10. Automatic Daily Process

10.1 Introduction

The End of Cycle (EOC) events constitute a set of programs, which are automatically triggered during the batch processes. The EOD process is designed to tie up all the operations for a financial day and prepare the system for the next day.

note: During End of Day, the batch process should be run after End of Transaction Input (EOTI) has been marked for the day, but before End of Financial Input (EOFI) has been marked for the day.

As part of running the End of Day processes for Exchange Traded Derivatives, the system does an automatic Deal Settlement, whereby all deals that were booked during the day will be processed sequentially. This includes:

For Futures:

•Deals that result in Open Positions in the Basket.

•Deals that close an existing Open Position.

•Deals that Exchange Open Positions for Physicals.

•Automatic Exchange for Physicals (on the Futures Expiry Date)

For Options:

•Exercise deals.

•Assignment deals

•Automatic Expiry of Out of Money options (on the Option Expiry Date)

•Automatic Exercise / Assignment of In the Money options (on the Option Expiry Date).

All the deals within a basket are processed in the order of the Value Date + Trade Time Stamp of the Deal.

This topic contains the following sub-topics:

1)ETD Batch Processes at EOD

2)Automatic Events Executed during End of Day for Futures

3)Automatic Events Executed during End of Day for Options

4)Sample Accounting Entries for Various Events

5)List of Glossary - Automatic Daily Processing

10.2 ETD Batch Processes at EOD

The ETD batch process is a POST-EOTI batch function. The batch can be run anytime, after marking EOTI and before marking EOFI. As part of the End of Day (EOD) process for ETD, the system does an automatic deal settle­ment in the order in which the deals have been booked during the day.

All deals within a basket are processed in the order of Value Date + Time Stamp of deal. Notional Revaluation done during the previous EOD will be reversed before processing for the day begins. If there is a backdated deal, all the events in the basket after the back valued time stamp will be reversed during EOD, and all deals booked after that back valued time stamp will be processed again.

This topic contains the following sub-topics:

1)Process End of Day Batch Start

10.2.1 Process End of Day Batch Start

This topic describes the systematic instruction to process the End of Day Batch Start.

Context:   

To run the Batch process, use the End of Day Batch Start screen.

Prerequisite:   

Specify User ID and Password, and login to Homepage.

1.On Homepage, type AEDSTART in the text box, and then click next arrow.

Step Result:   The End Of Cycle Operations screen is displayed.

Figure 10.1: End Of Cycle Operations

2.On the End Of Cycle Operations screen, click New.

3.On the End Of Cycle Operations screen, specify the field details and then click Enter query.

For more information on the fields, refer to the below Field Description table.

Table 10.1: End Of Cycle Operations - Field Description

4.To exit the screen without running the batch, click Exit or Cancel button.

You cannot cancel an EOD Batch process once it has begun.

10.3 Automatic Events Executed during End of Day for Futures

This topic contains the following topics:

1)Settlement of Opening Deals

2)Realized Revaluation of Open Positions

3)Settlement of All Closing Deals for Day

4)Liquidation of All Open positions on Expiry Date

10.3.1 Settlement of Opening Deals

This process will update the Cost of the portfolio based on the new holdings. The events that can be triggered in Oracle Banking Treasury Management for settling open deals are:

Table 10.2: Event Code - Description

Table 10.3: Example

The result of the Settlement Process will be 12 Contracts at 280 USD, where the average cost of holding will be (280/12 USD) 23.33 USD.

10.3.2 Realized Revaluation of Open Positions

As part of this running, this process the system will equal the Holding Cost of the portfolio to the Current Market Price and account for the Realized Gain or Loss.

The events that can be triggered in Oracle Banking Treasury Management for processing Realized Revaluation is:

Table 10.4: Event Code - Description

Let us extend the above example and see what happens when Realized Revaluation is done for all Open Positions in Futures:

Table 10.5: Existing Positions

Table 10.6: Result

10.3.3 Settlement of All Closing Deals for Day

As part of settling all Closing deals for the day, the system calculates and posts accounting entries for the closure gain or loss.

