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1. 11 SUITED a E 11 Fact villi edi Ee E n 12 4 Implementation and TO SUNS P 13 oid 13 bi d 14 nc M 14 jene 0 e acces a 18 rette the flow m WSS RR 19 File formats PERS E R NER 22 Additional teguirementSisessisisseraesseiosssas oia i eiio e aun CU esada um Fun Un M aet E INN 23 PVE Mn Q 23 SDBI ITO M C Rs LENA 23 Am dh sessir aceite ry eae eae ere 24 Generalization OL POSE BENT PP FE SNR 25 5 2 F t re roi du 25 Tobe provided T Q 25 Suggestions for Mprov MEt Pe oe ee ee er uoa oat oe Sept aaaea sinear een a ti 26 TEEmol OE Vus ementi lasteti pe o acu hsc a a an canna chal ap osos du tun ccoalad cantatas stata s Miicie T 26 MR FST TN eS ioa dae fpa acy oe Sa Rae EDAM E Eo EM LE M OR LEO E E Ber 31 Extended referees ons eiste ose ipod cen ere iH SIDE ti S OEE quad ness odiis sen AINE E THU iguanas b rs e TRAE 31 Attachment A
2. Open Update Transaction transaction updated and Apply saved in database Put on tag CLS Eligible if the criteria is meet if no longer meet remove tag CLS Eligible Verify or Any tag Update Popup message Final transaction Transaction Apply cannot be updated with current tag When amended An amended forward spot trade looks and acts the same way as a regular forward trade does in the workflow with two exceptions It has one additional tag CLS Amend and it populates different fields in the message sent in the export Verify CLS Eligible CLS EXPORT Tag CLS Send is CLS Amend activity is run removed and CLS CLS Send Sent is added The export file sends AMND in field 22A All other scenarios are the same only that the additional tag CLS Amend is added One trade can be amended to CLS an unlimited number of times If the trade is matched an amendment can still be sent to CLS Therefore a trade with status CLS Matched can if all tags are cleared be sent to CLS again However when you amend a matched trade in CLS the trade will go to the unmatched basket For the trade to match again the counterparty need to either amend their side or send in a new trade 50 Swaps Transaction state Transaction Tag Action Outcome Comment Open Apply Put on tag CLS Eligible or CLS Eligible Only Forward Leg if the criteria is
3. The If report sissisodan eaea A Eiaa adindan saaie teas 32 Attachment B File format MPS O4 riscio iiano A cs ec tue ears sues SEST a E b k essens ieas 60 Acknowledgment The process of writing this thesis has involved and engaged several persons First I would like to thank the Royal Institute of Technology KTH and my instructor Anders Sj gren for accepting my thesis and giving me invaluable feedback I would also like to thank Gudrun Jeppesen at Stockholm University SU for her initial feedback in the start of the process Thanks also to If P amp C Insurance Company for giving me the opportunity to write this thesis My mentor at If Anders Eriksson has been a great help and support during this process To be able to work with him and learn from him has been the greatest value of this thesis My coworkers and boss at If has also shown great support and understanding thank you Last but not least I would like to thank my family for their endless support in whatever I do Suggestion for reader I recommend readers to this report who are not familiar with financial terms the application Currency Linked System and the system WallStreet Suite to read the Terminology chapter before anything else in this report 1 Introduction 1 1 Background The Insurance Company is in need of a documentation of how an interface for their software as a service application Currency Linked Systems CLS can be used together with their IT based Tr
4. Cannot be sent forward in the transaction flow with this tag Verify CLS Eligible Only Forward Leg CLS Send Open Transaction is sent to state Open All tags are removed Verify CLS Eligible Only Forward Leg CLS Send Cancel Transaction is sent to state Canceled Verify CLS Eligible Only Forward Leg CLS Send CLS EXPORT activity is run Tag CLS Send is removed and CLS Sent is added The export sends a message for 55 transactionnr 1 with NEWT in field 22 and disregards transactionnr 2 Verify CLS Eligible Verify Popup Message Only Forward Cannot be sent Leg forward in the CLS Sent transaction flow with this status Verify CLS Eligible Open Transaction is See When Only Forward sent to state amended Leg Open further down CLS Sent All tags are removed CLS Amend is put on Verify CLS Eligible Cancel Popup Message Only Forward Cannot be Leg canceled with CLS Sent transaction tag CLS Sent Verify CLS Hligible CLS IMPORT If the import Tag CLS Only Forward activity isrun contains a file Matched Leg Leg with match Group 2 is put on CLS Sent Put on tag manually CLS Matched Leg Group 1 CLS Matched Leg Group 1 AND CLS Matched Leg Group 2 replace tag CLS Sent with CLS Matched and send to Final Final CLS Hligible Cancel Cannot be Only Forward canceled with Leg trans
5. Matched Thereafter the transaction is sent to state final CLS Amend This tag is put on when the transaction is sent back to state Open from state Verify It is used when a transaction that has been sent to CLS is changed The transaction has tag CLS Sent and CLS Eligible or CLS Eligible Only Forward Leg and is thereafter sent to state open to be changed All tags are cleared and CLS Amend is put on at the same time When the transaction is applied CLS Eligible or CLS Eligible Only Forward Leg is put on and when it is sent to state Verify tag CLS Send is put on only if one of the eligible tags is already set When the file is sent to CLS field 22A in the file contains AMND When the file is sent with AMND it is only updated and therefore keeps its old reference number If the trade is already match in CLS you can still send an amendment and the trade in CLS will be put in the unmatched basket until the counterparty sends in a new or amended trade to match Swap specific tags Some special tags are needed for swap instruments That is because they consist of two legs that sometimes need to be separated Swaps are exported as two transactions spot and forward when they are sent in to CLS In the system it remains as one transaction so when the import runs there s a possibility that only one of the transactions in CLS is matched Therefore two new tags are needed A swap can only go to state F
6. Verify Popup message Cannot be sent forward in the transaction flow with this tag Verify CLS Eligible CLS Send Open Transaction is sent to state Open All tags are removed Verify CLS Eligible CLS Send Cancel Transaction is sent to state Canceled 48 Verify CLS Eligible CLS Send CLS EXPORT activity is run Tag CLS Send is removed and CLS Sent is added The export file send NEWT in field 22 Verify CLS Eligible CLS Sent Popup Message Cannot be sent forward in the transaction flow with this status Verify CLS Eligible CLS Sent Open Transaction is sent to state Open All tags are removed CLS Amend is put on See When amended further down Verify CLS Eligible CLS Sent Cancel Popup Message Cannot be canceled with transaction tag CLS Sent Verify CLS Hligible CLS Sent CLS IMPORT activity is run If the import contains a match Transaction is sent to state Final Transaction tag CLS Sent is cleared and CLS Matched is added If the import doesn t contain a match it remains unchanged Final CLS Eligible CLS Matched Cancel Popup Message Cannot be canceled with transaction tag CLS Matched 49 Final CLS Eligible Re Open Popup Message CLS Matched Cannot be moved with transaction tag CLS Matched
7. 2 Extended background Model When approaching this documentation I compared two models the model provided by the Insurance Company and a general way of work called object oriented analysis and design I present these two below as well as a discussion where they are compared The Insurance Company s model The Insurance Company model was provided by my mentor Anders Eriksson He has previously written a report for another system Central trade manager CTM and asked for the same outline for this report for CLS The CTM report was written according to this model Background About CTM Interface between WSS and CTM Workflow today and tomorrow Controlling the flow in WSS Transaction Statuses new version calls statuses tags Transaction Parameters Property Editor Activity Manager Transaction Hook Rule editor Transaction Flow Modes File formats for export and import as an attachment Additional Requirements Suggestions for improvement This model first explains the background purpose of the report It then provides some short basic information about the system and the workflow where it will be used Then it describes the technical set up and the logic required written in a way that only a person with good knowledge about the WSS can understand it The transaction flow part describes how the set up will work and can later be used as a foundation for acceptance testing After that the file formats are described and this is a
8. Generate in Settlement manager to generate today s payments The payments consist of FX trades in state Final If they have same currency value date account and counterparty they are netted This is done early in the morning Pay today If there are no payments due today same procedure is done next day If there are payments those are shown as netted transactions that are sorted as the user wish Print fax 16 A fax is automatically generated by the system and is printed by the user The system has fetched payment instructions to the counterparties from Client editor to be printed on the fax Confirm amounts The user contacts the counterparties and confirms the netted amounts Payment ok If the amounts differ and we are have wrong payment details we investigate If they differ and we are correct we proceed as the payment is OK If we agree with the counterparty from the beginning we proceed to next task Send fax to own bank Back office sends the confirmed fax to their bank for them to make the payment pre advice Check received fax The bank replies with a confirmation on the payment pre advice Fax ok If the fax received from the bank states that the payment pre advice has been made money will later be paid received If the fax states that the payment pre advice hasn t been made Back office needs to contact the bank and investigate before the money is paid received Money paid received Back o
