TEMENOS T24

AM Cash Management

User Guide

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electronic or mechanical, for any purpose, without the express written permission of TEMENOS Holdings NV.

Copyright 2005 TEMENOS Holdings NV. All rights reserved.

AM Cash Management

Table of Contents
Overview.................................................................................................................................................. 3
Setup ....................................................................................................................................................... 4
Deal/Transaction processing ................................................................................................................... 6
Selection Criteria.................................................................................................................................. 8
Request Parameters .......................................................................................................................... 12
AM.SWEEP.REQUEST.................................................................................................................. 12
AM.LIQ.SWEEP.REQUEST ........................................................................................................... 13
AM.CCY.HEDGE.REQUEST ......................................................................................................... 14
Actions ............................................................................................................................................... 15
Proposed Orders ............................................................................................................................ 16
Example 1 – AM.SWEEP.REQUEST ......................................................................................... 16
Example 2 - AM.LIQ.SWEEP.REQUEST ................................................................................... 18
Example 3 - AM.CCY.HEDGE.REQUEST ................................................................................. 20
Recalculation .................................................................................................................................. 23
Generate Orders ............................................................................................................................ 24
Enquiries................................................................................................................................................ 25
AM.SWEEP.DETAIL.AMEND ............................................................................................................ 25
AM.LIQ.SWEEP.DETAIL.AMEND ..................................................................................................... 26
AM.CCY.HEDGE.FORWARD.AMEND ............................................................................................. 27
AM.CCY.HEDGE.SWAP.AMEND ..................................................................................................... 27

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AM Cash Management

Overview
AM Cash Management consists of three elements. These are Cash Sweeps, excess Cash
Reinvestment (or short cash position coverage), and Currency Hedging.
Cash sweeps and excess cash investment are related to modelling (Dynamic Model Portfolios) in a
workflow sense. The reason being that usually, as a side effect of rebalancing a multi-currency
portfolio, cash account balances for the various currencies are affected in a way which requires
realignment.
There are three main reasons for this. Firstly, whenever securities’ rebalancing modifies the currency
exposure of security positions the corresponding cash accounts offset the currency exposure change.
As an example, when the USD security exposure is reduced through security rebalancing then the
amount of USD cash increases by the same amount as the USD exposure is reduced.
The second reason stems from the way the rebalancing mechanism functions. The rebalancing
algorithm does not rebalance cash. Instead the cash accounts act as unbounded buffers that allows
for target security allocations to be always feasible. The result is that cash accounts frequently display
negative balances after securities rebalancing. As a consequence, cash needs to be transferred in
order to cover short cash positions.
The third reason is related to business practices. Common portfolio management practice usually
assigns a distinguished role to the cash account with the same currency as the reference currency.
Usually more liquidity is available on that cash account while balances in cash accounts in other
currencies are usually kept to a minimum.
The Cash Sweep process allows the rebalancing of cash accounts, whilst the Cash reinvestment in
money market securities allows available cash above a given threshold to be invested on risk-free
assets while awaiting exposure to securities. These usually take place after securities rebalancing
Currency hedging is required in a multi currency portfolio to allow decoupling currency exposure from
securities exposure.

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AM Cash Management

Setup
AM.PARAMETER is used to record the default settings for the projected Cash Flows that can be
activated when making a Cash Management request. The fields COUPON.DAYS, DIVIDEND.DAYS,
INTEREST.DAYS, REDEMPTION.DAYS, MM.DAYS and FX.DAYS record the default number of
business days to look ahead for forward cash flows when forecasting account balances.
The fields DIVIDEND.TRANS, INTEREST.TRANS, MM.TRANS and FX.TRANS identify the related
transaction codes that will be treated as Cash Flows.
The AUTO.RECALC.CM field determines whether changes to records resulting from a Cash
Management request automatically trigger a recalculation of the proposed amounts.
The CON.RATE.RTN field allows an external/local routine to be applied to determine the actual
exchange rate to be applied to a given FOREX trade generated from Account Sweeping processing.
The MIN.CASH.AMT field determines the default minimum amount (specified in the base currency of
the system) to be left on each cash account during Cash Management processing. For Account
Sweeping this refers to the TRADED.CCY account.

AM.PARAMETER Settings

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In addition to the above settings, the field RBL.OUTPUT.TYPE controls the method of order
generation and processing for Liquidity requests (I.e. whether to use standard SEC.OPEN.ORDER
processing or SC.SOO.CUST.DETAIL – High Volume processing). Refer to the Securities User
Guide for information on securities processing.

