuals or firms) who make investment
decisions for financial gain. They use their financial skills and
methods to increase returns and manage risks. Extended trading
services are almost exclusively used by large institutional investors
including fiduciaries, non-profit organizations, corporations,
retirement plans, and foundations. Most of the investments come
from retirement plans such as 401(K) and other defined
contribution plans. This is significant as almost 9% of American
household financial assets are invested in Defined Contribution
(DC) or Individual Retirement Account (IRA) plans.
Financial Investors
3

4. These are investment companies engaged in the business of
investing the pooled capital of investors in financial securities. Most
fund companies governed by SEC provide Extended Trading
Services. Some of the major players in the market are listed below:
• Vanguard
• American Funds
• Fidelity
• MFS Funds
• Nuveen
• American Century
4
Bank and Trust companies act as trustees for groups of people
who have lent money to a corporation through bonds or other
obligatory instruments. They provide a full range of core services
like custody services, compliance reporting, investment
management, and special record keeping for each of the
participating investor. Most of these companies have in-house
capabilities in information technology and provide platforms for
execution of extended day trades.
Bank and Trust Companies
Fund Compani
Third Party Administrators are organizations that are primarily
involved in processing insurance claims or certain aspects of
employee benefit plans for a separate entity.
They also handle other aspects of employee benefit plans such
as processing of retirement plans. Retirement plans such as
401(K) are often managed by investment companies. Instead of
handling all the plan contributions by employees, distribution to
employees, and other aspects of investment processing,
investment firms typically outsource these administrative tasks to
Third Party Administrators.
Third Party Administrators (TPA)
Mutual Funds in Household Retirement Accounts
Mutual Fund percentage of retirement assets by type of retirement vehicle, 1990-2010
DC plans*
8
16
23
30
38
44
45
50
53 49
54
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
22
28
34
41
46
48
42
47
49 45
47
IRAs
DC plans include 403(b) plans, 457 plans, and private employer-sponsored DC pakns (including 401(k) plans).
Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined
Contribution Administrators, American Council of Life Insurers, and Internal Trvenue Service Statistics if
Income Division

5. Information Technology plays a pivotal role in facilitating trade
execution and processing. A number of automated and centralized
platforms are used from order entry – purchase, exchanges and
redemption, to order confirmation, registration and money settlement.
Some of the critical IT systems and platforms involved in extended
day trading are listed below:
• TPA Order Aggregation System
• Order Management System
• Fund Accounting Platform
• NSCC – Fund/ SERV
• Settlement Platform
Role of Information TechnologyRole of Information Technology
The fund accounting platform receives an extract of all the trade
orders submitted to NSCC and updates the corresponding accounts
for the type of order, units, fund, pricing, and other order details. The
platform provides the updated position for assets and cash for each
account and interfaces with the settlement platform. It also provides a
feed to TPAs and notifies them of the trade submitted to the fund
companies and the good faith estimate for the trades.
Fund Accounting PlatformFund Accounting Platform
5
TPAs use Order Aggregation systems to aggregate orders for their
client banks in their own standard format with basic validations and
send it to the order management systems.
Third Party Administrators (TPA)
Order Aggregation System
Third Party Administrators (TPA)
Order Aggregation System
The trade order management system receives aggregated orders
from TPAs/ banks and generates trade orders. The aggregated
orders can be of three types:
1. Sell (Full/ Partial liquidation)
2. Buy
3. SWAP/ Exchange
For sell orders, no pricing information is necessary for generating the
trade order. However, for buy orders or exchange orders, the
platform retrieves pricing information from the pricing engine to
generate corresponding trade order. After receiving confirmation
from fund companies, the platform also stores any pricing informa-
tion provided by the TPAs/ banks to identify future discrepancies.
The trade orders may or may not be aggregated depending on
business needs. Once the trade orders are created, the OMS
submits it to NSCC for further processing and submission to fund
companies. The platform also creates an extract for the fund
accounting platform based on the trade orders submitted to NSCC.