9. 2005 Guide to Financial Markets London The Economist in association with Profile Books LTD Mallo C amp Mesny P 2010 Report on global foreign exhange market activity in 2010 Basel Bank for International Settlements SWIFT Search u d H mtat fran SWIFT https www2 swift com search redirect faces 11 10 2011 SWIFTStandards 1 02 2006 Category 3 Treasury Markets Foreign Exchange Money Markets and Derivatives La Hulpe Belgium Wall Street Systems 2011 WallStreet Systems H mtat fr n Wallstreet Suite http www wallstreetsystems com products wallstreet suite den 2011 November 7 Extended references With the help of a modeling language the If model can be further improved The reference I used above to J Gorman s book can be helpful when learning about Object oriented analysis and design OOA D and also about the modeling language UML Business Process Model and Notation BPMN can be used to describe workflows and make process models I recommend these sources to learn more about BPMN Chinosi Michele T A January 2012 BPMN An introduction to the standard Journal Computer Standards amp Interfaces Volume 34 Issue 1 Object Management Group Inc 2 June 2010 Object Management Group Business Process Model and Notation H mtat fran http www omg org spec BPMN 2 0 examples PDF 12 March 2012 3l AttachmentA The If report Business specification CLS WallStreet Suite v 7 4 Lisa F
10. meet Transaction is saved in database Open Commit Transaction is sent to state Verify Tag CLS Send is put on if tag CLS Eligible or CLS Eligible Only Forward is set Open Cancel Transaction is sent to state Canceled Verify CLS Eligible CLS Send Verify Popup message Cannot be sent forward in the transaction flow with this tag Verify CLS Eligible CLS Send Open Transaction is sent to state Open All tags are removed Verify CLS Eligible CLS Send Cancel Transaction is sent to state Canceled Verify CLS Eligible CLS Send CLS EXPORT activity is run Tag CLS Send is removed and CLS Sent is added The export sends two messages 51 One message with transactionnr 1 and one with transactionnr 2 both has NEWT in field 122 Verify CLS Eligible CLS Sent Verify Popup Message Cannot be sent forward in the transaction flow with this status Verify CLS Eligible CLS Sent Open Transaction is sent to state Open All tags are removed CLS Amend is put on See When amended further down Verify CLS Eligible CLS Sent Cancel Popup Message Cannot be canceled with transaction tag CLS Sent Verify CLS Eligible CLS Sent CLS IMPORT activity is run If the import contains a file with match for transactionnr 1 P
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12. OPTION This property should enable asset class specific exports Transaction number optional input The export activity should have a field where we can enter transaction number in case we want to run the export for only one transaction Export directory The export directory should state the path to the directory where PayPlus picks up the file to match it in CLS Import activity properties CLS BIC Value Client BIC When the import is done and the file is in the import directory is should be possible to choose only one Client BIC to import all messages in the file for that specific BIC This is so different portfolio owners can import only their trades and exclude other portfolio owners Import directory field 43 Transaction tags Transaction Tags are set up using script They should only be applied to a transaction when certain conditions are met an action is taken or when they reach a certain state Most of the tags will be visible to back office in their daily work CLS Eligible A transaction gets this tag when the trader press Apply Some conditions needs to be fulfilled in order for the transaction to get this tag If it does not get this tag or the CLS Eligible Only Forward Leg tag the transaction cannot go to CLS Transaction get this tag if Both currencies has property CLS CURRENCY YES Both currencies are not CLS EXCEPTION CURRENCIES on portfolio owner or counterparty Client has property CLS NODE Portf
13. av IT baserat Finanssystem Pa If Skadef rs kring med mentor Anders Eriksson Pa Kungliga Tekniska H gskolan med handledare Anders Sj gren Kandidatuppsats Aff rssystemprogrammet 15hp Examensarbete 1 teknik och management ar 2012 for Kungliga Tekniska H gskolan KTH Version 1 6 2012 03 12 Lisa Fors Table of content SPS GU MEN eee 1 ss eA TERY AT ETN INNER ROTE NOTTE OE 1 PROMO diui E 5 ibis reuci dm 5 D Entradas recs intus uices oa Msi bonia d eic ded eub DR E OREUE 6 1 BACK STOUT L NOR E 6 1 2 Task and OU soir T SN ESS N EN nee 6 UO 010 ST i OT Tr E 6 mor T 6 Scop and BIBT T8 a fs TE o E mme 7 egi cercle enr 7 2 Extended background isois an ai see PS 9 DNS e M ERE 9 The Insurance Company s qUOUEL ose test eod P Ul oie tm tena nodo selen tners skenor ber sades 9 Object oriented analysis and deSEIL sseeserserssrrssrserrsrersrssrrsrrssrrsrrsrrssr bes qb p Oodd ivan ee e DE etum Rn pue aue 10 DISCUSSION 25500 4550 10 Previous WOTK MM
14. be configured if the interface is built It also explains how the set ups work and the logic behind it Property editor In this chapter the properties needed for different objects are stated The properties are set up in an editor called Property editor and later added to the different objects Transaction tags In this chapter the set up of transaction tags in WSS is explained The logic and conditions for the tags are also explained Activity Manager This chapter explains how the application Activity Manager in WSS should be set up Transaction Flow This more in depth chapter explains exactly what happens to a transaction when it moves in the transaction flow in WSS It explains in what transaction state a transaction is and what the outcomes of actions would be from that state This chapter justifies the set up Suggestions for improvement In this chapter suggestions for improvements are stated They are ideas that might have come up during the work or things that were excluded because of limitations To be provided This chapter shortly explains what the insurance Company later will provide to WallStreet Systems This has been excluded from the original specification because of lack of time and priorities the build the most critical parts first Attachment 1 This picture explains how the file should look like in order for CLS to be able to read it It also explains from where the file should get the data in its fields
15. goal and have been declared by the Insurance Company Scope and limitations The specification should be written according to model that the Insurance Company s used in earlier reports The report should mainly explain how WSS should be set up and integrate with CLS to give the best end user experience It should be written in a way that it can apply to any company using WSS v 7 4 together with CLS Therefore no company specific info should be shown in the report The report should be limited to contain the set up that the Insurance Company had in earlier version of WSS that is only for fx spot fx forward fx swap trades see Termonlogy chapter That means that nothing should be specified for fx options and non deliverable forwards NDFs at this stage This info is not company specific but general as it only concerns what instruments that are most widely traded in CLS 1 3 Expected outcome The following headings explain what the outline of the If report should contain Background Explains shortly why the specification is needed and what purpose it serves About CLS This chapter explains more about CLS and the use of it when you also use WSS Workflow The process models show how the workflow at the insurance Company was done before and after the use of CLS They show both the confirmation and the settlement workflow to distinguish the different processes Controlling the flow in WSS This chapter explains how WSS should
16. need sides b bee dai et ob Ges E AEE EE a Eaa N a bas Cien e bass 59 To be provid d E 59 33 Document History Version Author Date Description 1 0 Lisa Fors 20110816 First draft 1 1 Lisa Fors 20110819 Update with feedback from Anders Eriksson 2 0 Lisa Fors 20110824 Second draft 2 1 Lisa Fors 20110829 Second draft after feedback from Anders Eriksson 3 0 Lisa Fors 20110830 Sent to wallstreet 3 1 Lisa Fors 20110905 Workflow added 34 Background If and Sampo are upgrading their investment operations system Wall Street Suite v 6 5 to version 7 4 The upgrade will be conducted as a new implementation of the system CLS which is a Currency Linked System used for confirming and settle trades made in the FX market has been working as an application as a service together with version 6 5 With the new implementation If and Sampo will have to develop new functionality in v 7 4 in order to make it work with CLS New enhancements will be added as well as improvements to make the CLS solution look more like the other application as a service that they use CTM Omgeo About CLS Founded in 1997 CLS Group was first to create a global settlement system to eliminate settlement risk in the foreign exchange market CLS settlement is now the market standard for FX settlements and continues to work for minimizing the risks associated with FX trading CLS
17. No it shouldn t be possible to trade that asset with or for this client via CLS CLS EXCEPTION CURRENCIES Value All CLS currencies should be possible values Some clients don t trade with certain currencies even though they are CLS eligible If a Client has a value in this property it shouldn t be possible to do any trades via CLS with the combination of this client and currency CLS BIC Value Client BIC The value of the property decides what BIC that is used in the export file and in the file header Depending on if the client is a portfolio owner or counterparty the use of the BIC is different If the client is a portfolio owner The BIC is used in field 82A Party A M BIC of the Customer in the export file The BIC code is used on position 4 12 on the first part of the file header an example with If P amp C Insurances BIC code IFPCSESIXXX 1 FOLIFPCSES1XXXX1001100001 If the client is a counterparty The BIC is used in field 87A Party B M Counterparty BIC in the export file If the counterparty also lacks CLS SETTLEMENT MEMBER BIC Client BIC is is used in field 53A This means that the counterparty is a settlement member CLS SETTLEMENT MEMBER BIC Value BIC code of CLS member 40 The CLS SETTLEMENT MEMBER BIC property is added to third parties to help populate different fields in the messages sent in the export file The property should be added to Portfolio owners that are a third party to a set
