Margin Maintenance User Manual

Margin Maintenance User Manual
Margin Maintenance
Oracle FLEXCUBE Universal Banking
Release 11.3.0
[May] [2011]
Oracle Part Number E51535-01
Margin Maintenance
Table of Contents
1.
THE MARGIN MAINTENANCE SERVICE............................................................................................... 1-1
1.1
INTRODUCTION ........................................................................................................................................... 1-1
1.1.1
The features of the Margin Maintenance Sub-system ........................................................................ 1-1
1.1.2
Maintenance required for the sub-system.......................................................................................... 1-2
1.1.3
Who can create a Margin product? ................................................................................................... 1-3
1.2
CREATING A MARGIN PRODUCT ................................................................................................................. 1-3
1.2.1
Specifying your Preferences for the Margin product......................................................................... 1-4
1.2.2
Specifying Accounting Entries and Events......................................................................................... 1-5
1.2.3
Restricting Customers Categories ..................................................................................................... 1-7
1.2.4
Specifying the MIS Details for a Product .......................................................................................... 1-8
2.
DEFINING A MARGIN SCHEME ............................................................................................................... 2-1
2.1
INTRODUCTION ........................................................................................................................................... 2-1
2.1.1
Features of the Margin Scheme Maintenance screen ........................................................................ 2-1
2.1.2
Specifying MIS details for a margin scheme...................................................................................... 2-2
2.1.3
Specifying the Settlement Instructions ............................................................................................... 2-2
3.
PROCESSING MARGIN TRANSACTIONS............................................................................................... 3-1
3.1
INTRODUCTION ........................................................................................................................................... 3-1
3.1.1
Specifying the Settlement Instructions for a margin transaction ....................................................... 3-1
3.1.2
Viewing Accounting details ............................................................................................................... 3-2
3.1.3
Generating the Advices for an Event ................................................................................................. 3-2
4.
SCREEN GLOSSARY .................................................................................................................................... 4-1
4.1
FUNCTION ID LIST...................................................................................................................................... 4-1
1.
1.1
The Margin Maintenance Service
Introduction
The Margin Maintenance sub-system is the channel through which money settlements arising
due to the various events processed in the respective modules are routed. The sub-system also
facilitates the netting of all settlements for an individual customer.
1.1.1 The features of the Margin Maintenance Sub-system
The need for a Margin Tracking sub-system is explained using the following illustration:
As a bank which deals in exchange traded derivatives you can either trade in the market on
behalf of your bank or on behalf of your portfolio customers.
When you are acting on behalf of your customer as per customer instructions to buy or sell
contracts you are simply mediating between the Broker / Exchange / Clearing Member on the one
hand and the Customer on the other. However, since you maintain separate portfolios for yourself
and you need to buy and sell contracts on a regular basis, you will need to mediate with brokers
on an on-going basis.
Therefore, the Broker/Clearing Member/Exchange becomes the counterparty through whom you
access the market whereas the Customer is the entity on behalf of whom your bank is
transacting. When your customer places an order with your bank, you will in-turn route the order
to the appropriate market participant. Consequently, you will impose margin requirements on your
customer. However your bank is also bound by margin requirements stipulated by the counter
party on the other side. These requirements need not be identical.
To meet the margin requirements of your portfolio customers and brokers, you need to set-up
separate schemes for Broker/Clearing Members and Portfolio Customers.
For example, in your North Carolina branch of Chase Manhattan bank, you have maintained two
customer portfolios PF003 and PF004 respectively. Each of these portfolios have been linked to
the following schemes:
Portfolio ID
Scheme ID
PF003
SMPC001
PF004
SMPC002
Another scheme SMBR004 is linked to the Broker ID - CITI.
As per your customer instructions you open 120 long positions in the specified contract for PF003
and 100 long positions for PF004. Since the trade initiation is done through the broker CITI, the
process necessitates margin settlement with the Broker as well as the portfolio customers.
Therefore, while processing the margin settlement transaction with the Broker, you will use the
scheme SMBR004, and specify the settlement amount for a total of the 220 long positions
opened during the day.
However, while processing the margin settlement transaction for your portfolio customers you will
initiate two separate margin settlement transactions. One involving the scheme SMPC001 and
the other one involving the scheme SMPC002.
1-1
The balance in the margin scheme can either be topped-up or refunded. As part of the EOD
programs the system check for the margin balance in the customer schemes and generates a
Margin Call advice if the margin balance is below the margin maintenance level.
Since every scheme is associated with a currency, while defining margin schemes for a
portfolio customer you can maintain as many schemes as the number of currencies. The linkage
between the Margin Scheme and the Currency is done as part of the Portfolio Maintenance for
customer portfolios.
Similarly, the broker scheme-currency linkage is maintained through the Broker Scheme definition
screen.
1.1.2 Maintenance required for the sub-system
For the Margin Maintenance sub-system to function effectively, firstly you need to set up Margin
Products in Oracle FLEXCUBE. Margin products basically provide the infrastructure for the
maintenance of the various events, accounting entries and advices. You can choose to maintain
margin products to cater to two types of customer categories:

