Cash & Liquidity Management
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Promoting Clarity, Consistency and Automation in Transaction Processing

by Steve Lethaby, Vice President, GSF Sales and Relationship Management responsible for the UK, Ireland, South Africa and the Americas, Clearstream

Treasurers in all regions with surplus cash to invest are dealing with diverse regulatory and market challenges, with an extended period of ultra-low interest rates and a variety of recent and pending regulations, such as MiFID II and money market fund (MMF) reform in the United States. As we have established in previous articles (see articles in TMI edition 235 and TMI’s SWIFT Corporate Forum 2015-2016) these developments are prompting treasurers to explore a wider spectrum of investments, such as tri-party repos. However, despite – and in some cases because of – the challenging period that we are experiencing, there are also significant opportunities emerging for greater transparency and automation in transaction execution and processing.

The background to online dealing

The value of online dealing of FX transactions, typically through bank-independent portals, has become widely recognised in recent years, with a large proportion (over half according to recent studies) now using these platforms for transaction execution as an alternative to telephone dealing. There are a variety of benefits to this approach from both a decision-making and a straight-through processing (STP) perspective. For example, users have the ability to seek competitive quotes from any number of their authorised dealing counterparties on a transaction, or to request a quote from a single bank. The bank(s) bid for the deal online, and the user then selects the chosen quote, most commonly according to the best price, but other factors such as bank relationships and credit limit utilisation will also play a role. The transaction, together with the unsuccessful quotes, can then be passed through automatically to the treasury management system (TMS) or enterprise resource planning (ERP) tool, without the need for manual input. The transaction is then subject to treasury’s authorised approval and back office workflow processes, and updates risk, accounting and management reports.

The proposition for tri-party repos

As corporate treasurers have become more familiar with online dealing, and adoption has increased, the number of financial counterparties that deal through these platforms, and the range of instruments supported, have increased. For example, FX and interest derivatives, loans and deposits, and MMFs are now widely traded electronically, offering comparable advantages to online dealing of FX. This value proposition also extends to tri-party repos. They can be traded through platforms such as 360T, a recently acquired Deutsche Börse Group sister company of Clearstream.