Best Practices FX Business
Pre-trade preparation and documentation
Know your customer
Determine Documentation Requirements
Agree upon trading and operational practices
Agree upon and document special arrangements
Trade capture
Enter trades in a timely manner
Use Straight Through Processing
Use real time credit monitoring
Use standing settlement instructions
Operations should be responsible for settlement instructions
Review amendments
Closely monitor off market and deep in the money option transactions
Confirmation
Confirm and affirm trades in a timely manner
Be diligent when confirming by non secure mean
Be diligent when confirming structured or non standard trades
Be diligent when confirming by telephone
Institute controls for trades transacted through electronic trading platforms
Verify expected settlement instructions
Confirm all netted transactions
Confirm all internal transactions
Confirm all block trades and split allocations
Review thirty party advices
Automate confirmation matching process
Establish exception processing and escalation procedures
Netting
Use online settlement netting systems
Confirm bilateral net amounts
Employ timely cutoffs for netting
Establish consistency between operational practices and documentation
Settlement
Use real time nostro balance projections
Use electronic messages for expected receipts
Use automated cancellation and amendment facilities
Implement timely payment cutoffs
Report payment failures to credit officers
Understand the settlement process and settlement exposure
Prepare for crisis situations outside your organization
Nostro reconciliation
Perform timely nostro account reconciliation
Automate nostro reconciliations
Identify non receipt of payments
Establish operational standards for nostro account users
Accounting / financial control
Conduct daily general ledger reconciliation
Conduct daily position and P&L reconciliation
Conduct daily position valuation
Review trade prices for off market rates
Use straight through processing of rates and prices
Unique features of foreign exchange options and non deliverable forwards
Establish clear policies and procedures for the excise of options
Obtain appropriate fixings for non standard transactions
Closely monitor option settlements
General best practices
Ensure segregation of duties In Front, Middle & Back Offices
Ensure that staff understands business and operational roles
Understand operational risk
Identify procedures for introducing new products, new customer types or new trading strategies
Ensure proper model sign off and implementation
Control system access
Establish strong independent audit / risk control groups
Use internal and external operational performance measures
Ensure that service outsourcing conforms to industry standards and best practices
Implement globally consistent processing standards
Maintain records of deal execution and confirmations
Maintain procedures for retaining transaction records
Develop and test contingency plans