Your bank’s Brokers/Clearing Members/Clearing Houses – the definition and
maintenance of Broker Margin products helps you to manage the margin requirements of
your bank’s brokers.

Your Portfolio Customers – you can use a Customer Margin product to handle the margin
requirements of your bank’s portfolio customers
After defining margin products you need to create Margin Schemes for individual customers. A
margin scheme is a pool or balance that maintains a net receivable or payable position for a
Broker or Portfolio Customer.
The existing modules in Oracle FLEXCUBE interface with the Margin Maintenance sub-system
using the Margin Scheme. It is because of the transactions involved in the various front-end
modules that the Receivable/Payable balance in the scheme is built up. Apart from the various
modules, a margin settlement, which is a transaction of the Margin Maintenance sub-system also
affects the scheme pool balance.
A data diagram of the Margin Maintenance sub-system illustrates its work-flow:
Margin Product
Broker / CM / PfPf-Customer
Product Type
Role to Head
Event
Accounting
Margin Scheme
Margin Settlement Transactions with PfPf-Customer / Broker
Top Up / Reduction in Margin
Total Receivable/Payable to the PfPf-Customer/Broker
Tracking System
Modules like ED will contribute to this Receivable / Payable pool.
pool.
The module will hand over the following details for a Receivable tracking.
•Receivable / Payable
•Amount
•Customer / Broker
1-2
The maintenance of Margin Products and Schemes and the processing of Margin Settlements
have been dealt with in detail in the sections detailed below.
1.1.3 Who can create a Margin product?
A margin product is created in the Head Office branch of your bank. Any user in the head office,
with the requisite rights, can create a product.
1.2
Creating a Margin Product
You can capture information pertaining to a margin product through the ‘Margin Product
Definition’ screen. You can invoke this screen by typing ‘MGDCPROD’ In the field at the top right
corner of the Application Browser and clicking the adjoining arrow button.
In this screen, you can enter the basic details of the product. They are:

the product code and module

a description of the product

the product type

a slogan for the product

the group to which the product belongs

the Start Date of the product

the End Date of the product

the remarks, if any
Product Code
You can identify a product that you maintain with a unique Product Code, and a brief description.
In the Product Code field, you must assign the product a unique code (which is unique across all
the modules of Oracle FLEXCUBE). This code helps in identifying the product. You can briefly
describe a product that you create in the Description field.
1-3
The services that you offer in a module will be specific to the module. For example, a broker
margin maintenance product is specific to the ETD (Margin) module. You can view the module in
which you are creating a product in the Product Module field.
Product Slogan
You can enter a slogan for the product that you are creating. In the Slogan field enter a slogan
that suitably announces the product to your brokers/portfolio customers depending on the product
type you are maintaining.
Product Group
Grouping products according to the common features they share, helps you organize information
relating to the services you provide. This helps you retrieve information easily.
You can invoke a list of all the product groups that you have maintained in your bank. Choose the
product group to which the product you are creating belongs.
Start Date and End Date
When you create a product, you must also specify a date from which it can be offered. You may
also specify the date upto which you would like to offer the product. Enter these dates in the Start
Date and End Date fields.
You cannot offer a product beyond the specified end date. If you do not specify an end date
for a product, you can offer it for an indefinite period.
Remarks
If you want to enter any remarks regarding the product, do so in the Remarks field.
1.2.1 Specifying your Preferences for the Margin product
Indicating the values to be re-keyed during authorization
In Oracle FLEXCUBE, all operations on a margin settlement record (input, amendment,
modification, etc.) have to be authorized by a user other than the one who entered the details of
the record. These operations have to be carried out before the end-of-day activities have begun.
Authorization is a way of checking the entries made by a user.
As part of specifying the preferences for a margin product, you can indicate that details of certain
fields should be re-entered when a margin settlement record is invoked for authorization. This
process is called re-key authorization. Re-key authorization is used as a cross-checking
mechanism. During authorization, the complete details of the margin settlement record will be
displayed only after the values to the re-key fields have been entered.
To indicate that re-key authorization should be done for contracts involving the product check the
Re-key Required box in this screen. You can specify any or all of the following as re-key fields:

