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Corporate FX trade Desk

This desk is the TROPS desk which deals with the trades of companies for
buying & selling of FX. Here the HDFC Bank’s corporate customers buy / sell
FX from the bank. The deals are entered by Tags (the dealers who do deals
for corporate) in Treasury Trader (TT) and then flow to the Back Office system
ITMS thru the forex interface.

From TT to ITMS 3 types FX deals are passed.

MFC deals - Merchant Forward Contract deals for Corporate


MM deals - Money Market deals
FX deals - Inter Bank deals

This desk handles the settlement of the MFC deals. These deals are generally
TOMM, SPOT, FORWARD deals. There are no CASH deals.

The companies generally enter into Forward FX transactions with the bank to
cover their position or to meet a forward dated obligation in business. Thus
these deals are again LC for impost or buyer’s credit etc.

The customer sends the deal details & the documents for the same to TROPS,
Dealers or Doc services. These are sent to the dealer to book the trade. The
dealer inputs the deal in TT & TROPS settles the transactions but the
documents are handed over to respective branch’s documentary services
division.

When the deal is booked in TT & in turn in ITMS, the same needs to be
authorised in ITMS. The merchant module of ITMS is used for the MFC
transactions processing.

The deals in ITMS are mainly of 2 types. New Deal booking & Cancellation of a
deal. The new deals are booked under product code FXCRP & Purchase / sale
Cancellations are booked under PCCAN / SCCAN respectively.

Deal cancellation:

Deal cancellation transaction is a reverse trade deal entered in the system


with reference to the original deal. These types of transactions are required
for corporate in case they want to cancel a forward dated deal. Take a case
where ABC Ltd. is importing goods worth $10000 which is expected to come 2
month later. At that forward date he will need to pay to the exporter $10000.
He books a deal with the bank to buy $10000 at that forward date from HDFC
Bank @ 44.50. Subsequently, the import order gets cancelled. Thus now he
does not need the USD that he is supposed to receive in future, hence he
would want to cancel the deal with HDFC bank. To complete the transaction,
HDFC Bank would book a cancellation contract in the system. Earlier the bank
has sold USD & bought INR, now another contract (the cancellation contract)
will be booked for the same forward date for $10000 where HDFC Bank will
buy USD & sell INR. The rate of this cancellation deal may or may not be
same as the original deal, as a result of which the customer may benefit or
lose some amount. This rate difference is called ‘charge amount’. This
amount on the cancellation trade date is booked under receivables / payables
account & then on maturity date is debited or credited to the customer’s
account. If the customer does not have account with the bank, he may
request to issue a DD in his name.

The original deal & the cancellation deal have the same Deal Number in ITMS,
but the link ID is different.

IF there is an error while inputting the cancelled deal in TT & the same is
passed on to ITMS, the same can not be modified. Thus if the error is in the
rate then ITMS has a wrong charge amount which is actually different than
the charge amount actually posted to the customer account. Due to this,
users are relying on the physical cancellation sheet provided by the dealer &
take the charge amount from this sheet only.

Contract Utilisation:

The settlement of trade on the maturity date is called Contract utilisation. For
this the information of utilisation of contract is passed on from TT & the only
needs to be authorised in ITMS. In TT the dealer modifies the deals to convert
the forward deal maturing on that day to Cash deal. If any deal which is
maturing today is not modified in TT, the remaining such matured contracts
in ITMS get utilised during that day’s EOD process.

Split Deals:

At times an existing deal is split into 2 deals. This is again based on customer
requirement. In such case the existing deal is cancelled & 2 more new deals
are opened. All these deals have the same ITMS deal number. The 2 split
deals can have different maturity, different rates etc.

Deals on Hold:

Deals are entered in TT throughout the day. The same flow to ITMS on real
time basis thru the interface. In this interface there is a functionality to put a
hold to the flow of the deals. This is generally done at a set time every
evening, say 5:30 PM. All the deals flowing from TT to interface will then be
put on hold. Next day morning, a user needs to go & release the hold to start
the deals flow to ITMS. All the deals with the hold status from last evening till
this morning are then passed on to ITMS. A report of such deals is generated
from ITMS & sent to branches for their information.