The events that can be triggered in Oracle Banking Treasury Management for processing the closure of deals are:

Table 10.7: Event Code - Description

10.3.4 Liquidation of All Open positions on Expiry Date

As of the Expiry Date the system will identify all series expiring on that day and liquidate all Open positions in the series. The system reverses contingents.

The events that will be triggered in Oracle Banking Treasury Management for liquidating open positions on the Expiry Date are:

Table 10.8: Event Code - Description

10.3.5 Portfolio Event Processing

The system supports all costing methods for Futures as a part of Batch processes for managing positions.

All the deals booked during the day would be processed in the order they were booked..

The type of Portfolio event that need to be triggered for the deal, would be decided based on the following:

•Nature of the Deal – For creating Long or Short position or Liquidation deal for Exercise, Expiry or Physical Delivery

•Direction of the Position – in the same direction as the existing position or in the opposite direction

•Action performed – Deal Booking or reversal, Deal Matching or un-matching

Accounting entries would be posted which will depend on the following:

•Nature of the Instrument - Futures, Future style Options, Option style Options

•Underlying Asset type - Currency pair or Others

•Portfolio Configuration - Open Individual Position, Post Deal-wise PL Entries

For each event, accounting entries would be posted for the components as applicable.

•For the portfolios that follow FIFO/LIFO/WAC costing methods, the entries will be posted for Asset or Liability for all deals in the order they were booked and based on the direction of the deal

•For the portfolios that follow DMAT costing method, if ‘Open Individual Position’ is toggled-on, then Asset or Liability entries would be posted for opening the position individually for all the deals irrespective of the direction of the deal and whether they are matched or not. Otherwise, entries would be posted only after the deals were matched. However, basket balances would be updated by all the deals immediately after they were booked considering the direction of the deal, resulting in a Net Position in the basket.

•For the portfolios that follow WAC costing method, the existing process for Futures WAC and PL calculation would continue

•Both Notional Profit-Loss for Option style Options and Realized Profit-Loss for other instruments would be posted from the ERVL/ ERVS

Reversal entries would be posted only for Notional Profit-Loss on the next business date.

Entries would be for posted for individual PL for each pair of matched deals, if ‘Post Deal-wise PL Entries’ is toggled-on for the portfolio associated

Entries for Realized PL would be posted against ‘Broker Margin (VM) Account’, based on the setup for the broker

Entries would be for posted for individual Notional Profit-Loss for each deal, if ‘Post Deal-wise PL Entries’ is toggled-on for the portfolio associated

Otherwise, single set of entries would be posted for the net Notional Profit-Loss calculated for the basket in that port­folio.

10.4 Automatic Events Executed during End of Day for Options

This topic contains the following topics:

1)Settlement of Opening Deals for Options

2)Settlement of Closing Deals

3)Notional Revaluation of Open Positions for Options with Option Style Premium

4)Automatic Exercise of Options/Assignment of Exercise

5)Automatic Expiry of Out/At the Money Positions

6)Reversal of Notional Revaluation for Options with Option Style of Premium

7)Produce Instrument Detail and Instrument Price Detail Hand-offs

8)Portfolio Event Processing

10.4.1 Settlement of Opening Deals for Options

While running this process the system updates the cost of the portfolio based on the new holdings. This is done as per the costing method (Deal Matching / Weighted Average / LIFO / FIFO) defined for the portfolio.

note: While running this process, the system updates the cost of the portfolio based on the new holdings. This is done as per the costing method (Deal Matching/Weighted Average/LIFO/FIFO) defined for the port­folio.

The events that will be triggered in Oracle Banking Treasury Management for processing the settlement of opening deals for options are:

Table 10.9: Event Code - Description

10.4.2 Settlement of Closing Deals

As part of the settlement of Closing deals for your bank own portfolios, the closure gain or loss will be computed and accounted for depending on the portfolio Costing Method.

While processing the settlement of closing deals for customer portfolios, the system does not process any accounting for profit and loss. However, the deal premium will be passed from the Broker/Customer to the Customer/Broker.

The events that will be triggered in Oracle Banking Treasury Management for processing the settlement of closing deals for options are as follows:

Table 10.10: Event Code - Description

10.4.3 Notional Revaluation of Open Positions for Options with Option Style Premium

Notional revaluation of open positions can be done only for your bank’s portfolios. The system does a notional reval­uation of open positions to compare the current Option Premium with the Acquisition Premium of the basket and to compute the revaluation gain/loss.