Scheme ID

Scheme Event

Settlement Amount
If no re-key fields have been defined, the details of the margin transaction involving the product
will be displayed immediately when the authorizer calls the specific record for authorization. The
re-key option also serves as a means of ensuring the accuracy of inputs. You can specify the
authorization re-key fields through the Margin Product Preferences screen.
1-4
1.2.2 Specifying Accounting Entries and Events
Each product that you maintain in Oracle FLEXCUBE will impact specific accounting heads
(GLs). Therefore while defining a product you have to identify all GLs specific to the product and
indicate their roles individually.
The different stages in the life cycle of a margin product are referred to as events. After identifying
accounting roles and mapping them with account heads, you have to identify the various events
that need to be associated with the margin product. Subsequently, you will also have to identify
accounting entries, which have to be posted when individual events are triggered in Oracle
FLEXCUBE.
The mapping of accounting roles to respective account heads and the identification of life-cycle
events at which they ought to be triggered automates the process of posting accounting entries.
Example
Scenario I
Let us assume you are defining a margin product for Brokers with the product code - MGBR. As part of
identifying and mapping accounting roles to appropriate account heads you would have to identify two GLs:
1. An amount Payable account.
2. An amount Receivable account.
Your bank has maintained separate payable and receivable GL for Brokers. Consequently your entries in
the respective fields would be as follows:
Accounting Role
Description
Account Head
Account Description
BR_PAYABLE
Broker Payable Account
LI2000009
Suspense – Liability
BR_RECEIVABLE
Broker Receivable Account
AS2100003
Suspense Asset
Next, we have to identify and associate life-cycle events with the margin product.
Event
Description
MREF
Margin Refund
MTOP
Margin Top Up
Now, we have to identify the accounting entry that has to be posted when each event is triggered in Oracle
FLEXCUBE.
Event Code – MREF
Account Role
Amount Tag
Dr/Cr Indicator
Transaction Code
BR_SETTLEMENT
MG_SETLM_AMT_MREF
Debit
MSC (Miscellaneous)
BR_RECEIVABLE
MG_SETLM_AMT_MREF
Credit
MSC (Miscellaneous)
Advices
The advice associated with this event is – Debit Advice.
1-5
Event Code - MTOP
Account Role
Amount Tag
Dr/Cr Indicator
Transaction Code
BR_PAYABLE
MG_SETLM_AMT_MTOP
Debit
MSC (Miscellaneous)
BR_SETTLEMENT
MG_SETLM_AMT_MTOP
Credit
MSC (Miscellaneous)
Advices
The advice associated with this event is – Credit Advice.
The accounting entries maintained at the product level will be defaulted to all transactions associated with
the product. As a result, each time you process a margin transaction involving this product, the system posts
the accounting entries mapped at the product level.
Scenario II
Now, let us assume you are defining a margin product for Portfolio Customers. The Product Code that you
assign to this product is - MGPF.
As in the earlier case you will need to identify Accounting Roles and Events and map relevant Accounting
Entries to the events. Your entries in the respective screens would be as follows:
Role to Head Mapping screen
Accounting Role
Description
Account Head
Account Description
PF_PAYABLE
Portfolio Payable Account
LI2000009
Suspense-Liability
PF_RECEIVABLE
Portfolio Receivable Account
AS2100003
Suspense-Asset
Next, you will identify and associate life-cycle events with the portfolio margin product.
Event
Description
MTOP
Margin Top Up
MREF
Margin Refund
The accounting entries that need to be posted when each of these events are triggered will be as follows:
Event Code - MTOP
Account Role
Amount Tag
Dr/Cr Indicator
Transaction Code
PF_SETTLEMENT
MG_SETLM_AMT_MTOP
Debit
MSC (Miscellaneous)
PF_RECEIVABLE
MG_SETLM_AMT_MTOP
Credit
MSC (Miscellaneous)
Advices
We will specify that a Debit Advice is to be generated whenever this event is triggered.
1-6
Event Code – MREF
Account Role
Amount Tag
Dr/Cr Indicator
Transaction Code
PF_PAYABLE
MG_SETLM_AMT_MREF
Debit
MSC (Miscellaneous)
PF_SETTLEMENT
MG_SETLM_AMT_MREF
Credit
MSC (Miscellaneous)
Advices
We will indicate that a Credit Advice is to be generated whenever this event is triggered.
You can map accounting roles to specific account heads through the Product Accounting
Role to Head definition screen. Identification of life-cycle events and association of appropriate
accounting entries with each event has to be done through the Event-wise Accounting Entries
and Advices definition screen.
1.2.3 Restricting Customers Categories
Customers can be grouped according to the common characteristics that they share. For
example, you can group your customers into:

