Operations & Technology
Settling it, reconciling it, proving the profit and loss is real, and writing the systems all of that runs on. Invisible from a price screen and unavoidable from every other seat.
In every firm above: Not a kind of firm — a kind of seat. the whole map
The seats
three of them, each answering the same six questions so that they can be read against each other.
Next to it
The other group on the same side of the price.
What an interview asks here
These questions are checking whether you know the half of a trade that is invisible from a price screen — and that its failures are boring, expensive and preventable.
Try each one out loud before you open it. What is underneath is the shape of a complete answer, not a script — somebody who can produce those parts in their own words can also answer the four variations that follow, and somebody who has memorised a paragraph can answer one.
Q1A trade did not settle. Walk me through what has actually gone wrong and what it costs.
What it is checking. The core operations question, and it wants a mechanism rather than a shrug.
A complete answer contains:
- Something did not match: the confirmation, the settlement instruction, the account, or the securities were not there to deliver.
- Delivery against payment means neither leg moves, so both sides are left with an exposure they did not intend.
- It costs money: the party that did not receive has to fund the gap, and there is usually an interest claim or a penalty.
- And it has to be chased with the market rather than with the client, which is why the seat exists at all.
Read it properly: Clearing and settlement · Operations and settlement
Q2What is a reconciliation break, and why does the age of one matter more than its size?
What it is checking. Whether you know which breaks are noise and which are a position nobody owns.
A complete answer contains:
- A break is a difference between two records that should agree — the firm's against the custodian's, the clearer's or the counterparty's.
- Most are timing and clear themselves within a day.
- One that persists is not timing: it is a real difference, and until it is explained the firm does not know what it holds.
- So breaks are ranked by age, not by amount, and an old small break is worse than a new large one.
Read it properly: Operations and settlement · Custody and securities services
Q3What is the daily profit-and-loss explain, and what does a persistent residual tell you?
What it is checking. The product control question, and the answer is about direction rather than size.
A complete answer contains:
- Yesterday's risk positions applied to today's market moves should predict today's profit and loss closely.
- The residual is what is left over: noise, if the process is sound.
- A residual with a consistent sign is not noise — it means the risk is mismeasured, the marks are wrong, or something is in the book nobody described.
- Which of the three it is decides who has a problem, so the residual is investigated rather than smoothed.
Read it properly: Product control and finance · Valuation
Q4How would you verify a price the desk marked, on an instrument with no screen quote?
What it is checking. Independent price verification, which is easy to describe and easy to do circularly.
A complete answer contains:
- Find a source the desk does not control: a consensus service, a comparable instrument, a recent trade, a counterparty's collateral call.
- Where none exists, verify the inputs to the model rather than the output, and test how far the value moves when each one moves.
- Take a reserve for what remains uncertain, up front rather than on discovery.
- And record which of those three routes was used — a mark verified against the desk's own broker is not verified.
Read it properly: Product control and finance · Where marks are hardest
Q5Why is a system that returns a wrong number worse than one that crashes?
What it is checking. The technology question that is really about failure modes.
A complete answer contains:
- A crash is loud: it stops, somebody is paged, nothing downstream consumes it.
- A plausible wrong number is consumed by every system downstream, priced, reported and traded on.
- By the time it is noticed the wrong value is in positions, risk numbers and possibly a published figure.
- So the design goal is to fail loudly, and the check is reproducibility: yesterday's number regenerated from stored inputs.
Read it properly: Technology and quantitative development · 2010
Q6A corporate action election expires today and the holder has not responded. What happens?
What it is checking. The deadline that cannot be reopened, which is where operational loss actually comes from.
A complete answer contains:
- The default applies, which is a decision made on the holder's behalf by not deciding.
- It cannot be undone afterwards; there is no market to trade back into.
- Whether the loss lands on the holder or the custodian depends on whether the notice was passed on correctly and in time.
- Which is why elections are tracked by deadline rather than by value, in every time zone the client holds in.
Read it properly: Corporate actions · Reading the notice
Q7Where does a spreadsheet become a risk?
What it is checking. The most common piece of production software in finance, and nobody calls it that.
A complete answer contains:
- The moment something the firm depends on runs through it: a valuation, a limit, a regulatory return.
- It has no version control, no test, no access control and usually one author.
- The failure is silent — a dragged formula, a hard-coded cell, a stale link — and it survives because the output still looks like a number.
- The answer is not to ban them but to find them, and to move the ones that matter into something with a test around it.
Read it properly: Technology and quantitative development · Internal audit
Do these against a clock — one at a time, ninety seconds each, answer before you look.
Whose questions these are. Every question on this page was written for this publication. None is taken from anybody else’s question bank, and none is a claim about what any named firm asks — that is neither verifiable from here nor ours to assert. They are our own reading of which mechanism a question of this kind is testing. Information and education only.
Test yourself: five questions
Five quick questions on this part of the industry — checked entirely on your device, nothing stored or sent. Wrong answers come with explanations, and the seat pages above hold every answer. For education only.