The extract is used for future reconciliation when confirmation for
trade is received from fund companies.
Order Management System (OMS)Order Management System (OMS)
Depository Trust and Clearing Corporation is the world’s largest
post trade financial services company. It provides post-trade
services to exchange-traded and over-the-counter securities.
Through its subsidiary - National Securities Clearing Corporation
(NSCC), it provides clearing, settlement and information services
for equities, corporate and municipal bonds, government and
mortgage backed securities, money market instruments, and
over-the-counter derivatives. In the U.S., a vast majority of third
party mutual fund transactions are processed through NSCC
application Fund/Serv. Fund/Serv plays a major role in linking fund
companies with brokers/dealers, banks and other distribution firms
in expanding investor access to funds.
Depository Trust and Clearing Corporation
(DTCC)
In extended trading, TPAs aggregate orders for their respective
banks and send it to the trade order generation platform. Some of
the leading TPAs in the industry are EPIC (Electronic Payroll
Investing Center), Sunguard and RELIUS.

6. Settlement platform settles each account at the end of business
day for asset positions and cash balance. It receives feed from
Fund Accounting platform and NSCC.
Settlement PlatformSettlement Platform
6
Some of the key challenges that financial institutions face in
implementing extended trading services solution are:
• Trans-national markets and global exchanges that demand fast
and accurate processing of high transaction volumes
• Delivering superior customer service
• Providing an architecture that is easy for the customers to
understand and flexible to accommodate any future changes
Industry IssuesIndustry Issues
NIIT Technologies provides mission-critical, flexible and scalable
trading solutions that support multiple channels and cover different
types of trading methodologies, resulting in increased agility and
transparency in trading environments.
The new trading platform is built as a set of robust Extract, Trans-
form and Load (ETL) workflows to process all inbound files (trade
order confirmation, pricing information etc.) and outbound files
(trade order files to destination, client notifications etc.). The
workflow can send notifications at every critical stage of the trade
order. These notifications provide complete transparency with
respect to the status of an order at any time to the business users.
The workflows additionally provide the ability to raise B50 requests
for setting up new fund accounts.
NIIT Technologies has also built a Graphical User Interface (GUI) for
the operations team and the system administrators to easily
manage and view the status of trades placed. Few of the functional-
ities which are provided to the users are:
• A dashboard with summary information of all the trade orders
submitted/ processed/ confirmed/ in exception
• Ability to view and process exceptions raised during Straight
Through Processing
• Ability to setup new clients/ TPAs and their preferences
• Ability to maintain fund level attributes and setup or modify
trading destination details, transmission schedules and destina-
tion holidays
• Ability to generate trade order status reports, B50 status reports
and audit log reports
Our SolutionOur Solution
Fund/Serv is the industry standard for processing and settling
mutual fund transactions. It interfaces with fund companies, bank
and trust companies, TPAs, broker/dealers and other distribution
firms. It uses automated and standardized formats for trade
orders. The order generation platform creates trade orders for
Fund/Serv in the appropriate format. This is used by Fund/Serv
for placing the trades with respective fund companies. It also
provides confirmation to the order generation platform once the
trades are successfully processed by the fund companies.
Fund/Serv uses a cut-off time of 6 a.m. (ET) for extended day
trading. Any trade order received after that is processed for next
day’s NAV.
National Securities Clearing Corporation
(NSCC) – Fund/Serv
National Securities Clearing Corporation
(NSCC) – Fund/Serv
Our Extended Day Trade LifecycleOur Extended Day Trade Lifecycle
A brief overview of our Extended day trade lifecycle is captured in the below diagram.