18. Settlement is offered by CLS Bank owned by the foreign exchange community and operates the largest multi currency cash settlement system With CLS settlement you can eliminate the settlement risk settle seventeen currencies use payment versus payment to settle matched trades and also settle several different instruments like fx spot fx forward fx swap fx option and Non deliverable forwards NDF 35 Workflow Confirmations workflow pre CLS Process model BPMN of the Confirmations workflow pre CLS Fax Fax CP CP Frontoffice p Backoffice p Wait for fax 0 24h I I Input trade V Compare Diss Send trade O ok to final trade to fax Counterparty Correct Investigate trade Input trade The trader inputs the trade in deal capture WSS v 6 4 Compare trade to fax BackOffice waits for 0 5 24h for a fax from the counterparty when the fax arrives they compare it to the deal in the system They mark the fax with checks at all important fields Trade ok If all important fields correspond BO signs the fax from the CP and fax it back to them They then press the Final button in back office verification If the fields don t correspond further investigation is needed Investigate BO checks with the trader if he made a mistake otherwise the trader contacts the CP Correction If our trader input the trade wrong the trade is sent back to him in the system If the CP was wrong they correct it and send a n
19. Verksamhetsanpassning av IT baserat finanssystem Business Configuration of T based Treasury System Wo Ed VETENSKAP of OCH KONST amp toca Lisa Fors KTH Information and Communication Technology Examensarbete inom teknik och management Kandidat Degree Project in Engineering and Management Stockholm Sweden 2012 Kurs IK120X 15hp TRITA ICT EX 2012 51 Abstract If P amp C Insurance Company faces a challenge when their treasury system needs a new interface to a software as a service application They need a suggestion for configuration for how the system and the application can work together The work presented in this report is a suggestion for how you can make business configuration of an IT based Treasury System in general The exact configuration for the case received from If is presented as a separate report found in Appendix A and is called the If report The If report presents the suggested technical set up of the configuration It is not company specific but system and application specific The work made in that report will be a standard in future version of the treasury system The work made in this report is presented to the Royal Institute of Technology and can work as an example of how to approach a business configuration that needs to be done in an IT based Treasury System Keywords WallStreet Suite WSS Currency Linked Systems CLS Back office Properties Sammanfattning If Skadef rs kring star i
20. action tag CLS Matched CLS Matched Verify CLS Eligible Cancel Cannot be Only Forward Leg CLS Sent CLS Matched canceled with current tags 56 Leg Group 1 OR CLS Matched Leg Group 2 Verify CLS Eligible Open Transaction is See When Only Forward moved to state amended Leg open All tags further down CLS Sent are removed except CLS Matched CLS Matched Leg Group 1 Leg Group 1 OR OR CLS Matched CLS Matched Leg Group 2 Leg Group 2 Tag CLS Amend is put on Final CLS Eligible Re Open Popup Message Only Forward Cannot be Leg moved with CLS Matched transaction tag CLS Matched Open Update Transaction transaction updated and Apply saved in database Put on tag CLS Eligible Only Forward Leg if the criteria is meet if no longer meet remove tag CLS Eligible Only Forward Leg Verify or Any tag Update Popup message Final transaction Transaction Apply cannot be updated with current tag When amended An amended swap trade acts different than a new swap does It has one additional tag CLS Amend and it populates different fields in the message sent in the export file For all states and actions that are not explained below an amended swap acts like a regular swap Verify CLS Eligible CLS EXPORT Tag CLS Send is Only Forward activity is run removed and CLS Leg Sent is added CLS Send CLS Amend The export
21. ated in the systems as CLS Sent Possible changes of objects should also be specified and connected to other objects By doing that you might save time by having a common changed object connected to several other objects instead doing one for each one of them A class diagram should be written to identify different classes which are connected to each other and contain info To explain more about the technical structure and architecture component and deployment diagrams can be written They explain more in detail what the structure look like through pictures and how they work through info in the pictures Gorman 2005 Discussion The OOA D is a well known and used model It is used in several courses at KTH where diagrams such as class diagrams and use cases are often written This is a very structured way to work and makes it easy for other people without previous knowledge to understand and follow the work The programmers get s an overview of what is needed but they also need to do some thinking of their own to be able to build the system The Insurance Company s model is more technical and assumes the reader have good knowledge about the system and workflows It might be easier for a programmer to implement but harder for an end user to understand However the Insurance Company has already written a specification with their own 10 model and wants to continue to do so They are familiar with the model and also with the systems I
22. ce that one of these conditions is the property CLS ASSET CLASS shown above under Properties The full configuration of the tags and the explanation of all conditions can be found in Appendix A under heading Transaction tags CLS Eligible A transaction gets this tag when the trader press Apply Some conditions needs to be fulfilled in order for the transaction to get this tag If it does not get this tag or the CLS Eligible Only Forward Leg tag the transaction cannot go to CLS Transaction get this tag if Both currencies has property CLS CURRENCY YES Both currencies are not CLS EXCEPTION CURRENCIES on portfolio owner or counterparty Client has property CLS NODE Portfolio owner Counterparty and instrument of the trade all have same value in CLS ASSET CLASS Counterparty has property CLS BIC Portfolio owner has property CLS BIC Leg group 2 Value date Opening date OR no leg group 2 exist Activity Manager Two new activities are needed in order to export import transactions from to WSS The transaction is sent in a certain file format which gets its information from the transaction and different object with certain properties It is also imported in a certain format which WSS can accept Both the export and the import activity can put on and clear tags to show what stage the transaction is in or trigger an action See the full description of activities in Appendix A under heading Activity Manager Transaction F
23. e the criteria have been created In this area it is not as important to be knowledgeable about the system it might be better to have help from an independent person who is able to provide new ways of thinking and then confirm them with a system expert Creation of transaction flow how the criteria works in reality for all possible scenarios This is the area when the static data and criteria are tested It is important that nothing in the two previous areas is finalized since it most likely will be further changes made The transaction flow confirms if the criteria work and how the end user will experience the configuration It s helpful here to have several persons looking over the flow since it can be quite large and complicated 24 All configurations have been made in a non company specific way which makes it possible for other companies to use Future configuration and limitations has been presented in Appendix A Suggestions for improvement and can work as a basis for a new report or to further build on the If report All goals for the report have been achieved and when the configuration later is implemented the purpose of the report will be fulfilled Generalization of result The mentor at the Insurance Company approved the work as a working interface The specification has been handed over to the system vendor for them to build and it will become a standard interface in future versions of WSS 5 2 Future work To be pro
24. e written in the improvement end of the specification when I had good understating of both WSS and CLS This section also contains some limitations as future work 4 Implementation and results The results of the report contains of the suggested technical configuration in WSS It is presented in the Insurance Company s model which you can follow by the name of the headings The background has been excluded since it is explained in this report as well as found under heading Background in Appendix A About CLS CLS stands for currency linked system and is used for confirmation and settlement of foreign exchange trades It offers a way to eliminate the settlement risk through payment versus payment payments are made to involved parties at the same time CLS is the market standard for FX settlements and is used by 13 441 banks corporates and funds CLS Group 2011 Today 17 currencies are eligible for use in CLS It performed as a file transfer between the customers treasury systems and CLS When both counterparties has sent in their trades in files to CLS or input them directly in the system CLS checks the trade details and if correct replies with a file to the customers 13 Workflow The work flow of the Insurance Company today is presented here to show the difference in the business processes if the proposed configuration is accepted and implemented The end of the confirmations flow is the start of the settle