Banks

Corporate

Financial Institutions (excluding banks)

Individuals
While defining Margin products you can choose to restrict specific customer categories from
using the margin product. Conversely, you also have the option of restricting specific customers
within a product from using the product.
For instance, let us assume that you have segregated the customers of your bank into the
following categories:

Portfolio Customers

Brokers

Industrialists

Agriculturists
You are defining a Broker type of margin product. Therefore you will maintain the Restriction
Type as Allowed and move category Brokers to this column, thereby restricting the other three
categories from using this product.
When you disallow the other three customer categories from using the product, the system
automatically displays the details of all customers classified under the restricted categories in the
Customer Access column.
You would like to allow the industrialist Mr. Amitabh Chowdhury to use this product. Choose from
the option list and change the restriction status to Allowed.
Specific customers and customer categories can be restricted through the Customer Categories
Restriction screen.
1-7
1.2.4 Specifying the MIS Details for a Product
You can define the Management Information System (MIS) details for the margin product that you
are creating through the MIS Product details screen.
Through the MIS product details screen you can link the product to transaction MIS codes. The
transaction codes linked to the product are defaulted to the margin settlement transaction record.
1-8
2.
2.1
Defining a Margin Scheme
Introduction
A margin scheme broadly defines your counterparty’s (Portfolio Customer or Broker) margin
requirements. It represents the arrangement that your Portfolio Customer has with your bank for a
particular currency. In the case of Brokers, a scheme represents the arrangement that your bank
has with the broker for a particular currency.
Since a scheme is a pool of balance maintaining a net receivable or payable position for a Broker
or a Portfolio Customer you can choose to liquidate the scheme either partially or wholly at any
given point in time.
Every scheme that you define is linked to a Margin product and a Customer. Consequently, each
scheme is indicative of whether the relationship that the counterparty shares with your bank is
that of a Portfolio Customer or a Broker / Clearing Member.
The ‘Margin Scheme definition’ screen is available in the Oracle FLEXCUBE Browser under the
Maintenance tab.
2.1.1 Features of the Margin Scheme Maintenance screen
Linking a Margin Scheme to a product
You should necessarily use a margin product that has already been created while capturing the
details of a margin scheme. You can either choose to associate a Broker type or Customer
Portfolio type of margin product depending on whether the scheme is meant for a portfolio
customer or for a broker.
For instance, let us assume that you are creating a margin scheme for Brokers of your bank for
settling receivable/payable balances arising out of transactions processed in the Exchange
Traded Derivatives module. In this case you will have to associate a Broker type of margin
product with the scheme. To select a product, click on the option list positioned next to the
Product field.
After you associate a margin product with the scheme the system displays the Scheme Type as
Portfolio Customer or Broker depending on the product type associated with the scheme.
2-1
The Reference Number and the Scheme ID
Each time you maintain the details of a new scheme the system automatically assigns a unique
Reference Number to the scheme. You have the option of modifying this reference number.
The Scheme ID is also generated by the system. You will not be allowed to modify the Scheme
ID since it is assigned by the system.
Indicating the Scheme details
As part of specifying the scheme details firstly you have to indicate the code of the customer for
whom you are creating the particular scheme.
After you indicate the Customer Code, you have to specify the currency in which the scheme is to
be maintained. Click on the option list positioned next to the respective fields and select the
Customer Code and Currency from the lists that get displayed.
In addition to specifying the Customer Code and Currency you have to indicate the Rate Code
and Rate Type that is to be associated with the currency. The different rates maintained in the
Exchange Rates screen are identified by unique Rate Codes. The Rate Code identifies the
corresponding rate maintained in the Exchange Rate table. Whenever a conversion is done this
rate will be picked up and applied on the margin transaction associated with the scheme.
Similarly, the Rate Type indicates whether the rate to be applied on the margin transaction is the
Mid Rate or the Buy/Sell Rate.
Specifying the Settlement details
You have to indicate the default account that should be involved in the accounting entries for
settling margin transactions in the particular scheme. The currency of the Settlement Account
should be the same as that of the Scheme Currency
After indicating the Settlement Account, you have to indicate the code of the branch to which the
settlement account belongs.
Specifying the Margin Level details
You can indicate the minimum Initial and Maintenance margin amounts for the scheme that you
are maintaining.
2.1.2 Specifying MIS details for a margin scheme
The MIS transaction codes associated with the margin product will be defaulted to the margin
scheme. You can choose to change them or add to the existing list. You can do this through the
Margin Scheme MIS Details screen.
2.1.3 Specifying the Settlement Instructions
Along with other details of a margin scheme, you have to specify the following settlement related
details for the scheme.

