1 pointA firm uses the measurement of ‘breaks’ as a form of detective control. What aspect of the trading process does this address?

The term 'breaks' in a trading context typically refers to discrepancies or mismatches that occur during the reconciliation process. This could be between different systems, between a firm's records and its counterparties, or between a firm's records and its custodian banks.

Detective controls are procedures that are designed to detect and prevent undesirable events, errors, or irregularities that have already occurred. They are called 'detective' because they involve reviewing historical data to find what went wrong.

In the context of a trading process, 'breaks' could address several aspects:

1. Trade Confirmation: This is the process of comparing the details of a trade to ensure that the records match on both sides. If there are any discrepancies (or 'breaks'), it could indicate an error in trade entry, a failure to deliver securities, or even fraudulent activity.

2. Settlement: This is the process of exchanging the securities and payment between the buyer and seller. 'Breaks' in this process could indicate a failure to deliver securities or payment, or discrepancies in the settlement details.

3. Reconciliation: This is the process of comparing a firm's internal records with external data (such as data from custodian banks or counterparties) to ensure they match. 'Breaks' in this process could indicate errors in data entry, processing errors, or discrepancies in the external data.

In summary, the measurement of 'breaks' as a form of detective control in a trading process primarily addresses the accuracy and integrity of trade data, the timely and correct settlement of trades, and the overall operational efficiency and risk management of the firm.