Money Market

TREASURY

TEMENOS EDUCATION CENTRE

Introduction Slide No. 2

Typical Structure

DEALING ROOM

FOREX SPOT

FWDS

DEALER DESKS

MONEY MARKET CASH

CDs

DEALER DESKS

TREASURY FRAs

SWAPS

DEALER DESKS

Slide No. 3

Dealer.Desk

Slide No. 4

Workshop - 1

Set up your own Dealer.Desk with 2 modules: 1. MONEY MARKET (MM) 2. FOREX

Attach to your USER profile

Slide No. 5

Solution - Dealer Desk New Number

Slide No. 6

Solution - Dealer Desk

Attach to USER PROFILE

Slide No. 7

Deal Transaction DEAL INPUT LIMITS

TOLERANCE

AUTHORISE

ACCOUNTS

ENQUIRIES

DELIVERY

REPORTS

PAYMENTS

ADVICES Slide No. 8

Brokers PAYMENTS & CONFIRMATIONS COUNTERPARTY

COUNTERPARTY

COMMISSION

COMMISSION

BROKER

VOICE

ELECTRONIC Slide No. 9

BROKER

Slide No. 10

MONEY MARKET TEMENOS EDUCATION CENTRE

Salient features • Straightforward but flexible processing • Interest – Always in arrears – Fixed or floating

• Term – Call, Notice or Fixed

• Repayment – Partial or total – Roll over into new deal period

• Brokerage – With or without

Slide No. 12

Primary Features

The module automatically: Accrues and applies Interest Matures Contracts Calculates Charges and Commissions

Slide No. 13

Introduction

The Money Market module is integrated with:  Positions

     

Limits Customers and Accounts Portfolio Accounting and Reporting Management Information Delivery

Slide No. 14

Basic Elements

 Counterparty  Amount  Term  Category code  Interest details  Delivery Instructions

Slide No. 15

Products supported

Asset types • Loan • Placement • Account Receivable

Liability types 

Deposit



Taking



Sundry Deposit

Slide No. 16

Category Code

 Identifies the type of deal:  21001 - 21029  21030 - 21039  21040 - 21044  21045 - 21049  21050 - 21074  21075 - 21084  21085 - 21089  21090 - 21094

Deposit Taking Fiduciary Deposit Sundry Deposit (No Interest) Loan Placements Fiduciary Placement A/C Receivable (No Interest)

Slide No. 17

Inputting a MM deal

• MM.MONEY.MARKET for input and maintenance of all products • Multi-level input allowed – basic deal inputs at front office – full settlement instructions at mid office – confirmation matching for customer and broker at back office

Slide No. 18

Interest rate types

• FIXED

1

• FLOATING

3

• NONE

9

Slide No. 19

Settlement details

 





Drawdown account Principal liquidation account Interest liquidation account

DEFAULT PROCESS SEC.ACC.MASTER CUSTOMER.CCY.ACCT (Current Account) AGENCY

NOSTRO.ACCOUNT

Interest benefit account Slide No. 20

Workshop - 1

• Input a deposit of USD 10,000 from your customer for a period of 3 months at a fixed interest of 2% • If your customer does not have a current account in USD, then input suitable account particulars for draw down. • Do not authorise this transaction.

Slide No. 21

Solution – Contract input

Slide No. 22

Solution – System defaulted fields

Slide No. 23

Global Global Product Product and and Sub Sub Product Product Limit Limit Structure Structure

Global Limit FOREX Product Limit FX Spot

Sub Product Limit

FX Fwd

Sub Product Limit

FX Swap

Sub Product Limit

MONEY MKT Product Limit LOANS

Sub Product Limit

DEPOSIT

Sub Product Limit

SUNDRY

Sub Product Limit Slide No. 24

Limits

These are examples of limits set up in Model Bank :  3010 - MM Placement  3020 - Sundry Loans  3030 - MM Rollover Contracts

May be time banded Slide No. 25

Time bands

A US$100m deal for 4 months would use the following facility:

$

150m 100m 50m

3m

6m

12m Slide No. 26

Time bands

However if this part of the limit is not used it may be apportioned to the lower time band 150m 100m 50m

In which case we can deal up to $150m here. 3m

6m

12m

Limits can only be apportioned to a shorter period Slide No. 27

Term

CALL/NOTICE: Maturity date is a number in the Range 0 to 999 0

= Call

1 to 999

= Number of Days Notice.