AM.PARAMETER

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Deal/Transaction processing
The Cash Management suite consists of three workflows – Account Sweeping, Tactical investment of
Liquidities and Currency Hedging. Each workflow comprises of a request application, a detail
application and one or more editable ‘fastpath’ enquiries.
In addition, the Cash Management service agent (…/AM.CASH.MANAGEMENT) handles the
processing of requests performing such tasks as the creation of ‘Detail’ records, the recalculation of
amended ‘Detail’ records and the final creation of either FOREX orders or Securities orders

The three ‘Request’ applications are AM.SWEEP.REQUEST, AM.LIQ.SWEEP.REQUEST and

AM.CCY.HEDGE.REQUEST. These applications allow for the selection of individual or groups of
portfolios, parameter settings and actions to be performed.

The AM.SWEEP.REQUEST application provides the facility to move funds between two cash
accounts in the same portfolio with different currencies via a FOREX trade. A Buy operation fills a
shortfall in the Traded Currency account with funds from the Counter Currency account. A Sell
operation sweeps excess funds in the Traded Currency account to the Counter Currency account.

The AM.LIQ.SWEEP.REQUEST application provides the facility to move funds between a cash
account and a securitised Money Market instrument using a securities order. When a request is made,
the operation attempts to sell a holding of the specified security to cover the short cash positions and
invest any excess balances in the specified security. Requests may also be restricted to cover short
cash positions only.

The AM.CCY.HEDGE.REQUEST application provides the facility to assess currency exposures in

relation to the Reference Currency and to reduce the currency exposure. This is performed either via a
FX Forward contract or a synthetic FX Swap contract

Note – The valuation of any Securities holdings is based upon the Start of Day position. To ensure
that an ‘Online’ valuation is used the ONLINE.VALUATION flag should be set to ‘Yes’, on the
respective Cash Management request.

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AM Cash Management

The following diagram illustrates the Cash Management workflow: -

Cash Management Workflow

In addition to the standard routines for the amendment of ‘Detail’ records for each of the Cash
Management workflows, local API routines may be added which will be processed prior to the core
processing.
These local routines will have the same name as the core authorisation subroutine name with the
addition of the ‘.LOCAL’ suffix. i.e.: -
AM.SWEEP.DETAIL.AUTHORISE.LOCAL
AM.LIQ.SWEEP.DETAIL.AUTHORISE.LOCAL
AM.CCY.HEDGE.DETAIL.AUTHORISE.LOCAL
AM.CCY.HEDGE.WRK.AUTHORISE.LOCAL

The local routines must be named as described and will only be called if compiled and catalogued

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AM Cash Management

The fields on the above requests can be split into three sections – ‘Selection Criteria’, ‘Request
Parameters’ and ‘Actions’. These are described in the following sections: -

Selection Criteria
The Cash Management requests allow individual or groups of portfolios to be selected for processing.
This is performed via the CRITERIA field using a valid AM.CRITERIA Id, or via the fields FIELD,
OPERAND and VALUE. Cash sweeping and Currency Hedging also allow individual portfolios to be
specified in the PORTFOLIO.ID field.

It is then possible to exclude Portfolios selected by criteria. The Context Enquiry , Portfolio Selection
List can be used to view the portfolios selected by the CRITERIA, if there is any requirement to
exclude portfolios from processing then such portfolios can be entered in the EXCLUDE.PORTFOLIO
field.

In addition to the above criteria, an additional level of selection is required depending upon the type of
request.
For Cash sweeping the TRADED.CCY field identifies the cash accounts that the process will attempt to
sweep, either by selling excess funds or filling a shortfall of funds against the COUNTER.CCY.

AM.SWEEP.REQUEST Selection Criteria

AM.SWEEP.REQUEST Selection Criteria

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For Liquidity sweeps, the SESSION.CCY identifies the currency of the cash accounts to be processed
and the SECURITY.ID defines the Money Market instrument in which to invest or disinvest. The
currency of the instrument does not have to be the same as the SESSION.CCY.
In the case where there is an insufficient holding in the Money Market instrument to cover a short
balance, then a Sale of the available holding will be proposed (i.e. - the Cash Account remains
overdrawn).