25. easury system WallStreet Suite v7 4 WSS CLS is a confirmation and settlement system for trades made in the foreign exchange market It automates the process of confirming and executing trades made by brokers in a secure way For that CLS is widely appreciated and used by banks and financial institutions all over the world In order for the Insurance Company to be able to use it they need an interface to their treasury system WSS The report written for If should not be confused with this report written for KTH The original report that was handed over to If is in this report found as Appendix A it will be referred to as the If report The If report will if successful be handed over to WallStreet Systems the provider of WSS for them to develop The assignment is to write a documentation which should serve as a suggestion for how the interface can be configured 1 2 Task and objectives Purpose The purpose is to automate the manual settlement and confirmations process of foreign exchange trades FX trades for back office Goal The main goal of this documentation is to present a suggestion for a business configuration that later can be implemented in the treasury system This requires following A method that is familiar to the Insurance company Aconfiguration that applies to any company using WSS A naming convention that is similar to other interfaces used in the treasury system These goals will help fulfill the main
26. edge when the specification was almost done and I wouldn t have been able to create as good process models in the beginning of the process The report was written according to If s model which I think worked well but can be improved so it can be applied to other business configuration reports The configuration was done in a way that can be applied to any company using WSS and all names used in the configuration are similar to already existing names This will make the work easier for Back office which is shown in the Tomorrow process model This means that the purpose of the report to automate Back office work is fulfilled An initial weakness of the report was the lack of feedback from several sources My mentor was the only person providing feedback during the work with the report However he is both knowledgeable enough and has the right contacts to quickly discuss uncertainties The finished report was approved by If and later also approved by the system vendor to be a standard interface This shows that the finished report and its configuration is both valid and will work in reality 5 Discussion The analysis of the report shows two main weaknesses even though the finished report was successful The lack of knowledge about CLS can make it hard for If when the configuration later is done Only one person is knowledgeable enough to test the interface The report is also written in such way that it can be hard for an end user that is not
27. el I collected facts by Background The background was written through information told by my mentor About CLS The facts presented here are from the CLS Group s website and from own user experience 12 Workflow today and tomorrow The workflows were written from own experience of back office work and from information given by my mentor Controlling the flow in WSS The controlling the flow section is the most Transaction Statuses new version complex Here I used basic understanding from calls statuses tags WSS together with research about the new version Transaction Parameters through user manuals and my mentor The name Property Editor of the tags parameters and properties were taken Activity Manager from the specification for CTM as the names Transaction Flow should be similar Some parts were created Modes through discussions and brainstorming with my mentor Most ideas to the set up that we presented were very changed several times during the work as I gained greater understanding of the logic with time File formats for export and import The file formats were created from material about the formats from If and from internet The message formats are standardized and are used by banks and institutions all over the world therefore a lot of information about the fields in the files and their meaning can be found online Additional Requirements Suggestions for The additional requirements wer
28. erences like other currencies The total foreign exchange market consists of four smaller markets the spot market the futures market the options market and the derivatives market The spot market Exchange of two currencies normally two days spot days after the agreement has been made The futures market The exchange of currencies is set to a future date to a specific rate It is used to eliminate risk when you expect a payment in another currency than your own for example your Swedish firm expects 10M USD in two months If you entered a futures contract where you know you can sell your USD against SEK to a fixed rate you have secured yourself against the risk that the SEK lose value against the USD The options market An option is a right to buy sell a currency or a currency future at a specific price in a specific period You can buy and sell an option and therefore also the right The derivatives market In this market forward contract foreign exchange swaps forward rate agreements and barrier options are traded Levinson 2005 FX FX is short for Foreign Exchange Trades made in the foreign exchange market are often referred to as FX trades Fx forward An FX instrument that involves two currencies which at an agreed rate are exchanged at an agreed date in the future This also involves NDF non deliverable forwards For NDF s you net the cash flows of the trade so that only one party of the trade pays Mallo amp Me
29. ess of the confirmed trade Third party Settlement member CLS Settlement member Third party 2 Deal 4 Deal Deal info gt Export file Match 4 Export file Deal info CLS Reply Import file Match Import file gt CLS Reply Payment gt PP Payment Figure 4 Settlement flow post CLS In this scenario two third parties makes a deal with each other The deal info is sent to the settlement member in an agreed format The settlement member forwards the deal info in an export file to CLS If the deal info is same from both parties the trades matched The matched info is sent back to the settlement member and then to the third party The payment is later made payment versus payment to the settlement member Controlling the flow in WSS To make the business configuration possible several configurations and features needs to be implemented These are described briefly in this report and more in depth in Appendix A 19 Properties Properties are used in the system on different objects as Clients Currencies and Instruments etc They are a part of the static data and are therefore not used very often after the initial set up The properties decide if the objects should be a part of the interface or not These properties are not in the system today and therefore needs to be created by the developing company When they are de
30. ew fax Correct trade Our trader corrects whatever was wrong with the trade The process then starts all over as the fax is already received the waiting time is Oh 36 Settlement workflow pre CLS Process model BPMN of the Settlement workflow pre CLS Backoffice Automatic action Payment instructions Wait 24h Contact Investigate bank Generate Money payments paid received Generate payments mode process A person in BackOffice press Generate in Settlement manager to generate today s payments The payments consist of FX trades in state Final If they have same currency value date account and counterparty they are netted This is done early in the morning Pay today If there are no payments due today same procedure is done next day If there are payments those are shown as netted transactions that are sorted as the user wish Print fax A fax is automatically generated by the system and is printed by the user The system has fetched payment instructions to the counterparties from Client editor to be printed on the fax Confirm amounts The user contacts the counterparties and confirms the netted amounts Payment ok 37 If the amounts differ and we are have wrong payment details we investigate If they differ and we are correct we proceed as the payment is OK If we agree with the counterparty from the beginning we proceed to next task Send fax to own bank BackOffice sends the conf
31. familiar with WSS to understand If these two factors didn t exist the report would be more valid and also more valuable to If in a learning and developing perspective The prerequisites for the report unfortunately made this impossible With more time and resources I believe 23 future business configuration reports can be produced in a more efficient way This report delivered all the goals served its purpose and most importantly made the client happy which in the end is what matters the most 5 1 Conclusions The proposed configuration was done in five main areas Properties Transaction tags Activity Manager Transaction Flow File formats These areas are all vital for the configuration to work The five main areas can be simplified as Configuration of static data properties transaction tags activity manager data file format The static data is the backbone of the configuration This needs to be configured correctly in order to be able to create criteria It is a time consuming area which often changes during the progress of the configuration In this area is it necessary to have a good knowledge or have help of someone with good knowledge about the system Creation of criteria how the static data should be used and when When creating the criteria for the static data it is important to be willing to change both the static data to better fit the criteria and the reversed Some parts of the static data might not work onc