Slide No. 28

Interest Details

8. INTEREST.RATE.TYPE Fixed rates entered in INTEREST.RATE Floating rate key entered in INTEREST.KEY (see following slides for full details) +/- spread on the entered ‘RATE’ or ‘KEY’

15. INT.DUE.DATE Call/Notice contracts only

16. LIQ.DEFER.INTEREST Call/Notice contracts only L: Liquidate D: Defer Slide No. 29

Further Further Details Details 33. TAX.INTEREST.KEY Deposits/Takings Only 76. DEALER.DESK 17. FX.DEAL.METHOD Broker or Deal Method e.g. RE = Reuters, PH = Phone If Broker used, brokerage can be automatically calculated 80. PORTFOLIO Deal maybe put into a Portfolio. Slide No. 30

Related Interest Files  BASIC.RATE.TEXT  BASIC.INTEREST  INTEREST.BASIS  Defaults from CURRENCY record A - 360/360 B - 366/360 E - 366/365 F - 360/365 S - Special Conditions Accruals use Base B and adjust on last accrual In this case the amount of interest is entered in TOTAL.INTEREST.AMT

Slide No. 31

Related Files

 Parameter files shared with the Loans and Deposits module: • • • • •

LMM.INSTALL.CONDS LMM.CHARGE CONDITIONS LMM.ADVICES LMM.ACTIVITY LMM.ACTION.CODES LMM.TEXT

 FT.CHARGE.TYPE  FT.COMMISSION.TYPE

Slide No. 32

Tables

LMM . INSTALL . CONDS

•Defines data/cycle on which interest should be accrued. Slide No. 33

Tables

LMM.CHARGE.CONDITIONS

FT.COMMISSION.TYPE/ FT.CHARGE.TYPE

•Defines the type of charge and category code. Slide No. 34

LMM.ADVICES

Defines when advices should be printed. What particular transaction

- e.g New contract.(linked from LMM.ACTIVITY)

Which format the category code advices belong to.

Slide No. 35

LMM.ACTIVITY

• Contains a description of the event

- e.g New contract.

• The activity code/key is pre-defined already on GLOBUS. • This activity code/key is used to link up on LMM.ADVICES (Field 2.1 - Activity)

Slide No. 36

LMM.TEXT Category in SUSPLMMCR in ACCOUNT.CLASS

Advice texts printed on confirmations when settlement information is not known. Only two records may be created on the LMM.TEXT (one for payments and other for receipts); the ID of these 2 records are category codes contained in ACCOUNT.CLASS (viz. SUSPLMMCR and SUSPLMMDR) Slide No. 37

Other Related Files LMM.ACCOUNT.BALANCES  History of principal movements  Details of current interest period calculation.

LMM.SCHEDULES.PAST  Details of repayments and interest settled  Details of previous interest period calculations

LMM.SCHEDULES LMM.SCHEDULE.DATES

Slide No. 38

Demonstration

 Early maturing of a Money Market Deal using charges.

Slide No. 39

A deal before early maturity

Same deal after early maturity

Value date is changed as GLOBUS recalculates the interest payable.

Early Maturity with charges

Charges applied

Rollovers

Money Market deals can be rolled over manually or automatically

Slide No. 43

Manual Rollover

Must be a live deal.  NEW.MATUR.DATE - enter new date  ROLLOVER.DATE - old maturity date defaults as date for rollover  ROLLOVER.MARKER - extend 1 - no interest action 2 - liquidate or capitalise

 CAPITALISATION - yes/no  NEW.INTEREST.RATE  NEW.INTEREST.SPREAD - rollovers only

Contracts may be merged at maturity and rolled over Slide No. 44

A Rollover with new rate & principal decrease

Choose your Rollover type

Enter new rate Change Principal Slide No. 45

Auto Rollover

 Can automatically rollover at maturity.  New interest rate can be applied or picked up from PERIODIC.INTEREST table  Will continue to roll indefinitely until manually stopped or FINAL.MATURITY is reached.

Slide No. 46

Auto Rollover every month

Picks up rate from table 01 in PERIODIC.INTEREST Slide No. 47

Principal Increase  Can use in conjunction with Rollover or separately, using Fields 64 and 65.  Can be back or forward-dated  Only one forward date allowed at a time  Cannot be entered for interest basis “S” i.e. Special Conditions.  Details entered on:

MM.MONEY.MARKET MM.RECEIPT.ENTRY MM.PAYMENT.ENTRY

Slide No. 48

Early Maturity

A deal can be early matured in a number of ways:  Amend maturity date in original deal. GLOBUS will then amend all accounting entries and send delivery messages.  Use MM.RECEIPT.ENTRY or MM.PAYMENT.ENTRY.

