Deal Slip: What It Means and How It Works

What Is a Deal Slip?

The term deal slip refers to a detailed record of foreign exchange (FX) transactions. Deal slips are the primary way for forex brokers to maintain accurate records. Brokers must adhere to the regulations in their jurisdictions regarding the retention period for each deal slip. Deal slips are also used to track trade activity in other financial markets, including stocks, bonds, and options.

Understanding Deal Slips

As noted above, deal slips are a form of record-keeping for various financial transactions, notably in the forex market. They are essentially trade tickets, which provide time-stamped proof of a transaction execution at a specific price.

Each deal slip bears a unique serial number and includes information, such as the currency pair traded, date, time of the transaction, amount of the trade, the transaction type including long or short, and the settlement date. The deal slip also identifies the counterparties and brokers involved in the trade.

Deal slips have been used long before electronic trading became common and many trading firms now record and store this information in a digital format. Nevertheless, some deal slips are still printed on paper and stored physically.

Deal slips can be recorded on paper. Many deal slips are now generated automatically, thanks to advanced technology. This minimizes any chances of error and allows brokers, exchanges, and platforms to keep an electronic copy of deals on hand, which can be easily accessed if needed.

Information on a Deal Slip

As noted above, a deal slip is like a receipt that highlights information about trade deals. Primarily used in the forex market, it is also commonly found in other markets, including the stock, bond, and options markets. These receipts have the following information on them:

• Transaction type
• Name and type of security
• Order type and duration
• Quantity of securities involved
• Commissions paid
  
• Name of each party involved, including the counterparty
• Date

How to Use Deal Slips

Deal slips are an essential control for minimizing errors and auditing a firm’s records. They give all parties more confidence that markets are functioning properly. Once a trade is executed, a deal slip provides a record that helps in maintaining internal accounting reports, classifying trades for auditing and tax purposes, and categorizing transactions for analysis of trading patterns.

After representatives from a firm’s trading desk complete the deal slip, it is usually forwarded to the organization’s back office so the trade can be confirmed with counterparties and then settled by the settlement date.

Misuse of Deal Slips

The misuse of deal slips can reveal fraudulent activity. For example, The Wall Street Journal reported in 2009 that disgraced investment advisor Bernie Madoff asked assistants to generate falsified trading tickets. These assistants researched past prices for specific securities and found data used to create documents for trades that were never executed. Rather, they aligned with Madoff’s claims for his steady annual returns.

In another case, British securities broker Jonathan Bunn received a lifetime ban by the country’s Financial Services Authority (FSA) in 2010 for fraudulent trading. The losses cost his firm, Lewis Charles Securities, more than €2.67 million. Investigators discovered that Bunn falsified deal slips which resulted in his firm holding an unmatched short position of more than 6.9 million shares of HSBC Holdings, leaving the firm vulnerable to high losses.

The Bottom Line

Deal slips are an important part of the financial world. That's because they provide an accurate account of financial transactions. Although there have been cases where they have been misused, electronic record-keeping alleviates the potential for fraud, as trading platforms, brokerage firms, and exchanges are able to document details automatically when financial transactions are executed.