AM.LIQ.SWEEP.REQUEST selection criteria

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Currency Hedging can be restricted to certain instruments within the selected Portfolio(s). These are
recorded in the POS.ID field based upon the selected Asset and Sub Asset types.
The ASS.TYPE and SUB.ASS.TYPE fields are used to identify the instruments to be considered
when hedging. Note - The SUB.ASS.TYPE field takes precedence i.e. when an Asset type is entered
in combination with a Sub Asset type belonging to it, then the instruments for the selected Asset type
are restricted to the related Sub Asset type selection.
If the ASS.TYPE and SUB.ASS.TYPE are left blank then all instruments held within the portfolio(s)
are considered for hedging.
When the ASS.TYPE and/or SUB.ASS.TYPE are entered, and the record validated, the POS.ID
field is populated with the instruments matching the Asset/Sub Asset type selection, and Portfolio
selection.
The list of Pos ids can then be amended by removing instruments from the multi value set.
Instruments can also be added through the EXTRA.VEX.ID field.

AM.CCY.HEDGE.REQUEST

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AM Cash Management

AM.CCY.HEDGE.REQUEST after validation

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AM Cash Management

Request Parameters
AM.SWEEP.REQUEST

The fields FWD.FLOW.ACTIVE through to OPEN.ORDERS provide the facility to include any future
Cash Flows and pending Security Orders when calculating the Account Balance to be swept. The
number of days to look ahead for cash flows is defaulted from the AM.PARAMETER record
described above. These can be changed on the AM.SWEEP.REQUEST.
(Note – the transaction codes for the various types of cash flow need to be defined in
AM.PARAMETER in order to be treated as cash flows)
The OPERATION.TYPE determines whether to convert excess funds in the Traded Currency Account
(SELL) or to cover a shortage of funds in the Traded Currency (BUY)
The USE.CONVENTION field determines whether a convention FX rate is to be obtained from the
external routine defined in CON.RATE.RTN on AM.PARAMETER.
The TXN.THRESHOLD field provides the facility to avoid the generation of trades for small amounts.
By applying a value to this field (specified in the base currency of the system) transactions are not
generated for amounts below the transaction threshold.
The MIN.CASH.AMT (specified in the base currency of the system) determines a minimum amount to
be left on each TRADED.CCY cash account.

AM.SWEEP.REQUEST Parameters

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AM Cash Management

AM.LIQ.SWEEP.REQUEST

As with cash sweeping, the fields FWD.FLOW.ACTIVE through to OPEN.ORDERS provide the facility
to include any future Cash Flows and pending Security Orders when calculating the Account Balance
to be swept. The number of days to look ahead for cash flows is defaulted from the
AM.PARAMETER record described above. These can be changed on the
AM.LIQ.SWEEP.REQUEST.
The SHORT.BALANCES field determines whether both excess and short cash position are to be
considered for sweeping, or whether the request should be restricted to short cash positions only.
The MIN.CASH.AMT (specified in the base currency of the system) determines a minimum amount to
be left on each cash account.

AM.LIQ.SWEEP.REQUEST Parameters

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AM Cash Management

AM.CCY.HEDGE.REQUEST

As with the above Cash Management requests, the fields FWD.FLOW.ACTIVE through to
OPEN.ORDERS provide the facility to include any future Cash Flows and pending Security Orders
when calculating the Account Balances. The number of days to look ahead for cash flows is defaulted
from the AM.PARAMETER record described above. These can be changed on the
AM.CCY.HEDGE.REQUEST.
The OPERATION.TYPE determines whether the hedging request should creates a FX Forward or
synthetic FX Swap contract
The TXN.THRESHOLD field provides the facility to avoid the generation of trades for small amounts.
By applying a value to this field, FX Forward transactions (plus associated FX Spot trade in case of FX
Swaps) are not generated for amounts below the transaction threshold.
The ROUNDING.SIZE is used to determine how amounts are rounded. This is applied after the
minimum trading size filter has been applied and only applies to the forward leg in the case of a Swap
operation.
The MIN.CASH.AMT (specified in the base currency of the system) determines a minimum amount to
be left on each cash account.

AM.CCY.HEDGE.REQUEST Parameters

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AM Cash Management

Actions
The fields START, CLEAR.DETAIL, BUILD.DETAIL, GENERATE.ORDER, RECALCULATE and
ONLINE.VALUATION are found on all Cash Management requests. Each field provides the facility to
trigger an action for the request process to perform.
In all cases the START field needs to be set to ‘Yes’ for any subsequent actions that have been set to
be triggered.
The above group of fields provide the facility to build or clear proposed orders, generate orders,
execute an online valuation, and perform recalculation when one of the parameters on a proposed
order is changed. Further details on these settings can be found in the following sections of the User
Guide.