32. ffice checks the account to see that the money has been paid received 17 Tomorrow If the suggested configuration in the If report is made is implemented in WSS the confirmations and settlement flow will change to a more automated workflow Confirmations flow Export trade file Import trade file Front office El Back office fr OK Counterparty Investigate Figure 3 Confirmations flow post CLS Input trade The trader inputs the trade in deal capture WSS v 7 4 Trade ok The export activity is run automatically and transports the trade file to CLS It later automatically imports trade files Back office then checks in back office verification if there are trades there that haven t been exported imported If the trades are OK they have already automatically been sent to state Final If they are not OK further investigation is needed Investigate BO checks with the trader 1f he made a mistake otherwise the trader contacts the CP 18 Correction If our trader input the trade wrong the trade is sent back to him in the system If the CP was wrong they correct it and send it directly to CLS Correct trade Our trader corrects whatever was wrong with the trade The trade is automatically sent to CLS through the export activity Settlement flow The settlement flow is the continuation of the previous model where the trade has been confirmed The settlement flow explains the payment proc
33. he trade Transaction flow The transaction flow describes the flow of a trade after it has been input in a treasury system The transaction is input by a trader and is usually confirmed by a Back office before the actual money is exchanged What system you use and how the confirmation is executed affect the transaction flow There can be hold ups like disagreement of agreed rate of the trade etc which delays the flow Transaction tags Tags are used in WSS to recognize specific characteristics of a transaction For the transaction to get a tag certain conditions or actions must be taken For example for a transaction to get tag CLS Eligible means that it can be confirmed and settled through CLS certain properties must be present at the entities 20 involved in the trade portfolio owner currency counterparty and instrument If those properties are present and coincide with each other the tag is set on the transaction Other tags like CLS Send which means that it is ready to be sent to CLS is set only if tag CLS Eligible is already set Tag CLS Sent means that the transaction has been sent to CLS is only set if the export activity has run successfully Transaction state A trade in WSS can be in four states When it s made by a trade the transaction is in state Open As soon as the trade commits to the trade by pressing the Commit button the state changes to Verify Back office then verifies the trade against the c
34. hed Leg Group 1 If transaction number 2 imports a match put on tag CLS Matched Leg Group 2 State change CLS Matched Leg Group 1 AND CLS Matched Leg Group 2 Transaction is sent to state Final CLS Matched Leg Group 1 OR CLS Matched Leg Group 2 Transaction stays in state Verify For same day swaps The import activity runs and the transaction number is used to link the file If transaction number 1 imports a match put on tag CLS Matched Leg Group 1 The other tag CLS Matched Leg Group 2 is put on manually by BackOffice when the manual same day payment has been made State change CLS Matched Leg Group 1 AND CLS Matched Leg Group 2 Transaction is sent to state Final CLS Matched Leg Group 1 OR CLS Matched Leg Group 2 Transaction stays in state Verify 47 Transaction flow This table explains how the transaction flow in the system depending on what action the user takes and what tag the transaction have Forward and Spot Transaction state Transaction Tag Action Outcome Comment Open Apply Put on tag CLS Eligible or CLS Eligible Only Forward Leg if the criteria are meet Transaction is saved in database Open Commit Transaction is sent to state Verify Tag CLS Send is put on if the tag CLS Eligible or CLS Eligible Only Forward Leg is set Open Cancel Transaction is sent to state Canceled Verify CLS Eligible CLS Send
35. inal when both these tags are put on CLS Matched Leg Group 1 This tag is used when only leg group 1 forward leg is matched in CLS When the import contains a match for leg group 1 the tag is put on CLS Matched Leg Group 2 This tag is used when only leg group 2 spot leg is matched in CLS When the import contains a match for leg group 2 the tag is put on CLS Matched Leg Group 1 CLS Matched Leg Group 2 Replace matched tags with CLS Matched and send transaction to state Final 45 Activity Manager An activity transports the transactions in files to CLS Another activity imports transactions that are confirmed from CLS One new activity is needed in order to select transactions that should be exported if transaction tag CLS Send is set The transactions will be sent in different messages depending on the instrument properties owner properties and transaction tags The activity can run with different properties depending on what we want to export You can export transactions from a portfolio only a certain file format or just a single transaction The CLS EXPORT activity should create a file in the MT304 format When the activity is done a mail notification designed like the MT304 format should be sent containing the file data When a transaction has been included in a file the transaction tag CLS Sent should replace the tag CLS Send For swaps If the transaction is made with an instrument with class swap it shou
36. irmed fax to their bank for them to make the payment pre advice Check received fax The bank replies with a confirmation on the payment pre advice Fax ok If the fax received from the bank states that the payment pre advice has been made money will later be paid received If the fax states that the payment pre advice hasn t been made BackOffice needs to contact the bank and investigate before the money is paid received Money paid received BackOffice checks the account to see that the money has been paid received Confirmations workflow post CLS Process model BPMN of the workflow post CLS Export trade file Import trade file Frontoffice Backoffice Input trade Trade ok Counterparty Correct We Investigate trade Input trade The trader inputs the trade in deal capture WSS v 7 4 Trade ok The export activity is run automatically and transports the trade file to CLS It later automatically imports trade files BO then checks in back office verification if there are trades 38 there that haven t been exported imported If the trades are OK they have already automatically been sent to state Final If they are not OK further investigation is needed Investigate BO checks with the trader if he made a mistake otherwise the trader contacts the CP Correction If our trader input the trade wrong the trade is sent back to him in the system If the CP was wrong they correct it and send it direc
37. ks at all important fields Trade ok If all important fields correspond BO signs the fax from the CP and faxes it back to them They then press the Final button in back office verification If the fields don t correspond further investigation is needed Investigate BO checks with the trader if he made a mistake otherwise the trader contacts the CP Correction If our trader input the trade wrong the trade is sent back to him in the system If the CP was wrong they correct it and send a new fax Correct trade Our trader corrects whatever was wrong with the trade The process then starts all over as the fax is already received the waiting time is Oh Send trade to final The trade is in the system sent to state Final which is the final state for a transaction This means that it has been fully confirmed and is ready to be paid Now the Settlement flow follows 15 Settlement flow The settlement flow explains the confirmed trades flow until it is paid It is the continuation of the previous model Without CLS this is usually done through manual payments to the counterparty With the use of CLS the payment is done automatically Before CLS settlement was done according to this process model Automatic action Payment instructions Wait 24h Contact bank Investigate Generate payments paid received Figure 2 Settlement flow pre CLS Generate payments mode process A person in Back office press
38. ld be divided into two messages when sent to CLS Spot leg Leg Group 2 Forward leg Leg Group 1 The export activity divides the swap into two messages and adds 2 and 1 to the transaction number in field 20 If the transaction has tag CLS Eligible divided the transaction Transactionnr 1 is exported to CLS Transactionnr 2 is exported to CLS For same day swaps If a transaction with tag CLS Eligible Only Forward Leg and CLS Send is exported only the forward leg should actually go to CLS Just like a regular swap it divides into two files Transactionnr 1 should be exported to CLS Transactionnr 2 is not exported One new activity is needed in order to import transactions from CLS The CLS IMPORT activity should check if there are any files to import It should only import transaction with status Matched status in CLS is called MESSAGE The activity should send an email notification containing the trade data from CLS The transaction number should be used as a link to match the imported transactions with the transactions in state Verify If Matched The transaction gets tag CLS Matched and transaction state is set to Final If not matched The transaction remains unchanged For swaps Depending on what the import statuses for the files are the transaction gets different tags 46 The transaction number in field 20 is used to link the files to the transaction If transaction number 1 imports a match put on tag CLS Matc
39. low State flow The transaction flow is a validation of the suggested configuration It shows different types of transactions in different stages and with different tags set It goes through all possible scenarios in WSS and explains what the result should be when actions are taken This not only works as a validation but also as a help for the developer and as a user acceptance test for the finished product A simple model was created and shown below is a part of it the rest can be found in Appendix A under Transaction Flow 21 In the example we follow a trade that is exposed to actions A trade has been made and is in state Open The states in the system are Open Verify Final and Canceled More information about states can be found in chapter Terminology A trader then presses Commit which triggers a script that put on one tag Another option is if the trader press Cancel which sends the transaction to state Canceled When the trader has committed the trade it goes to state Verify Here is an example of a tag put on in the flow CLS Send If Back office then presses the Verify button the outcome will be a popup message This model covers not only successful user actions but also scenarios when you press the wrong button when certain tags are put on This helps the programmer understand the logic of the interface Transaction state Transaction Tag Action Ou