TPA/BANK TPA/BANK TPA/BANK TPA/BANK TPA/BANK
Vendor Supported Process
NSCC Supported Process
TPA/Bank Supported Process
FUND 1
FUND 2
FUND 3
TRADE ORDER
GENERATOR
PRICING
ENGINE
NSCC
(FUND SERVE)
ORDER
AGGREGATOR
SETTLEMENT PLATFORM
SYSTEM OF RECORDS
(FUND ACCOUNTING PLATFORM)
1
8
8
2 2 2
5
5
6
6
3
9
7
4
11
10
12
8 8

7. 7
Trade orders received by NSCC are validated for certain mandatory
information. If the order satisfies the preliminary validation, an
acknowledgement is sent back to the trade order generator. NSCC
sends the trade order file to respective fund companies for
processing.
4. NSCC Validation and Order Submission to fund companies4. NSCC Validation and Order Submission to fund companies
The fund companies validate the trade orders and if the orders
qualify for trade and are received before their cut-off time, they are
processed and a confirmation is sent to NSCC. The trade order
confirmation contains information such as pricing of the trade,
number of units bought/ sold/ exchanged.
5. Trade Order Processing at fund companies5. Trade Order Processing at fund companies
Once trade confirmation is received by NSCC, the corresponding
confirmation is sent to the trade order generator. Usually the trade
confirmation for trade order placed could be received any time
during the day. There are multiple cycles in which confirmations for
the trade orders are sent by NSCC. If the confirmation is not
received during the day, an exception is flagged and a manual
intervention is necessitated to understand the issue and resolve it.
6. Trade Order Processing at fund companies6. Trade Order Processing at fund companies
The trade order generator sends an acknowledgement to the
TPAs/ banks after it receives the trade confirmation from NSCC.
7. Trade Confirmation to the Banks/TPAs7. Trade Confirmation to the Banks/TPAs
The trade order generator sends the trade confirmation details to
the fund accounting platform for the corresponding fund account.
8. Feed to Fund Accounting Platform8. Feed to Fund Accounting Platform
The fund accounting platform updates the trade details for
bookkeeping purposes and generates settlement feed that
consists of information such as activity, position and income.
9. Trade Order Processing at fund companies9. Trade Order Processing at fund companies
Actual settlement is performed and the asset position and cash
balance is updated for each individual account. Typically, the
settlement would happen on T+1 day; however, in certain
exceptional cases such as exchange trades, where both the buy
and the sell order could not be processed within the cut off time,
an exception is raised. Once both the sides of exchange trade are
executed, a confirmation is received by the settlement platform
from NSCC and the Fund Accounting platform and the final
settlement is executed. In some rare cases, a reconfirmation may
be received for a trade that was already settled. Such cases are
settled based on defined business rules and the concerned parties
e.g. TPAs, banks etc. are notified.
10. Trade Order Settlement10. Trade Order Settlement
TPAs create an order file and send it directly to the vendor
supported trade order generator or a bank may decide to
aggregate orders for TPA before TPAs send it to the trade order
generator. Different mechanism can be used for sending orders
including File Transfer Protocol (FTP) or Network Data Mover
(NDM) processes.
1. Order Generation1. Order Generation
Fund Prices are sent to the trade order generator from multiple
vendors. Usually prices are taken from multiple sources and based
on a pre-decided business rule; one source is selected for a
particular fund.
2. Pricing Information2. Pricing Information
Trade orders are generated in NSCC supported format at regular
intervals throughout the night. NSCC has a cut-off time (5:00 AM
ET) till which it accepts the trade orders. Every fund company has
their own specified cut-off time, by which, if the trade order is
received, they are obliged to price the trade at the current NAV.
3. Trade Order Generation3. Trade Order Generation

8. Mature Best-in-class Process Framework
NIIT software factories are ISO 27001, CMMi Level 5 and PCM Level
5 accredited. Our resources are therefore well versed with operating
in a highly mature process oriented and secure environment and
bring this expertise to all client engagements.