'Action' fields

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Proposed Orders

The BUILD.DETAIL field on Cash Management requests enables proposed transactions to be

created and reviewed, prior to booking the trades.
Proposed orders can be rebuilt at this stage by rerunning the request with CLEAR.DETAIL and
BUILD.DETAIL set to ‘Yes’. This may be necessary if additional Cash Flows, Security Trades, etc.
have taken place since the original BUILD.DETAIL request, for example.
Additionally, certain values on the proposed orders can be edited prior to booking the trades. This is
explained further in the ‘Recalculation’ and ‘Enquiries’ sections.

The following examples illustrate the workflow of processing the 3 types of Cash Management
Request through to the creation of Cash Management Detail records that display the proposed orders.
The ‘Detail’ records allow for the reviewing of proposed transactions created by the cash management
service. Under certain circumstances changing the available details may require and/or trigger the
recalculation of that particular detail record. (Described in the ‘Recalculation’ section.)

Example 1 – AM.SWEEP.REQUEST

The following AM.SWEEP.REQUEST has been set to select the USD cash account of Portfolio
1172-1 and proposes to sweep the excess funds to the GBP account of the same portfolio. The
forward cash flow look ahead is activated.

AM.SWEEP.REQUEST

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In this example the USD cash account for portfolio 1172-1 has excess funds of USD195,524.35. In
addition, a forward MM flow of USD20,000.00DR is due against this account in 2 (business) days time.
The AM.CASH.MANAGEMENT service is automatically triggered upon authorisation of the request.
This creates the AM.SWEEP.DETAIL record which illustrates the proposed FOREX transaction – in
this instance a Sell of USD175,524.35.
As can be seen, the minimum cash amount, transaction amount and the FX rate can be amended.

AM.SWEEP.DETAIL

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Example 2 - AM.LIQ.SWEEP.REQUEST

The following AM.LIQ.SWEEP.REQUEST has been set to select the GBP cash accounts of a group
of Portfolios using CRITERIA selection. The request proposes to sweep the excess funds to a GBP
securitised Money Market instrument and cover any short balances by disinvesting in the Money
Market instrument. A MIN.CASH.AMT of USD1,000.00 has been applied so that a minimum balance
is maintained on each account.

AM.LIQ.SWEEP.REQUEST

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AM Cash Management

In this example the GBP cash account balance for one of the selected portfolios is as follows: -
Ptfo 1025-1/Account 20699 has excess funds of GBP8,881.92

The AM.CASH.MANAGEMENT service is automatically triggered upon authorisation of the request.

This creates the AM.LIQ.SWEEP.DETAIL records which illustrates the proposed Security Orders
for each account.
For the above Portfolio a purchase of 8386 units of the Money Market instrument is recommended,
whilst still maintaining a cash balance above the minimum level of USD1,000.
As can be seen, the minimum cash amount and nominal can be amended. Note – The Nominal is
validated against the TRADING.UNITS of the named Money Market instrument.

AM.LIQ.SWEEP.DETAIL

The proposed orders can also be displayed via the enquiry AM.LIQ.SWEEP.DETAIL.AMEND.
This, and similar enquiries are explained further in the ‘Enquiries’ section of this User Guide.

Enquiry AM.LIQ.SWEEP.DETAIL.AMEND

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Example 3 - AM.CCY.HEDGE.REQUEST

The following AM.CCY.HEDGE.REQUEST has been set to select all instruments with asset class
‘30’ for Portfolio 1172-1. The request proposes to hedge through a FX Forward contract.

AM.CCY.HEDGE.REQUEST

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Validating the above record automatically populates the POS.ID field: -

AM.CCY.HEDGE.REQUEST after validation

AM.CCY.HEDGE.REQUEST after validation

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AM Cash Management

In this example the EUR exposure is 39,590.95

The AM.CASH.MANAGEMENT service is automatically triggered upon authorisation of the request.

This creates the AM.CCY.HEDGE.DETAIL records which illustrates the proposed FX Forward
transaction.
As can be seen, the hedging factor can be amended and the Forward rate applied.