The events that will be triggered in Oracle Banking Treasury Management for calculating the Notional Revaluation of open positions is as follows:

Table 10.11: Event Code - Description

10.4.4 Automatic Exercise of Options/Assignment of Exercise

For Automatic Exercise/Assignment exercise of options, the system will identify all ‘In the Money’ instruments on the Expiry Date and fire automatic exercise (for Long Positions) and Assignment of Exercise (for Short Positions) for the portfolio.

The Instrument and the Series (which is being traded) will be marked as Expired and will be unavailable for further trading.

For your bank’s own portfolios, the system will compute the Exercise Gain and Assignment Loss and post relevant accounting entries for the same.

note: For Customer portfolios, for Options with Future Style Premium, the system does the money settlement for the difference between the underlying asset Spot Price and the Option Strike Price. Also, the money settlement for the Deal Premium is calculated.

10.4.5 Automatic Expiry of Out/At the Money Positions

The Automatic Expiry of Out of the Money / At the Money positions will identify all out of/at the money instruments on the Expiry Date and fire an automatic expiry for the portfolio.

The Instrument and Series, which is being traded, will be marked as expired and will not be available for future trading.

For long positions in your bank’s own portfolios, the acquisition premium (paid / to be paid – depending on the Premium Style) will be expensed out. For short positions within your bank’s own portfolios, the received / to be received premium will be credited as income.

For your customer portfolios, the basket is marked as ‘Expired’. In case of Options with Future style of Premium, the money settlement of the premium will be done during the Expiry event.

10.4.6 Reversal of Notional Revaluation for Options with Option Style of Premium

Reversal of Notional revaluation will be done only for your bank’s own portfolios.

The event that will be triggered in Oracle Banking Treasury Management for the reversal of Notional Revaluation is:

Table 10.12: Event Code - Description

note: For Options with future style of premium, the system does a Realized Revaluation.

10.4.7 Produce Instrument Detail and Instrument Price Detail Hand-offs

The instrument details and instrument price details that were created or modified during the day can be handed off in an XML format using the Instrument Batch Hand-off process. This batch process collects the data of the instru­ment details that are either created or modified during the day and generates a notification for the same.

To run the Instrument Batch Hand-off process automatically at EOD, you must maintain two mandatory programs – for instrument detail and instrument price detail - under the batch operations. You can do this using the Mandatory Batch Program Maintenance screen.

10.4.7.1 Process Function Inputs

Context:   

Prior to maintaining the mandatory programs, you must first maintain the function inputs for Batch EOD Functions.

Prerequisite:   

Specify User ID and Password, and login to Homepage.

1.On Homepage, type BADEODFE in the text box, and then click next arrow.

Step Result:   The Batch EOD Function Inputs screen is displayed.

Figure 10.2: Batch EOD Function Inputs

2.On the Batch EOD Function Inputs screen, click New.

3.On the Batch EOD Function Inputs screen, specify the fields details, and then click Enter Query.click New.

For more information on the fields, refer to the below Field Description table.

Table 10.13: Batch EOD Function Inputs - Field Description

After specifying the above details, you can add the input of the function for the function in the Function Inputs table. You must mandatorily specify the Parameter and Data Type for each function. Now you can proceed with maintaining the Instrument Batch Hand-off process as a mandatory program.

10.4.7.2 Process Mandatory Batch Programs

Context:   

You can maintain the Instrument Batch Hand-off process as a mandatory program using the Mandatory Batch Program Maintenance screen.

Prerequisite:   

Specify User ID and Password, and login to Homepage.

1.On Homepage, type EIDMANPE in the text box, and then click next arrow.

Step Result:   The Mandatory Batch Program Maintenance screen is displayed.

Figure 10.3: Mandatory Batch Program Maintenance

2.On the Mandatory Batch Program Maintenance screen, click New.

3.On the Mandatory Batch Program Maintenance screen, specify the field details, and then click Enter Query.

For more information on the fields, refer to the below Field Description table.

