Blotter

What Is Blotter?

A blotter (also called a deal blotter or trade blotter) is a physical or digital record of all trades made over a period of time (usually one trading day) along with their relevant details.

Understanding Blotter

The purpose of a trade blotter is to carefully document trades so that they can be reviewed and confirmed by a trader or brokerage firm. The blotter is mainly used in the stock market, foreign exchange market, and the bond market. It can be customized based on the needs of the user. A trade blotter is also used in the options and commodity market.

The details of a trade will include such things as the time, price, order size, and a specification of whether it was a buy or sell order. This serves as an audit trail of transactions and is helpful to review if a particular trading strategy utilized was successful.

While blotters used to be written down on large boards or paper spreadsheets, today they are usually created through trading software programs that automatically record the trades made through a data feed.

A broker usually provides a blotter to its traders as a software program. It includes what security was traded, the time of trade, the quantity and price of sale or purchase, the ECN market the trade occurred over, and whether it was a buy, sell, or short order.

The blotter also indicates whether a trade was settled appropriately and includes orders that were entered but canceled before being filled. The trader can customize what details are to be shown on the blotter. A broker uses a blotter to keep a record of all transactions in the event that any issue with a trade arises.

Blotter Usage

A blotter can be used with or in place of a trading journal by traders who utilize it to improve their trading techniques and strategies. At the end of a trading day, traders will usually use the blotter to review how well they performed. They can sort through the blotter to review areas in which they could have performed better, such as timing with entries and/or exits.

Compliance departments and regulators, such as the Securities and Exchange Commission (SEC), also sort the blotter to detect whether any illegal trading has been done. The sorting can be done in numerous ways to reveal any discrepancies in trading. During an SEC audit, trading blotters are used by firms to show a record of their trades by type of investment. A separate trading blotter will be used for equities, for example, and another one for fixed-income securities, and so on.

If some trades were carried out on stocks on the watchlist, or restricted trading list, this might indicate insider trading. Blotters might also reveal that some portfolio managers are showing favoritism to select clients if the following (or other information) is revealed:

Furthermore, a portfolio manager involved in an investment strategy that deviates from the strategy disclosed to clients may be found out through a blotter. One example of a red flag: when a supposed buy and hold investment portfolio actually has only short-term traded securities.

Any unusual trading activity highlighted on a blotter will be investigated further to determine whether any wrongdoing was carried out.

Blotter Example

Let's say that investment firm ABC is preparing for an SEC audit. It separates out its trades by type of investment and generates a trading blotter for each investment for the time period requested by the SEC. Each spreadsheet (usually using Excel) contains details of the trade as shown below.

Example of a Blotter Template

Client name

Settlement Date

Buy/
Sell

Security
Symbol

Security
Desc.

Principal/
Proceeds

Total
Commission

Net Proceeds

In the case of fixed-income securities, such as bonds, an additional column called "Accrued Interest" is added to the sheet.