IF a matured deal is modified in TT during such hold period, the information


flows to interface but on release of hold, the same does not flow to ITMS as
such contracts would already have been utilised in ITMS. These deals are
cancelled in the interface manually.
Such deals need to be manually entered in the report to the branches. The
report sent to branches also needs to include such utilised deals & as the
same are deleted from Interface, ITMS does not have details of the same.

Charges & commission:

The charge is the rate difference when a deal is cancelled. This is posted to
the client account based on the original & cancelled deals rates. Corporate FX
desk prepares an excel sheet containing these charges based on the
cancellation sheets received from dealer. The fields entered by them are as
below:

Posting date, Maturity date, ITMS ref #, Counterparty code, Amount, Account
number (only in case if the entry is to be posted to receivable / payable
account), Branch code, Commission amount, Stamp charges, loss on stamp
charges.

The charge is booked in receivable / payable as the case may be on the deal
date & on maturity of the cancellation contract, the same is posted to
customer account.

Apart from these charge entries, certain commission & stamp charges are
also posted to customer’s account. The deal booking commission is Rs. 250 &
Rs. 20 is charged for stamping. These charges are not charged to all the
clients as certain customers have a waiver based on the relationship with the
bank. If stamp charges are waived the same needs to be booked in the loss
on stamp charges account. WE also charge Rs. 100/- to the customer on
cancellation of a contract based on relationship.

Currently in ITMS, there is not charges master maintained for clients. Thus
the same is entered by users in the excel sheet along with the rate difference
charges. The charges are debited to all clients whose accounts have been
opened with the bank else the same is posted to receivable account. & then
as when the same is charged to client, amount is reversed from receivable.

This excel sheet is then run though an MS Access Utility for creating the
opposite leg of the entries, pick up counterparty account number based on
code entered in the excel sheet and also record the maturity date entries for
the charges. Another work sheet is generated from this utility containing
entries that need to be posted to FCC / FCR. This work sheet is then run
though another FoxPro utility to convert the same into the FCC / FCR formats.
These are then uploaded in respective systems (FCC files are branch wise).

For any deal of FX the following is the flow of documents between the
customer & the bank:

• Customer sends the booking letter & other necessary documents to dealer
/ TROPS / Doc services
• Once the deal is booked in system, a booking confirmation is sent to
customer with a copy. The customer is supposed to sign one copy & send
the acceptance to bank.
• IF a deal is cancelled, the cancellation confirmation also has the same
procedure as the booking confirmation.
• For any charges & commission debited / credited to the customer, a credit
note is sent the customer.
• Every 15 days, i.e. 15th & 30th of each month, outstanding deals report for
each customer is sent.
• On month ends, a report on Charges receivable / Payable is sent to
customer.

For each customer deal a deal set is prepared & stored. This deal set
includes:

• Deal Slip
• Deal confirmation (3rd copy of bank use)
• Deal confirmation (2nd copy duly signed by the customer)

Branches are sent following reports on daily basis:

1. Deals booked / cancelled / modified / utilised on previous day


2. Outstanding deals report

Reports to LSS for PSR Blocking:

When a contract is cancelled, we either need to receive funds or pay funds to


the customer. In case we have to receive the funds from the customer, till the
maturity date we run a risk of him not paying up. This is termed as pre
settlement risk. We maintain limits for each of these customers. These are
maintained by LSS to whom TROPS daily sends the report of all outstanding
receivables for them to maintain the exposure. On settlement date when
client has to be debited, a list is sent to them for removal of limit.

MTM report for marking lien on FD

Many times customers are given limit by marking lien on their FD’s. For such
clients, MTM for all outstanding deals is calculated manually based on the
currently day’s FCY rate & then if the MTM value exceeds the lien value, a
mail is sent to retail ops to mark additional lien,

ODD deals:

These are other department deals (ODD) which are processed by branches
only. The accounting is also done by branches directly in UBS. These deals are
entered in TT & come to ITMS but are auto authorised in system. Only the
recon part is handled by system.

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