Course Code: 232

Duration: 1 day

Level: Basic

Fee: $795.00

Instructor: Charlotte Scott

CPE Credits: 7

Prerequisite: No Prerequisite Required

This one-day course introduces participants to the lifecycle of a foreign exchange trade. Participants follow the sequence of functional activity that occurs prior to the execution of a trade through settlement and Nostro account bank reconciliations.

As a result of this class, attendees will be able to:

• Identify the critical functional areas related to the lifecycle of a foreign exchange trade in the global OTC markets for currencies, including spot, forward, option and swaps
• Distinguish types of operational risks that have a potential impact on the firm, foreign exchange traders and their customers
• Analyze the source of costs per trade and its relationship to trading profitability
• Understand "best practices" models for the support of lifecycle functions

Topics For Discussion Include:

Product Description

• FX Market Place Structure and Participants
• Products: Spot, Forwards/Futures, Options, Swaps
  

Pre-Trade Preparation and Documentation

• Customer Account Set-up
• "Know Your Customer" considerations for Patriot Act regulation
• Non-disclosure agreements
• Documentation of any special arrangements (e.g., credit lines, prime broker trades)
• Capture of Standing Settlement Instructions (SSIs)
• Product Set-up of reference and static information

Order Entry and Trade Execution

• Origination of Customer Orders
• Media used to communicate customer orders
• Electronic dealing and trading systems such as Reuters and FXall
• Verbal communication and electronic links
• Trade Entry
• Trade Edit and Validation Criteria
• Trade Amendments
• Credit Monitoring

Confirmation

• Bilateral confirmations: Verbal and Hard-copy
• Trade matching criteria
• Affirmation of trade details
• SWIFT MT 300s and other industry solutions for trade confirmations
• Confirmation for block trades and split allocations
• Exception processing: Unconfirmed or disputed deals

Netting

• Establishment of netting agreements
• Bilateral payment netting
• Multilateral payment netting
• Confirmation of final netted amounts
  

Settlement

• Forecasting of liquidity needs
• Real-time balance projections
• DVP settlement risk and exposure
• Exchange of payments on value date
• Impact of time zone differences
• Communication of payment instructions and expected receipts to banks
• Mapping of SWIFT messages to the FX lifecycle
• Impact of settlement failure

Nostro Reconciliations

• Nostro account reconciliations with banks
• Identification of non-receipt of payments
• Follow-up and error resolution processes

Accounting/Financial Control

• Updates to General Ledger
• Calculation of P&L: Realized and Unrealized
• Position Valuations (Mark-to-Market)

CLS Bank

• Background on why CLS was created and how it evolved
• Herstatt risk
• Currencies supported by CLS
• Role of the Central Banks in CLS 
• CLS membership: Settlement members, users and third parties
• Trade flow through CLS
• Plans for future development