Table 10.14: Mandatory Batch Program Maintenance - Field Description

10.4.7.3 Process Instrument Hand offs

Context:   

Use the Intra Day Batch Start screen to initiate the instrument details and instrument price details hand-offs.

Prerequisite:   

Specify User ID and Password, and login to Homepage.

1.On Homepage, type BADTRIDB in the text box, and then click next arrow.

Step Result:   The Treasury Intra Day Batch Start screen is displayed.

Figure 10.4: Treasury Intra Day Batch Start

2.On the Treasury Intra Day Batch Start screen, click New.

3.On the Treasury Intra Day Batch Start screen, specify the fields details and then click Enter Query.

For more information on the fields, refer to the below Field Description table.

Table 10.15: Treasury Intra Day Batch Start - Field Description

4.Click OK.

10.4.8 Portfolio Event Processing

As part of the existing batch process, the system will identify all Option style Option deals that have premium settle­ment on the next day (Money Settlement Date):

•For all Long option deals, the system will trigger Premium Settlement for Options Bought (EOPL) event.

•For all Short option deals, system will trigger Premium Settlement for Options Sold (EOPS) event

•Entries will be posted for premium settlement as configured for EOPL/EOPS events configured for the portfolio. And entries will be posted for Payable / Receivable against 'Broker Margin (VM) Account', based on the setup for the broker

•Entries for Position Opening and Closing events will be triggered for the option deals as configured for the port­folio.

10.5 Sample Accounting Entries for Various Events

In this topic, we have given samples of accounting entries that will be posted during the batch processing programs for Futures as well as Options.

This topic contains the following sub-topics:

1)Future Deals

2)Option Deals

10.5.1 Future Deals

This topic describes the samples of accounting entries that will be posted during the batch processing programs for Future Deals.

This topic contains the following sub-topics:

1)Instrument Details - CME-90 day US T-bill-Future

2)Deal I – Reference Number D20101

3)Deal II – Reference Number D20302

4)Deal III – Reference Number D20401

10.5.1.1 Instrument Details - CME-90 day US T-bill-Future

Table 10.16: Field Values

Table 10.17: Series I

As mentioned earlier in the manual, each time you process a deal with the following combination:

Basket = Portfolio ID + Instrument ID + Series ID + Broker + Broker Account

The system assigns a unique reference number known as the Basket Reference Number to this combination.

Table 10.18: Event Values

10.5.1.2 Deal I – Reference Number D20101

Table 10.19: Nature of Contract - Open Long Position for Own Portfolio

The Basket BSK001 is updated with a balance of 200 Long contracts.

The event that needs to be processed in the Basket because of this Deal is EOLG. The accounting entries posted for this event are as follows:

Table 10.20: Accounting Entries

Realized Revaluation entries at EOD

Let us assume that the EOD price of the Instrument is 97.25 USD. At the End of Day, the event ERVL is triggered and the following entries will be passed:

Table 10.21: Accounting Entries

10.5.1.3 Deal II – Reference Number D20302

Table 10.22: Nature of Contract - Partial Liquidation of Long Position for your Own Portfolio.

In this case, since the Portfolio, Instrument, Series, Broker, and Broker Account combination is the same as the one that was used to process the earlier deal – D20101, the system uses the same basket BSK001.

The balance in the basket before processing this deal was 200 Long contracts. Since we are processing a short deal, the balance in the basket will come down to 100 long contracts.

The accounting entries posted for partial liquidation of long contracts will be as follows:

Table 10.23: Accounting Entries

10.5.1.4 Deal III – Reference Number D20401

Table 10.24: Nature of Contract – Settlement by exchange of physicals on Contract Expiry (Own Long Position).

The Current balance in the Basket is 100 long contracts. Since the instrument expires on 24-Nov-00, all 100 contracts within the basket will cease to exist on the Expiry Date.

The accounting entries that will be posted for the settlement of exchange of physicals on contract expiry will be as follows:

Table 10.25: Event Code - EEPL

10.5.2 Option Deals

This topic describes the samples of accounting entries that will be posted during the batch processing programs for Option Deals.

