What Is a Blotter Definition How It Works Uses and Example
What Is a Blotter? Definition, How It Works, Uses, and Example
What Is a Blotter?
A blotter is a record of all trades made over a period of time (usually one trading day) along with their relevant details.
Key Takeaways
- A blotter is a detailed record of one’s trading activity and history.
- Clearing firms and regulatory agencies like the SEC use trade blotters to adjust out trades and detect instances of illegal trading.
- A blotter can be used by traders to evaluate and analyze positions at the end of a day.
Understanding a Blotter
A blotter carefully documents trades and is mainly used in the stock market, foreign exchange market, and the bond market. It can be customized based on the user’s needs and is also used in the options and commodity markets.
Details of a trade include the time, price, order size, and whether it was a buy or sell order. This serves as an audit trail of transactions and helps review the success of a trading strategy.
While blotters used to be written on boards or paper spreadsheets, today they are usually created through trading software programs that automatically record trades.
A broker provides traders with a blotter software program that includes details such as what security was traded, the time of trade, quantity and price, the ECN market the trade occurred over, and order type.
The blotter also indicates whether a trade was settled appropriately and includes canceled orders. The trader can customize the details shown. A broker uses a blotter to keep a record of transactions in case of any issues.
Blotter Usage
Traders can use a blotter to review their performance and identify areas for improvement. Compliance departments and regulators use blotters to detect illegal trading. During an SEC audit, blotters are used to show a record of trades by type of investment.
Blotters can reveal insider trading or portfolio managers prioritizing certain accounts. They can also detect deviations from disclosed strategies. Unusual trading activity highlighted on a blotter is investigated further.
Example of a Blotter Template
Investment firm ABC generates trading blotters for an SEC audit. Each spreadsheet contains categorized trade details. In the case of fixed-income securities, an additional column called "Accrued Interest" is added.
What Are the Blotters of Original Entry?
All blotters record new information and fall under blotters of original entry. They include blotters for the receipt and delivery of securities, the purchase and sale of securities, and the disbursements of cash.
What Does a Trade Blotter Do?
A trade blotter records trading activity, creating a trading history. Information includes client name, trade name, settlement date, buy or sell, CUSIP, security symbol, quantity, unit price, and more.
What Triggers an Insider Trading Investigation?
An insider trading investigation by the SEC can be triggered by various activities, especially around significant news events.
The Bottom Line
Blotters are records of trades used for organizational purposes, tracking, adjustments, updates, and detecting illegal trading. They can be designed and applied in various contexts.