The accounts that will be impacted for the Payable/Receivable amounts

The method in which the margin settlement is to be settled – whether it is an Instrument
or a Message (SWIFT or Telex message)

Details about the route through which the money settlement should take place
2-2
3.
3.1
Processing Margin Transactions
Introduction
Margin Settlement transactions for topping-up or refunding from the schemes can be processed
through the ‘Margin Settlement processing’ screen. This screen is available under the
Transaction tab in the Oracle FLEXCUBE browser.
In this screen, firstly you have to specify the ID of the margin scheme that is to be linked with the
margin transaction. The other details about the Margin Scheme such as:

The Currency of the scheme

The Customer (Broker/Portfolio Customer) associated with it

The Settlement Account and the Branch in which it resides
will be defaulted in the respective fields. You can choose to maintain a different settlement
account (in a different branch) other than the one that is defaulted. You also have to indicate the
amount that needs to be settled while processing the margin settlement transaction.
The system date will be displayed in the Transaction Date and Value Date fields respectively.
While you cannot change the Transaction Date, you can choose to change the Value Date.
Additionally, you will also have to indicate whether a Top-Up event or a Refund event has to be
done in the scheme by choosing one of the options available below:

Top Up

Refund
3.1.1 Specifying the Settlement Instructions for a margin transaction
So far, we have discussed the basic information that is captured through the Margin Settlement
screen. To recall, along with other details of a margin settlement transaction, you have also
specified the settlement account and the branch where the account resides.
Apart from the details of this account, you may have to capture the following details to effect a
margin settlement transaction successfully:

The accounts to be debited/credited for Payable/receivable amounts

The method in which the margin settlement is to be settled -- whether it is an instrument
or a Message (as in a SWIFT or TELEX message)
3-1

Details about the route through which the money settlement should take place
3.1.2 Viewing Accounting details
Click the Accounting button, to view the accounting entries and overrides for the settlement
transactions.
The following accounting entry and override information is provided for each transaction:

Branch

Account

The currency of the Account

The amount tag

The transaction code

Dr/Cr indicator

Value Date

The Amount in the Currency of the Account, when the currency is a foreign currency

The exchange rate that was used for the conversion, if the Account is a foreign currency
account

Amount in local currency

All the overrides that were encountered for the event will also be displayed

The date and time on which the entry was entered in Oracle FLEXCUBE
3.1.3 Generating the Advices for an Event
From the Margin Settlement screen, click the Advices button. The Advices screen is displayed.
The advices that can be generated for the events that occur during margin settlement processing
are defined for the product to which the margin scheme is associated.
The party type to whom a specific advice should be sent is picked up automatically based on the
type of margin settlement you are entering and the parties involved in the transaction.
3-2
4.
4.1
Screen Glossary
Function ID List
The following table lists the function id and the function description of the screens covered as part
of this User Manual.
Function ID
Function Description
MGDCPROD
Margin Product Maintenance
4-1
Margin Maintenance
[May] [2011]
Version 11.3
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