AM.CCY.HEDGE.DETAIL

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AM Cash Management

Recalculation
Certain fields on proposed orders can be edited at the review stage resulting in the recalculation of the
other proposed values on the recommendation. This enables orders to be generated based upon the
system generated or User amended values.
The recalculationis performed automatically when the AUTO.RECALC.CM field on
AM.PARAMETER is set to ‘Yes’. Otherwise, the Cash Management request will need to be rerun
manually with the RECALCULATE field set to ‘Yes’.

NOTE - The Recalculation process only recalculates the proposed values as outlined below.
In instances where other values have changed since the last Cash Management request run (e.g.
New Cash Flows or Security Trade), the ‘Detail’ record should be rebuilt by rerunning the request with
CLEAR.DETAIL and BUILD.DETAIL set to ‘Yes’

The following fields can be edited for each type of request: -

• AM.SWEEP.DETAIL – ACT.MIN.AMT, ACT.TRA.AMT and ACT.TRA.RATE

When the ACT.MIN.AMT is amended the ACT.TRA.AMT is recalculated accordingly.

ACT.TRA.AMT allows the trade amount to be applied to the related FOREX transaction to be
amended.
The ACT.TRA.RATE allows the rate to be applied to the related FOREX transaction to be
amended

• AM.LIQ.SWEEP.DETAIL – ACT.MIN.AMT and ACT.NOM

When the ACT.MIN.AMT is amended the ACT.NOM is recalculated accordingly.
When amending the ACT.NOM the related minimum cash amount should be set to zero for the
change to take affect (The Minimum Cash amt. takes precedence during recalculation)

• AM.CCY.HEDGE.DETAIL – ACT.HEDGE.FCTR, ACT.FWD.RATE and ACT.SPOT.RATE

When the ACT.HEDGE.FCTR is amended the proposed transaction amount is updated
ACT.FWD.RATE and ACT.SPOT.RATE allow a Forward Rate and Spot Rate to be applied /
amended.

Examples illustrating the recalculation that takes place can be found in the ‘Enquiries’ section of the
User Guide.

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Generate Orders
The generation of orders normally takes place after the proposed orders have been reviewed and any
necessary amendments have been made.
Orders are generated when the GENERATE.ORDER field on the Request application is set to ‘Yes’ and
are based upon the actual values on the current version of the related ‘Detail’ record.
The Cash Sweep and Currency Hedging requests both generate transactions through the FOREX
application whilst Liquidity Sweep requests generate transactions through the Securities application.

Generate Orders

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Enquiries
A group of enquiries are provided that display details of the proposed orders. These enquiries allow for
the rapid review and modification of a selection of ‘Detail’ records described above. They provide the
facility to edit the fields described in the ‘Recalculation’ section and to commit the changes.
Once the ‘Detail’ records have been reviewed and any necessary amendments made, orders can be
generated from the Cash Management request (Described in the ‘Generate Orders’ section)

The following examples illustrate the enquiry display and update.

AM.SWEEP.DETAIL.AMEND
This enquiry displays proposed Cash Sweeps, selected by Request Id.

Enquiry AM.SWEEP.DETAIL.AMEND

Amending the minimum cash amount and committing the record results in the automatic recalculation
of the traded amount (AUTO.RECALC.CM parameter set to ‘Yes’)

AM.SWEEP.DETAIL.AMEND after recalculation

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AM Cash Management

AM.LIQ.SWEEP.DETAIL.AMEND
This enquiry displays proposed Liquidity Sweeps selected by Request Id.

Enquiry AM.LIQ.SWEEP.DETAIL.AMEND

Amending the minimum cash amount and committing the record results in the automatic recalculation
of the Nominal (AUTO.RECALC.CM parameter set to ‘Yes’)

AM.LIQ.SWEEP.DETAIL.AMEND after recalculation

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AM.CCY.HEDGE.FORWARD.AMEND
This enquiry displays proposed Forward type hedging transactions.

Enquiry AM.CCY.HEDGE.FORWARD.AMEND

Updating the Hedging Factor and committing the record results in the automatic recalculation of the
Amount to Hedge (AUTO.RECALC.CM parameter set to ‘Yes’)

AM.CCY.HEDGE.FORWARD.AMEND after recalculation

AM.CCY.HEDGE.SWAP.AMEND
This enquiry displays proposed Swap type hedging transactions.

Enquiry AM.CCY.HEDGE.SWAP.AMEND

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