This topic contains the following sub-topics:

1)European Option Deals with Option Style Premium

2)Deal I – Reference Number D10103

3)Deal II –Reference Number D10201

4)Deal II –Reference Number D10402

5)American Option Deals with Future Style Premium

6)Deal I – Reference Number D20104

7)Deal II –Reference Number D10402

10.5.2.1 European Option Deals with Option Style Premium

In the earlier topic, we had a look at the sample accounting entries that were triggered during the EOD processing of future deals. We will now have a look at the accounting entries that will get triggered during BOD and EOD, processing for Option deals with Option and Future style premium.

The Instrument involved in all the European option deals is CME-90dayUSTbill-96-Option-Call. The details of this instrument are given below:

10.5.2.2 Instrument Details - CME-90dayUSTbill-96-Option-Call

Table 10.26: Field Values

The details of the basket involved in the option deals in our example are as follows:

Table 10.27: Field Values

10.5.2.3 Deal I – Reference Number D10103

Table 10.28: Nature of Contract - Open Long European Call with Option Style Premium on Own Account

As a result of processing this deal, the system creates a basket BSK002 with the following combination:

PF001 + CME90DTB-CL-E-0P + 96/Nov-00 + CITI + CB001

The basket will be created with a balance of 80 Long contracts.

At EOD, the event that needs to be processed in the Basket because of this Deal is EOLG. The accounting entries posted for this event are as follows:

Table 10.29: Accounting Entries

For the event ERVL, the following entries will be posted:

Table 10.30: Accounting Entries

10.5.2.4 Deal II –Reference Number D10201

Table 10.31: Nature of Contract - Open Long European Call with Option Style Premium on Own Account

The balance in the basket before processing this deal was 80 Long contracts. Since we are processing a long deal, the current balance in the basket will go up to 100 Long contracts.

At EOD, the event that needs to be processed in the Basket because of this Deal is EOLG. The accounting entries posted for this event are as follows:

Table 10.32: Accounting Entries

ERVL is triggered and the following entries are posted:

Table 10.33: Accounting Entries

10.5.2.5 Deal II –Reference Number D10402

Table 10.34: Nature of Contract – Auto Exercise of Long position in an In the Money European Call on Expiry.

The current balance in the Basket is 100 long contracts. Since the instrument expires on 24-Nov-00, all 100 contracts within the basket will cease to exist on the Expiry Date.

The accounting entries that are posted for the settlement of exchange of physicals on contract expiry will be as follows:

Table 10.35: Event Code - EXRL

10.5.2.6 American Option Deals with Future Style Premium

The Instrument involved in all the American option deals is - NSE-HLL-230-Option-Put. The details of this instrument are given below:

10.5.2.7 Instrument Details - CME-90dayUSTbill-96-Option-Call

Table 10.36: Field Values

The details of the basket involved in the option deals in our example are as follows:

Table 10.37: Field Values

10.5.2.8 Deal I – Reference Number D20104

Table 10.38: Nature of Contract - Open Short in American Put Future Style Option.

As a result of processing this deal, the system creates a basket BSK003 with the following combination:

PF001 + NSE-HLL-230-Option-Put + 230 Jan-01+ CITI + CB001

The basket will be created with 20 short contracts.

At EOD, the event that needs to be processed in the Basket because of this Deal is EOSH. The accounting entries posted for this event are as follows:

Table 10.39: Accounting Entries

For the event ERVS, the following entries will be posted:

Table 10.40: Accounting Entries

10.5.2.9 Deal II –Reference Number D10402

Table 10.41: Nature of Contract - Assignment Prior to Expiry of Own Short Position in American Put.

At EOD, the event that needs to be processed in the Basket because of this Deal is EAXS. The accounting entries posted for this event are as follows:

Table 10.42: Accounting Entries

10.6 List of Glossary - Automatic Daily Processing

AEDSTART

End Of Cycle Operations - 10.2.1 Process End of Day Batch Start (p. 136).

BADEODFE

Batch EOD Function Inputs - 10.4.7.1 Process Function Inputs (p. 143).

EIDMANPE

Mandatory Batch Program Maintenance - 10.4.7.2 Process Mandatory Batch Programs (p. 144).

BADTRIDB

Treasury Intra Day Batch Start - 10.4.7.3 Process Instrument Hand offs (p. 146).