40. lso done on a quite high level where previous experience knowledge about WSS is needed At the end the additional requirements are presented this is to be done later or suggestions for improvement to the company which will build the specification All headings under Controlling the flow in WSS are not mandatory as some of them don t apply to an interface with CLS these are marked with cursive writing Object oriented analysis and design Work with Object oriented analysis and design OOA D can be done in many ways However most models can be drawn down to e Identifying usage scenarios for the system e Describe interactions between user and system e Assigning responsibility for the outcomes to parts of the system To be able to identify scenarios and users for the system interviews can be conducted Then different kind of diagrams can be helpful in sorting out the information To mention a few use cases sequence diagrams class diagrams and filmstrips The interaction between the user and the scenarios can be identified as interaction This will be done for different business processes In the end we need to find the outcomes of these interactions For all interactions an outcome should be specified For example a user can be identified as Back office which should be able to run scenario an activity which exports a file interaction The outcome of this interaction should be that the file is successfully sent to CLS and upd
41. ment flow Today Confirmations flow The confirmations flow explains the trades flow from it is input until it is confirmed in WSS It is done to make sure the trader has input correct details in the system The confirmation is done between yourself and the counterparty you traded with The trade details are compared and back office makes sure everything coincide In case something differs back office first talk to their trader and asks if he input something wrong if not the counterparty is contacted Without the use of CLS this is done mainly by fax with CLS the comparing is done automatically Before CLS was used the confirmations flow was done according to this process model Fax Fax Front office Back office ms for UMP 0 UN NM trade ic um aes Rc Send trade trade to fax to final Correct Investigate trade Figure 1 Confirmations flow pre CLS Back office The back office at the Insurance Company makes sure that the trades front office does are confirmed and settled They also do daily and monthly reconciliations and payments They use CLS as an application as a service where they see the trades in a web interface CLS also integrates with WSS through file transfers 14 Input trade The trader inputs the trade in deal capture WSS v 6 5 Compare trade to fax Back office waits for 0 5 24h for a fax from the counterparty when the fax arrives they compare it to the deal in the system They mark the fax with chec
42. n actions When a trade is made and input in the system it is sent to CLS when an automatic activity is ran The activity looks for trades that should settle in CLS picks them up and export them in a file to CLS It is also through an activity that the import file is received Amend To amend a trade in CLS is to overwrite the trade If you send in a trade which later turns out to be wrong you can send another file export and overwrite the mistake A trade can be amended an infinite number of times BIC BIC Bank identifier code A code that identifies a financial institution and is used for automated processing SWIFT Search Counterparty The party you enter a trade with If you buy USD against EUR with Bank A Bank A is your counterparty in this trade Currency Linked System CLS 26 CLS was launched in 2002 by CLS Group founded 1997 It is a settlement system which has become the market standard for FX settlement The brokers send in their trade and the trades are checked against each other It they match the money will be sent received on a payment versus payment basis That means that they money will only be sent received if the other party in the deal send receives their money This minimizes the settlement risk CLS Group 2011 Foreign exchange market The total foreign exchange market is the largest market in the world It exists because of the value that is created when currencies are compared to external ref
43. n by my mentor That report was for another interface for another system but helped in what approach I should take in the beginning My mentor wrote it without using a specific model or method but only his experience from working several years within the WSS community He wanted the If report to be written in the same way in order to make it easier to understand I think my mentor s report was written in a structured and logical way therefore I see no reason for using other methods or models The report was done by first reading and going over literature relating to CLS or WSS then designing the report then discussion of the result and in the end writing the conclusions 11 The approach taken writing the report was first extensive reading and research Much of this was provided by the Insurance Company but to stay current a lot of reading was done online Websites I used the most was CLS own website cls group com When the facts were collected I analyzed it and asked questions if there were anything that was unclear One goal was to have similar naming convention in my specification as in my mentors That would make it easier for the end user and create a more transparent interface As questions arisen I discussed them with my mentor I then created a layout of the report This was done with headlines and key words The key words were helpful as they made me realize the extent of the report and where I needed to research more I first star
44. nf r en utmaning nar deras f rvaltningssystem beh ver ett nytt interface till en service applikation De beh ver ett f rslag till hur deras system kan konfigureras f r att fungera ihop med applikationen Arbetet som presenteras i den h r rapporten r ett f rslag till hur en konfigurering av ett IT baserat f rvaltningssystem kan g ras pa ett generellt s tt Den exakta konfigureringen f r det har fallet fran If presenteras i en separat rapport som terfinns i Appendix A kallad If report If rapporten presenterar ett f rslag pa hur den tekniska konfigureringen kan g ras Den r inte specifik for If men d remot for det system och den applikation som anv nts Arbetet som har gjorts f r If rapporten kommer att bli standard i framtida versioner av f rvaltningssystemet Arbetet som har gjort f r denna rapport presenteras till Kungliga Tekniska H gskolan och kan fungera som ett exempel pa hur man gar till v ga n r man ska g ra en konfigurering i ett IT baserat f rvaltningssystem Nyckelord WallStreet Suite WSS Currency Linked Systems CLS Back office Properties Business Configuration of IT based Treasury System At If P amp C Insurance Company with mentor Anders Eriksson At the Royal Institute of Technology with instructor and examiner Anders Sj gren Bachelor Thesis in ERP Systems 15 ECTS Credits Degree Project in Engineering and Management year 2012 at the Royal Institute of Technology KTH Verksamhetsanpassning
45. olio owner Counterparty and instrument of the trade all have same value in CLS ASSET CLASS Counterparty has property CLS BIC Portfolio owner has property CLS BIC Leg group 2 Value date Opening date OR no leg group 2 exist CLS Eligible Only Forward Leg This tag is used for same day swaps where the spot leg is handled manually and the forward leg is exported to CLS A transaction gets this tag when the creator press Apply Some conditions needs to be fulfilled in order for a transaction to get this tag If it does not get this tag or the CLS Eligible tag the transaction cannot go to CLS Transaction get this tag if Both currencies has property CLS CURRENCY YES Both currencies are not CLS EXCEPTION CURRENCIES on portfolio owner or counterparty Portfolio owner has property CLS NODE Portfolio owner Counterparty and instrument of the trade all have CLS ASSET CLASS FX with value Yes Portfolio owner has property CLS BIC Counterparty has property CLS BIC Leg group 2 Value date 2 Opening date CLS Send This tag is put on when the trader press Commit and if the eligible condition is meet Put on tag CLS Send if CLS ELIGIBLE is set OR CLS Eligible Only Forward Leg is set 44 CLS Sent When the transaction is included in the export activity the earlier tag CLS Send is replaced with CLS Sent CLS Matched Transaction gets this tag when the import activity has run and the import file contains the transaction with status
46. ors Table of contents Document HIStory oce ee eee bte one CARO Era Ot Nude E ene ree ee Co ELS 34 boe qun MH P 35 About CIN Neva escheat esse parasagittal eet a eee eee E 35 VY ORE LOY Me P E S ANSER 36 Confirmations workflow occ Bi Bc 36 Settlement workflow pre CLS NC n m 37 Confirmations workflow post GLS eee tetto hdi epe eai pe bed Data ie pti dan n tnde pe aee Mq RR KRK KKR RR KR ka GERE sr ers ren sn 38 Settlement WOrkflo w POSt CIS MP 39 Controlling the dtes duis dors RE D 40 Property CUO P RETENEENTRH 40 Su eA nM Terr E era 40 Object POrtf llO cag t 42 BJ ECE UIE ICY 42 Object nS ANS NG MR ee 42 bc lui MT se ac ccna dre P 43 Transaction TAP Pe cee 44 Swap Specifi tags ML 45 EL O EEL E E EE terae E E EEEE en e Ue 46 Transaction flOW p Naia 48 Forward and Spot sott E E E E E E ere tert 48 SWAD en ene eee A E R E R E EE E E ER REE 51 Sameday SWAPS rssi ea oeste E E E E E E A A T E E E FANNS SANT 55 Suggestions for Mpt VETS ME 5 550424 5500 bv ssr snsdds der