Slide No. 49

MM.RECEIPT.ENTRY  Used when the Counterparty repays a Loan early: 1. Principal 2. Interest

 Can be Principal or Interest or both.  Value date is either today or before today.

Slide No. 50

MM.PAYMENT.ENTRY Used when Counterparty requests early repayment of a Deposit.  Is for Principal only.  Value date is either today or before today.  Cannot be made if the contract is within the delivery period for maturity date.

MM.PAYMENT.ENTRY contains details of: Any automatic payments made (e.g start of a loan) Repayment of deposits

Slide No. 51

Payment Options

Agency Nostro External Delivery of Funds Direct Second Party Third Party

N.B : Only one free format address is allowed

Slide No. 52

Accounting Entries for MM The following example illustrates the accounting entries passed by GLOBUS for a simple Money Market Deposit: US$ 1 Mio deposited at spot (2 days forward) for 3 days earning US$ 2,500 per day

Slide No. 53

Accounting Entries for MM Deposit MM Contingent A/C NOSTRO A/C 1,000,000 Value Date

1,000,000

1,000,000

1,000,000 7,500 Value Date

End of Day

Maturity

Forward CR RE.CONSOL.SPEC.ENTRY

MM Liability A/C 1,000,000 Maturity

1,000,000 Value Date

Live CR RE.CONSOL.SPEC.ENTRY

STMT.ENTRY (5001)

Interest Payable 7,500 2,500 Maturity 2,500 2,500 Accrual Forward CR RE.CONSOL.SPEC.ENTRY

Interest Expense P&L 2,500 2,500 2,500 Accrual CATEG.ENTRY 50010 Slide No. 54

Accounting

Start Date  Consolidated entry to debit the FORWARDCR Contingent Liability position for principal  Consolidated entry to credit LIVECR liability type  Statement entry to debit NOSTRO Acc

Slide No. 55

Accounting

The daily accrual process will generate:  P&L entry to debit P/L Interest Expense for the daily interest.  Consolidation entry to credit IENP (interest expense not paid) for the daily interest

Slide No. 56

Accounting

At contract maturity  Consolidation entry to debit LIVECR liability for principal  Consolidation entry to debit the IENP (interest expense not paid) for total interest  Statement entry to credit NOSTRO returning principal and interest.

Slide No. 57

Accounting

Interest is usually accrued on an actual daily basis. e.g. A 1 year loan that earns $360,000 is taken into the P/L at £1,000 a day.

No marked to market revaluations are taken into P/L.

Slide No. 58

Delivery

 Draw-down  Liquidation  Payments  Confirmations  Advices

Slide No. 59

Enquiries CAS : Cash Flow/Liquidity Position - daily analysis of net, in & outflows + cumulative balance incl. fwd. int. movements. NOSTRO.POSITION : Current & forward positions by currency. PM.IRE : Interest Rate Exposure - Asset & Liability by maturity with average rate with calculation of the break even rate for each period and cumulative balance.

Slide No. 60

Enquiries

INT : Interest Rate Sensitivity - Shows P&L effect of increases in interest rates in steps of 25 basis points to 100 then 200 & 300 MM.ETD : Money Market Events - A basis for investigating contract progress. PM.DPAL : Discounted Unrealised P/L

Slide No. 61

Position Enquiries  CAS: Cash Flow/Liquidity Position - daily analysis of net, inflows & outflows + cumulative balance including forward interest movements.  NOSTRO.POSITION: Current & forward positions by currency.  NOSTRO.FWD.DETS: Details of Cash flow on each Nostro Account.  MM.ETD: Money Market Events - A basis for investigating contract progress.

Slide No. 62

Profitability Enquiries  PM.IRE: Interest Rate Exposure - Asset & Liability by maturity with average rate with calculation of the break even rate for each period and cumulative balance.

 INT: Interest Rate Sensitivity - Shows P&L effect of increases in interest rates in steps of 25 basis points to 100 then 200 & 300

 PM.DPAL: Discounted Unrealised P/L  PM.WIPAL: ‘What-if’ P&L based on a movement in the yield curve

Slide No. 63

Reports

 RG.MM0001:

Maturity List

 RG.MM0002:

Payments List

 RG.MM0003:

Contracts ‘Unconfirmed’ by broker

 RG.MM0004:

Contracts ‘Unconfirmed’ by Counterparty

 RG.MM0006:

Missing payment instructions.

Slide No. 64

Dependency

Slide No. 65