Browse By

Treasury management. Introduction to Treasury Operations

Treasury management. Introduction

Like all other fields Treasury systems also have their own language.  Before you go ahead and build them or start working with a treasury group you have to get familiar with the language used. Here is a list of common terms you are likely to see in treasury and treasury operations groups

Common Treasury management terms.

Deal Ticket

All transactions in a treasury function are recorded through a system that tracks the flow of each transaction through its life cycle. The document that records the transaction is called a deal ticket or ticket for short.

Dealing System

The system that treasury function uses to trade and interact with other treasuries in the market. This is generally different from the treasury system that is used to record, track and manage transaction workflow within treasury.

Limits

Limits are part of the control mechanism to ensure that the treasury does not book un-authorized deals and trades by defining a cap on daily trading done by trader, dealer, desk or group. Limits also apply on products (Money market, Foreign Exchange, Equities) as well as counter parties. Some limits are internal (defined by the bank), while others are regulatory (defined by the regulator).

Treasury Desks

A treasury desk refers to a business line or business group whose performance and profitability is generally tracked separately. For instance Money market or Fixed Income, Foreign Exchange and Treasury Marketing Unit (TMU), Equities and Margin lending desks each refer to a distinct line that forms the treasury group.

Front Office,  Middle Office, Back Office

Roles that define segregation of duties and control across a treasury. A front office user is a dealer or trader who books the trades and executes it. A Middle Office user is responsible to enforce and review risk limits and exceptions while a back office function is responsible for settlement, confirmation and accounting. TROPS or Treasury Operations is generally used to refer to the treasury back office group.

Four eyes workflow

The ticket workflow is implemented with the Four Eye Principle. All tickets created need to pass through a confirmation cycle of approval, verification and authorization. The approval is conducted by the Front Office personnel, whereas the remaining two confirmations are performed by the Back Office.

Common Treasury Terms And Concepts

Ticket Approval

Once the deal ticket has been created, it needs to be approved by another user residing in the Front Office. For approval purpose, each user has been provided with a financial limit. If the ticket amount is more than the limit assigned to that user, then the user is not able to approve that ticket.

Ticket Verification

Once the deal ticket has been approved, it needs to be verified by another user. The verification is done by a user residing in the Back Office.

Ticket Authorization

Once the deal ticket has been approved & verified, it needs to be authorized by an independent user, once again, residing in the Back Office. For authorization purpose, each user has been provided with a financial limit. If the ticket amount is more than the limit assigned to that user, then the user is not able to authorize that ticket.

At any stage during the confirmation process the ticket may be returned to the original dealer who created the ticket either for cancellation or for corrections/ editing. The edited ticket will be go through the confirmation cycle again, i.e. approval, then verification and finally for authorization.

Confirmation

Whenever a deal is complete, a Confirmation letter setting forth the terms and conditions of the deal is sent to the counterparty. A confirmation is then required from the counterparty which usually arrives the same day. The confirmation provides a necessary final check against dealing errors. It should be independent of the trading room and be performed entirely by operations. Using the data from the settlements and payments systems, the confirmations provide a check to ensure that the operations areas of each party to the deal have recorded the same details for each of the transactions carried out.

The confirmation should contain (at a minimum) details of the counterparties and location, brokerage, transaction date, value/ settlement date, settlement instructions, currency amounts and exchange rates (for FX deals), etc.

The treasury system tracks the confirmation status of all deals including the monitoring of all unconfirmed transactions. There are 4 ways of receiving a deal confirmation from the counterparty.

  • Swift
  • Manual confirmation
  • System generated confirmation
  • Others

In the event that there are delays or where confirmations are not received there should be an established escalation procedure to follow up on missing confirmations. In addition to this management also needs to be informed.

Risk in the confirmation process arises either when discrepancies are missed or when trades are not confirmed. Failure by the counterparty to send confirmations could be the first sign that the counterparty is facing impending financial failure.

Common Treasury Terms And Concepts 1

Also see

  1. Treasury Cheat Sheet
  2. An additional list of Treasury Terms

 

5 thoughts on “Treasury management. Introduction to Treasury Operations”

  1. Amit says:

    i’m looking for “Master Course: Treasury Operations: Introduction to Treasury Operations”, please tell me how get training material and what topic its cover. please do mention cost of courses

    i’m looking for basic to advance exposer on treasury operation.

    Thanks,
    Amit

  2. jawwad says:

    Dear Amit

    Thank you very much for your note. I have two recommendations assuming you have already seen what we have on this site.

    The first is our video course on selling treasury products that gives a review of the treasury function as well as the roles of a treasury marketing unit. It also offers an introduction to derivative products and the reason why customers buy such solutions

    http://fourquants.com/elearning/video-courses/cross-selling-treasury-products-course-outline/

    Our second course is a pdf based self study course that reviews more treasury related tools dealing with liquidity and treasury risk
    http://fourquants.com/elearning/topic-guides/treasury-crash-course-topic-guide/

    Please let me know if either of these products are of interest. We also do live treasury related workshops in the Middle East and Far East but they generally get executed for banking customers.

    Once again thank you very much for stopping buy.

    Regards

    Jawwad

  3. Amit says:

    Hi
    Thanks for your reply, the above option which you have mentioned, does that cover entire treasury operation ( front office to back office)and as you have mentioned,it cover derivatives. i’m just wonder, does this course cover FX and FI products operation details.
    Please do mention cost of each (video based and pdf based)
    Thanks,
    Amit

  4. Jawwad says:

    Dear Amit

    We actually have a few courses that cover a large part of the treasury product universe. The challenge however is perspective. Typically we have customer who are interested in

    a) Pricing of Treasury products
    b) Usage of Treasury products
    c) Operations of Treasury products

    As of now bulk of our courses fall in the (a) and (b) category. The Treasury Operations course that we do have provides a high level overview of Treasury Operations but is supposed to be read side by side with materials in (a) and (b).

    We are currently working on a product specific treasury operations course that reviews role specific activities performed by a Front Office, Back Office and Middle Office user as part of a typical day. The course will cover the full cycle from day start to deal entry, from deal approval to day end for selected FX and FI products. We expect that the course will be available for sale on Friday 18th February in its PDF form and will be priced in the 249 US$ range.

    Our video courses are priced at US$199 per course per user for a quarterly subscription. We also have a one-price-get-all- pricing option which is right now priced at US$399 per quarter per user. PDF and Excel downloads are topic specific and range from US$9 to US$250.

    I hope this answers the question you had asked. Please feel free to ping me if I can be of any further assistance.

    Regards

    Jawwad

  5. Jawwad says:

    Dear Amit

    The new and revised Treasury Products course has been updated and launched. You can now buy the Treasury Products and Operations course from the following link

    https://financetrainingcourse.com/education/store/#ecwid:category=1963303&mode=product&product=8418854

    Warm regards

    Jawwad

Comments are closed.

Comodo SSL