Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 27 Best Practices and Controls • If the middle office is involved, it should account for all deal tickets by the daily close of business, locate missing deal tickets, and reconcile the system to the deal ticket, ensuring that all terms have been correctly entered into the system. • At the close of the business day, traders should review deal summary reports from the system, verifying deal capture and approving the report, indicating that all deals are complete and accurate. • The middle office should collect and monitor the dealmaker’s sign-off reports and should review the system daily to confirm that each risk component of the deal is captured on time and accurately. • The middle office should review the portfolio allocation to ensure that MTM, accrual, and hedge transactions are identified correctly. • If deal tickets are not used, all transactions must be input directly into an electronic trading system that creates a unique trade identification number and provides an audit trail of who has entered or changed the transaction. Key Reports • Deal summary report. • Position report. • P&L report. Reconciliation of Brokered Transactions Process Overview As in deal validation, each day the middle office (or the back office) should reconcile the terms of the brokered transactions with those in the deal capture system, ensuring accuracy of the deal entry. This third-party verification adds another level of control over the deal capture process. Objectives • Ensure accurate and timely deal capture through third-party verification. • Deter unauthorized deal making. • Ensure that all deals and their individual risk components are entered into the deal capture system accurately and on time. • Diminish the possibility of exposure to unknown risks. • Provide a sound internal control environment, with separation of duties between the creation of a deal by the front office and the verification of a deal by the middle office.