47. ounterparty this is in CLS made automatically and then press the Verify button When the trade has been verified it changes state to Final At any state there is also the possibility to press Cancel which changes the transaction state to Canceled Value date The date when the trade is executed For FX trades this is when you exchange you money for example pay USD receive EUR WallStreet Systems WallStreet Systems is the system provider of WSS They provide solutions for corporate treasury bank treasury central banking FX trading and back office operations Wall Street Systems 2011 WSS WSS is a treasury system for corporations provided by WallStreet Systems It works as a strategic enterprise platform where you can control cash management trading funding and investment activities automatically and also audit consolidate and account them Wall Street Systems 2011 In the Insurance Company s treasury department WSS is used by front office traders middle office risk and performance back office settlement and reconciliations and by accounting 30 References CLS Group 2011 CLS Retreived from About CLS http www cls group com About Pages default aspx den 7 November 2011 CLS Group 08 2011 CLS Information Retreived from CLS Information Market Data www cls group com Products Pages CLSInformation aspx den 05 10 2011 Gorman J 2005 UML for Managers Parlezuml com Levinson M
48. sends transactionnr 1 with AMND in field 22 and disregards transactionnr 2 Verify CLS Eligible CLS EXPORT Tag CLS Send is If CLS Only Forward Leg CLS Send CLS Amend CLS Matched Leg Group 1 activity is run removed and CLS Sent is added If CLS Matched Group Leg 1 is set The transaction cannot be exported with matched tags Matched Leg Group 1 needs to be amended remove that tag manually 58 Suggestions for improvement Netting with counterparties For companies that use settlement manager a support for netting throughout all the CLS counterparties can be investigated Trading with your own settlement member When trading with our own settlement member bank netting of the trade can be done before it goes into CLS This lowers the cost of using CLS but also increases the settlement risk The risk that your settlement member bank goes into bankruptcy needs to be considered for example Adding more funds A client who have several independent funds who independently trade in the FX market can use field 83a in the MT304 file to specify which fund who executed the trade Designing modes The use of different modes should be used and designed within every organization Take into consideration that in this specification BackOffice should have permission to set tag Matched Leg Group 2 on same day swaps To be provided For a complete use of CLS together with Wallstreet suit
49. should also be available for portfolio The portfolio properties should be used when a Portfolio owner have more than one fund which independently trades in the FX market When a portfolio has CLS properties these should override the properties on the Client Object Currency CLS CURRENCY Value Yes No All CLS eligible currencies should have this property with value Yes If one or two currencies lacks this property and is used in trades in the FX market they cannot settle via CLS Currencies that are CLS eligible as of 31 of August 2011 AUD Australian dollar CAD Canadian dollar DKK Danish krone EUR Euro HKD Hong Kong dollar ILS Israeli new shekel JPY Japanese yen MXN Mexican peso NZD New Zealand dollar NOK Norwegian krone SGD Singapore dollar ZAR South African rand KRW South Korea won SEK Swedish krona CHF Swiss franc GBP Pound sterling USD United States dollar Object Instrument CLS ASSET CLASS FX CLS ASSET CLASS NDF CLS ASSET CLASS OPTION Value Yes No All instruments that can be settled via CLS should have this property One instrument can only have one property 42 Object Activity Export activity properties Portfolio Value Top portfolio Trading portfolio This property should enable portfolio specific export in which the user can decide what portfolios to include exclude Type of asset Value CLS ASSET CLASS FX CLS ASSET CLASS NDF CLS ASSET CLASS
50. sny 2010 Fx option 27 A FX option gives you the right to buy sell two currencies against each other at a specific rate in a specific period The buyer of the option decides if he wants to execute the option or not Mallo amp Mesny 2010 Fx spot A FX instrument that involves two currencies which at an agreed rate are exchanged two business days after the trade was agreed Mallo amp Mesny 2010 Fx swap A FX instrument that involves two currencies first being traded as an Fx spot first leg and then same currencies are paid back as an Fx forward second leg All details of the trade are agreed when the parties enter the trade For example you believe that the EUR will be worth more against the USD in the future Mallo amp Mesny 2010 On the 01 01 2011 you decide to buy 100k USD EUR on 03 01 2011 at a rate of 0 73 and then sell 100k USD EUR on 01 03 2011 at a rate of 0 70 That means that on the 03 01 2011 you will pay 7 300 EUR and receive 100 000 USD On the 01 03 2011 you will pay 100 000 USD and receive 7 000 EUR MT304 A message format that is used by third parties to advice or instruct a deal It is only used for FX trades excluding options It provides details about the trade The message is automatically generated from WSS when an activity has run SWIFTStandards 2006 Opening date The date when you enter a trade Properties A property in WSS is a way to mark different entities with values For e
51. swap trade acts different than a new swap does It has one additional tag CLS Amend and it populates different fields in the message sent in the export file For all states and actions that are not explained below an amended swap acts like a regular swap Verify CLS Eligible CLS EXPORT Tag CLS Send is CLS Send activity is run removed and CLS CLS Amend Sent is added The export file sends AMND in field 22A Verify CLS Hligible CLS EXPORT Tag CLS Sendis If a CLS CLS Send CLS Amend CLS Matched Leg Group 1 OR CLS Matched Leg Group 2 activity is run Sent is added If tag CLS Matched Leg Group 1 OR CLS Matched Leg Group 2 is set disregard that leg Only the leg that hasn t a matched tag as an amendment The export file field 22A removed and CLS should be exported sends AMND in Matched Leg Group is set and that leg needs to be amended remove that tag manually 54 Same day swaps Transaction state Transaction Tag Action Outcome Comment Open Apply CLS Eligible Only Forward Leg if the criteria is meet Transaction is saved in database Open Commit Transaction is sent to state Verify Tag CLS Send is put on if tag CLS Eligible Only Forward Leg is set Open Cancel Transaction is sent to state Canceled Verify CLS Eligible Only Forward Leg CLS Send Verify Popup message
52. t won t be read by others then programmers and system specialists Previous work As CLS has been used together with WSS in an earlier version there is a report for that interface It has been written by an external Company which the Insurance Company no longer cooperates with Therefore the If report could not look anything like their report that would have been plagiarism A business specification has also been written for another system called CTM Omgeo The interface for CTM and the earlier version of WSS is already in use and in the new version of WSS as a standard interface Therefore I studied the set up and learned the logic to be able to re create a similar solution for CLS Even though they are different systems some things can be shared like the outline of the mode naming convention and some of the logic As the interface for CTM is already in use the end users are familiar with the way it works and the logic behind it therefore the CLS interface needed to be designed in a way that makes it easy for the end user to learn and work with it 3 Method The method I have worked with is the model that If provided I choose to work by their method but compromised by drawing four detailed models to better explain the workflows in a well known language called business process modeling BPMN this might be helpful if someone not familiar with the systems wants to learn more The most helpful material I used was another report writte
53. tcome Comment Open Commit Put on tag CLS Eligible or CLS Eligible Only Forward Leg if the criteri is meet Transaction is saved in database and sent to state Verify Open Cancel Transaction is sent to state Canceled Verify CLS Eligible Verify Popup message CLS Send Cannot be sent forward in the transaction flow with this tag File formats The file format is for the file exported from WSS to CLS It is explained in depth in Appendix A under heading Attachment 1 It explains exactly from where every field in the file gets its data The format used is a standard format called MT304which is used only for foreign exchange trades Therefore the names on the fields are standardized and only the mapping needs to be configured 22 Additional requirements As additional requirements more configurations are presented which were excluded due to lack of time or limitations of the report Analysis To start with the technical parts of the report made it possible to handle problems early in the process The creation of the transaction flow made my re think the set up and it was a good measure of how well the logic in the suggested configuration worked The process models were made in the end of the project This could ve been done earlier but due to the lack of time I had to save the non critical parts to the end In the end I think it was a great way to finish up the work I had the most knowl
54. ted to work on the set up of the system When I thought all the logic was in place I created a transaction flow where I tested that my set up would work theoretically This was done in a first draft for which a received feedback from my mentor by notes and comments I corrected added less vital parts like process models and suggestions for improvement and handed in a second draft This draft was after some more feedback the final draft Fact collection The facts presented in this specification are collected through observation reading and my mentor By observing and finding my way around WSS in the purpose of CLS I found new things and learned about new areas When I lacked information or understanding when working in WSS I used the extensive user manual From the user manual I learned about the new features in WSS versus the ones that were used in the previous version I also read the business specification written by my mentor for the system CTM From that I learned about the model and also the way another interface was set up in the system When questions arise my mentor was always available to answer them and give me feedback I also searched the web for the latest info about CLS and to learn about different message formats used in file transfers My mentor reviewed my work two times and gave comments which also worked as a source of information His experience and knowledge about WSS was my greatest resource Looking at the Insurance Company mod