Access to large resource base
NIIT has a large resource base of over 5000 analysts and consul-
tants and hence is able to quickly source professionals with the
desired skill sets required for the project. Furthermore, we also
possess the capability to ensure a quick ramp-up of project
resources when in need.
8
NIIT offerings span business and technology consulting, application
development and management services, IT infrastructure services,
and business process outsourcing. Our services to customer-
partners across the world has led to the evolution of a strong value-
optimizing framework for offering similar services through a cost
effective delivery model that can be used in single shore, dual or
multi shore formats.
Technology Bandwidth
Strong Industry Focus
NIIT has several thousand person years of experience in designing,
building and maintaining large-scale applications for day-to-day
NIIT Experience and Benefits
Information Technology has transformed the capital markets.
Markets have become interconnected resulting in the emergence
of trans-national markets and global exchanges. Aggressive
growth and accurate processing of high volumes of transactions
has become an imperative for financial companies to deliver
enhanced customer service. Our team has worked with leading
financial services companies to help them with trading solutions
that support multiple channels and covers different types of
trading methodologies.
NIIT Technologies help identify and assemble the core building
blocks to improve trade processing responsiveness, variability
and resiliency. Our offerings begin with the analysis and evalua-
tion of the customers’ trade processing environments. By select-
ing the right set of business processes, we help financial services
organizations manage costs and risks of transforming trading
environments.
Our banking and financial solutions help differentiate a financial
firm in an increasingly competitive marketplace. They help in
delivering new capabilities and establishing market credentials.
We also enable enterprise-wide trade cycle management by
leveraging integrated automation of processes thereby improving
efficiency, increasing transaction capacity and reducing opera-
tional and financial risk.
Conclusion business and has considerable experience in Front Office, Middle
Office and Back Office operations. As per the Datamonitor Black
Book of Outsourcing 2010 survey, in the overall satisfaction ratings,
NIIT Technologies is ranked number 1 in the Data Management
Services. NIIT’s team has working knowledge of Charles River,
Calypso, Advent Moxy, Linedata Longview, MacGregor ITG, Eze
Castle, Omgeo, Bloomberg, Reuters, Yodlee solutions such as
“Yodlee Account Data gathering” and many other tools and
products used in the industry.

9. A global IT sourcing organization | 21 locations and 14 countries | 7000+ professionals | Level 5 of SEI-CMMi, ver1.2
ISO 27001 certified | Level 5 of People CMM Framework
D_10_220612
Write to us at marketing@niit-tech.com www.niit-tech.com
NIIT Technologies is a leading IT solutions organization, servicing customers in North America,
Europe, Middle East, Asia and Australia. The Company offers services in Application
Development and Maintenance, Managed Services, Cloud Computing and Business Process
Outsourcing to organizations in the Financial Services, Insurance, Travel, Transportation and
Logistics, Manufacturing and Distribution and Government sectors.
The Company’s deep domain knowledge and new approaches to customer experience
management with robust outsourcing capabilities, and a dual shore delivery model, have made
NIIT Technologies a preferred IT partner for global majors in these chosen industries. Profound
and enduring customer engagements have become a hallmark of NIIT Technologies.
NIIT Technologies vision is to be the “First Choice” of services for the focused segments
serviced. The Company has a simple strategy - to focus and differentiate. It competes on the
strength of its specialization.
Over the years the Company has forged extremely rewarding relationships with global majors, a
testimony to mutual commitment and its ability to retain marquee clients, drawing repeat
business from them. Whether it is global banking and insurance major, leading Asset
Management solutions provider, the Number Two cement manufacturer, or travel big-wigs, NIIT
Technologies has been able to scale its interactions with these marquee clients into extremely
meaningful, multi-year "collaborations.
About NIIT Technologies
Vinit Sharma is a Business Solution designer within the Banking and Financial Services practice
at NIIT Technologies Ltd. He has over 8 years of experience. His expertise includes Capital
Markets, Corporate Finance, Credit Card and US Mortgage business.
About the Author
Europe
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