Fx Bank Product – Generally, to fulfill your needs, you will enter into two types of forex trades. They are:
When a foreign exchange trade is settled within spot days (usually two days) after the trade closes, it is called a spot trade.
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A foreign exchange trade that is settled after spot days (entry into the trade) is referred to as a pre trade.
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In this chapter, we’ll discuss how you can define Foreign Exchange (FX)-specific attributes as a product.
You can create foreign exchange products using the “Foreign Currency Product Definition” screen. You can call up the “Forex Product Definition” screen by typing “FXDPRMNT” into the box at the top right corner of the application toolbar and clicking the arrow button next to it.
On this screen, you can enter basic information related to the deposit product, such as the product code, description, etc.
For each product you create in Oracle FLEXCUBE, you can define general attributes such as branch, currency and customer restrictions, interest details, tax details, etc. by clicking the appropriate icon in the horizontal icon box on this screen. In addition to these general attributes, you can define other attributes specific to the foreign exchange product. These characteristics are discussed in detail in this chapter.
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You can define attributes specific to a deposit product in the “Forex Product Main Definition” screen and in the “Forex Product Preferences” screen. On these screens you can specify the product type and set the product options.
For more information about the general attributes you can define for a product, see the following Oracle FLEXCUBE User Guides about Modularity:
The first characteristic that defines your product is its type. In the Oracle FLEXCUBE Foreign Exchange module, you can broadly classify products into two types – Spot and Forward.
For example, you want to create a product for spot offers (buys) in GBP/USD called BuyGBP. When you define a product, specify that the product type of this product is Spot.
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Preferences are characteristics or terms defined for a product that can be changed in an agreement relating to that product. By default, the FX trade gets the attributes defined for the product it belongs to.
However, characteristics defined as “preferences” of a product may change upon agreement. To bring up the “Options” screen, click the “Preferences” button.
You can define product preferences on the “FX Product Preferences” screen. The following are options you can define for a product.
For a product, you can specify whether an option date can be entered for future offers during trade processing. If you specify an option date, you can change the value date of the contract to any date between the option date and the original value date, meaning that the contract can be canceled at any time between the option date and the value date of the contract.
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However, if you have enabled the option date for the product, you do not need to enter the option date during trade processing.
When you create a product, you can specify a maximum validity period for a forward trade related to the product. You cannot enter into an agreement with a tenor that exceeds the value specified for the related product. However, you can enter an FX trade with a tenor that is less than the tenor specified for the product.
To determine the maximum period allowed for a product, enter an absolute value (in months) in the “Max tenor” field.
All contracts made in the system should be confirmed or “authorized” by a user with the necessary rights. This is a safety feature.
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When creating a product, you can specify whether the author of contracts related to the product needs to re-enter important contract details. This ensures that the contract is not mechanically authorized. If you decide to change the detailed key, click the button against “Yes” in the required field for key change.
In the Rekey Fields section, you can specify which of the data you want to re-encode the authorization. Click the box next to each contract detail to indicate that it should be re-entered.
If you have chosen to revalue the foreign currency liability for the product, you must also specify the revaluation method by which the gain or loss will be calculated. You can overestimate your profit or loss in a number of ways. They are:
Check this box to move the FX trade confirmation status to “Unconfirmed” during change/cancel/reverse/rollover if an outgoing confirmation message is configured for the event.
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A non-deliverable forward (NDF) is a forward or futures contract in which counterparties settle the difference between a contractually agreed NDF price or rate and the current spot price or rate of an agreed nominal value.
NDFs have a set date and a settlement date. The settlement date is the date on which the difference between the current market exchange rate and the agreed exchange rate is calculated. The settlement date is the date by which payment of the difference is due to the acquiring party.
Oracle FLEXCUBE supports NDF functionality for FX contracts. The settlement for the NDF forward contract will be the net settlement amount of the NDF in the settlement currency, which is the difference between the exchange settlement amount and the amount at the fixed rate. The fixed rate will be provided on the day of settlement.
Oracle FLEXCUBE supports the NDF forward contract using the “two trade approach”. With this approach, two contracts are manually initiated, namely:
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The settlement date for the forward NDF contract is the settlement days for the settlement currency prior to the maturity date of the forward NDF contract.
For both contracts (the NDF advance contract and the NDF settlement contract) the amount in the NDF currency is the same, only the amount in the settlement currency changes depending on the exchange rate on the day the NDF advance contract is booked and the settlement contract the NDF.
Tick this box to indicate whether the product is an NDF product or not. By default, this box is unchecked.
For a forward product type, if the NDF indicator is checked, the product is intended for an NDF forward contract. For a point type product, if the NDF indicator is checked, then the product is intended for NDF fixation.
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Enter the default NDF currency from the options list. This field is activated when the NDF indicator is checked. The list of options for this field will be a list of all BOT and SOLD names allowed for the branch.
Enter the NDF base from the list of options. This field is enabled if the NDF indicator is checked. The NDF base is used to generate NDF notifications for the NDF Forward contract.
Revaluation is the process of listing assets and liabilities in foreign currency at current exchange rates. The revaluation of your foreign exchange assets and liabilities may result in a profit or loss for your bank. This is because the local currency equivalent of foreign currency assets and liabilities would be recorded in the books at different rates from the current exchange rates and the transfer of the assets and liabilities at the current/revaluation rate would result in a change in the rate. equivalent amounts in local currency. This change can be a gain or a loss.
If you want to reprice trades related to the product, select “Yes” by clicking the button next to it. You can disable the revaluation by clicking the button against “No”.
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If you enable revaluation of your product’s foreign currency liabilities, all trades related to the product will be revalued periodically. You can choose to revalue offers related to a product:
To replicate trades on a daily basis, click the button against “Daily” in the Frequency field. If you want to replicate offers on a monthly basis, select the “Monthly” option by clicking the button next to it.
Spot contracts can only be repriced on a daily basis – you will not be able to select the revaluation frequency as “Monthly”.
When you run End of Day processes in your bank, trades related to products designated for daily repricing will be replicated. For products designated for monthly revaluation, product trades will be revalued during the month-end process. The revaluation process would normally be carried out by an end of day operator.
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In the case of an LCY-FCY trade, the discounted amount of the LCY portion is considered to be the same as the LCY contract.
In the case of an FCY-FCY trade, the local currency equivalent of the discounted amount of the non-traded currency (calculated at the prevailing exchange rate) is considered the same as the LCY contract.
Interest in both currencies is credited separately on a daily basis, starting from the spot date to the maturity date of the contract. The local currency equivalent in FCY accrual items is calculated at the applicable exchange rates. Also, previous CM accruals are revalued when you run the account revaluation batch function as part of EOD operations.
Discounted amounts (conditional amounts) are revalued at contract level from the date of booking to contract maturity.
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On the due date, contingent items are cancelled; accounting entries are transferred
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