55. tlement member The value of CLS SETTLEMENT MEMBER BIC is used in field 57A in the export file The value of CLS SETTLEMENT MEMBER BIC is used in the second part of the export header on position 5 16 An example with Citibank as a settlement member 2 1304CITIGB2LXCLSN Counterparties that are a third party to a settlement member The value of CLS SETTLEMENT MEMBER BIC is used in field 53A and in the second 57A For counterparties that are a settlement member only CLS BIC will be needed CLS NODE Value Node number of the Portfolio owner The node number is specific to every portfolio owner It is sent to CLS in the first part of the export file header on position 13 22 1 FOLIFPCSES1XXXX 1001100001 Counterparty If the client is a counterparty following properties should be added CLS ASSET CLASS FX CLS ASSET CLASS OPTION CLS ASSET CLASS NDF CLS EXCEPTION CURRENCIES CLS BIC If third party to a settlement member CLS SETTLEMENT MEMBER BIC Portfolio owner Optional Optional Optional Optional Mandatory Mandatory If the client is a portfolio owner following properties should be added CLS ASSET CLASS FX CLS ASSET CLASS OPTION CLS ASSET CLASS NDF CLS EXCEPTION CURRENCIES CLS BIC CLS NODE If third party to a settlement member CLS SETTLEMENT MEMBER BIC Optional Optional Optional Optional Mandatory Mandatory Mandatory 41 Object Portfolio All properties available for Client
56. tly to CLS Correct trade Our trader corrects whatever was wrong with the trade The trade is automatically sent to CLS through the export activity Settlement workflow post CLS Process model BPMN of the workflow post CLS When CLS is used BackOffice has no processes for the settlement workflow Everything is automated therefore this model explains the settlement flow without interference from BackOffice Third party Settlement member CLS Settlement member Third party Deal qe le Deal Deal info gt Export file gt Match 4 Export file Deal info CLS Reply Import file Match Impor file CLS Reply Payment lt PvP p Payment In this scenario two third parties makes a deal with each other The deal info is sent to the settlement member in an agreed format The settlement member forwards the deal info in an export file to CLS If the deal info is same from both parties the trades matched The matched info is sent back to the settlement member and then to the third party The payment is later made payment versus payment to the settlement member 39 Controlling the flow in WSS Property editor Object Client CLS ASSET CLASS FX CLS ASSET CLASS NDF CLS ASSET CLASS OPTION Value Yes No All clients that are active in the FX market should have this property with value Yes to specify what instruments they process via CLS If a Client lacks an asset property or has a property with value
57. ut on tag CLS Matched Leg Group 1 If the import contains a file with match for transactionnr 2 Put on tag CLS Matched Leg Group 2 CLS Matched Leg Group 1 AND CLS Matched Leg Group 2 replace tag 52 CLS Sent with CLS Matched and send to Final If only one matched tag is set the transactions stays in state Verify Final CLS Eligible Cancel Cannot be CLS Matched canceled with transaction tag CLS Matched Verify CLS Eligible Cancel Popup Message CLS Sent Cannot be canceled with CLS Matched current Leg Group 1 transaction tags OR CLS Matched Leg Group 2 Verify CLS Eligible Open Transaction is See When CLS Sent moved to state amended open further down CLS Matched Leg Group 1 All tags are OR removed except CLS Matched CLS Matched Leg Group 2 Leg Group 1 OR CLS Matched Leg Group 2 Tag CLS Amend is put on Final CLS Eligible Re Open Popup Message CLS Matched Cannot be moved with transaction tag CLS Matched Open Update Transaction transaction updated and Apply saved in database Put on tag CLS 23 Eligible or CLS Eligible Only Forward Leg if the criteria is meet if no longer meet remove tag CLS Eligible Verify or Final Any tag Update transaction Apply Popup message Transaction cannot be updated with current tag When amended An amended
58. v7 4 further documentation needs to be provided The specification for FX forwards swaps and same day swaps is written so that options and NDF s can be used via CLS too However separate specifications for those two instruments are needed Following documents will later be provided Business specification for Options Business specification for NDF s When using CLS for options and NDF s different file formats are used and the file message looks different For NDF s it will be a continuation on the MT304 attached to this specification For options the file format MT305 is used Following documents will later be provided File specification MT304 File specification MT305 59 60 The file format MT304 is used for sending fx spot transactions from WSS to CLS Attachment B File format MT304 papoopieH pu3 Suowsod IRUN X uu It YOKEESNESTO lt 189 usaop Apadosd ji OIHERICN ICNETILINS ST Aoa Aj OMR HI nD lt Arn t NIS E iget papnjoui s pue ALOJEPUEW si ewwoo pewoap y Yunoww 3p09 Z OSI PIE e ul aq enw Aousuuno junouny pue K2uaum Iles JA HIAMIN LNINTILLIS S79 lt J0Jp3 USY lt epe Ul JSUMO OYOJPOG ONUS papoopueH y9 318 579 lt jsixe pus20p yredoJd j JIG AIANIN LNINTILLIS S7I Auedojg 104 anjeA lt J0yp3 jus lt pedsazunog veg i um Gu 2 gt get 0 ane Aoc suonsod gun X uy I4 Spo HIAS prar lt Joyp3 jus lt epe eu jo ApedsajunoD oq Dugnaex3 g d
59. veloped they should be individually added to the different objects The naming convention of the properties is similar to other interface properties To see the full configuration of the properties see Appendix A Property editor Example of a property The object Client which in the system is If and all of If s counterparties the clients they trade with should have a property explaining what instruments they can settle via CLS CLS ASSET CLASS FX CLS ASSET CLASS NDF CLS ASSET CLASS OPTION Value Yes No All clients that are active in the FX market should have this property with value Yes to specify what instruments they process via CLS If a Client lacks an asset property or has a property with value No it shouldn t be possible to trade that asset with or for this client via CLS Transaction tags Transaction tags are used in the system on transactions to show if they are eligible for certain actions or to show that an action has taken part which involved this transaction They show the end user what needs to be done and what has happened with the transaction These are put on or cleared in the flow of a transaction through a scripts which means that if a certain action takes place a tag can be set or cleared The naming convention of the tags is similar to other tag names that currently exist in WSS Example of a tag 20 The tag CLS Eligible is set on a transaction if certain conditions are fulfilled Noti
60. vided For a complete use of CLS together with WSS further documentation needs to be provided The specification for FX forwards swaps and same day swaps is written so that options and NDF s can be used via CLS too However separate specifications for those two instruments are needed Following reports will need to be written Report for Options Report for NDF s When using CLS for options and NDF s different file formats are used and the file message looks different For NDF s it will be a continuation on the MT304 attached to this specification For options the file format MT305 is used Following documents will later be provided File specification MT304 File specification MT305 25 Suggestions for improvement Several improvements can be made to this business configuration suggestion The model used should be revaluated and built upon In the future If might be able to use it as a standardized model I think that more employees should be educated in CLS This would not only help with future configurations but also to back up my mentor in his work The configuration itself can be improved in such way that it is more effective and easier understood however that would not make it similar to other interfaces today which is a disadvantage for the end user For exact improvements concerning the configuration see Appendix A Suggestions for improvement Terminology Activities Activities are used in the system to trigger certai
61. xample a currency can have property be marked with CLS CURRENCY with value Yes or No If the currency is used in CLS it should have value Yes if not value No The properties can also work as conditions For example a FX trade can only go to CLS if the portfolio owner If the counterparty and the instrument all have the same property CLS ASSET CLASS FX This is to ensure that the right trades are eligible for CLS If the counterparty don t do FX trades it shouldn t be possible to input FX trades that will go to CLS with them in the system 28 Same day swaps Same as Fx swap only that the first leg is settled same day as the trade is made In other words for the first leg opening date value date Settlement Settlement happen when the earlier agreed trade is executed When a trade has been confirmed the money is exchange on value date After that your trade is settled Until value date occurs the trade is not settled Settlement member A settlement member is a bank or corporation which is a member of CLS They hold an account in CLS and have direct access to the system The settlement member can provide the CLS service to other banks and corporations Third party A third party is a bank or corporation who uses CLS through a settlement member The CLS member then inputs the third party instructions and provides them with an interface where they can see their trades in real time Trader The person who commits to t

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