1 Overview of Collateral Margining and Settlement Netting

This chapter explains the Collateral-Netting process flows that need to be maintained in Oracle Banking Treasury Management application.

Figure 1-1 Collateral-Netting Process Flow

Table 1-1 Functions and Processes

Function / Process	Description
Maintenance:	Following are the description for Maintenance function/ process.
Collateral Party (MGDCLCIF)	Any treasury customer can be configured as a collateral party using ‘Collateral Party Maintenance’ function. These preferences defined for the customer are used for collateral margining for the transactions booked with this customer as collateral party. The details that can be captured for Collateral Party include, Mapping customer accounts that can be used for tracking margin for different modules, margin types and currencies
Instrument Margin Calculation Setup (ENDINMRG)	Margin calculation setup can be defined for a Module, product or an instrument using ‘Instrument Margin Calculation Maintenance’ function. These preferences are used for the applicable transactions for calculating margin required for different margin types allowed. The details that can be captured for Margin Calculation Setup include, A unique reference for the setup Details about the branch, module, product, instrument, portfolio for which this setup is used Details about the type of transactions and the purpose for which these preferences are applied Configuring the calculation parameters for each margin type applicable for this setup
Margin-Netting Product (MGDCPROD)	Products can be defined with default preferences for Collateral Margining and Settlement Netting using ‘Margin-Netting Product Maintenance’ function. The advantage of defining a margin-netting product is that it allows to create a broad framework for margining and netting processes followed by the bank. These preferences defined for a product are applied by default on all settlement schemes and master agreements linked to the product. The details that can be captured for Margin-Netting Product include, A unique code and a brief description for the Product Basic details about the type of the product, validity, exchange rate to be used, etc. Mapping Accounting roles to chart of accounts Configuring Events applicable with mapping to accounting roles and amount tags Specific preferences for margining and netting processes Configuring MIS details Details about Charges and Tax applicable for different events
Cash-Margin Settlement Scheme (MGDSCHEM)	Cash Settlement Schemes can be defined with default preferences for Cash Collateral Margining and Cash Settlement Netting using ‘Cash-Margin Settlement Scheme Maintenance’ function. These preferences defined for a scheme are applied by default on all cash settlements using this scheme. The details that can be captured for Cash-Margin Settlement Scheme include, A unique code and a brief description for the Scheme Details of the Customer for whom this scheme is used for settlement Specific preferences for settlement and netting processes, including currency and GL Mapping customer accounts that can be settled using this scheme Holiday preferences to be applied for the settlements using this scheme
Master Agreement (MGDMAMNT)	Master Agreements can be defined with default preferences for Collateral Margining and Settlement Netting using ‘Treasury Master Agreement Maintenance’ function. These preferences defined for a master agreement are applied by default on all transactions linked to the same agreement. The advantage of defining a master agreement is that it allows to create a broad framework for margining and netting for all transactions with a counterparty. The details that can be captured for Master Agreements include, A unique code and a brief description for the Agreement Basic details about the agreement party, type of the agreement and purposes for which the agreement can be used, etc. Details about the linked sub agreements, document type and version used, validity, exchange rate to be used, etc. Configuring margin codes for different margin types applicable for the agreement with specific preferences for collateral types allowed, calculation, settlement, securities eligible, etc. for each margin code Specific preferences for settlement netting purposes
Operations:	Following are the description for Operation function/ process.
Linked Entities (Contract subsystem)	While capturing the details for a contract, user can select any number of customers as Linked Entities for the contract. These are the parties that play different roles during the life cycle processing of the contract. These parties can be, the Actual customer with whom the contract was agreed, if the party selected as counterparty in the contract details is different for any specific reason a Trading or Execution Venue, in which the contract was executed a Clearing House, CCP or a Clearing broker, through whom the contract is cleared for the bank any Intermediary who is involved in the arrangement, execution or clearing of the contract any Intermediary who is involved in reporting or recording the contract for regulatory purposes
Collateral-Netting (Contract subsystem)	While capturing the details for a contract, user can additionally capture the preferences for Collateral Margining and/or Settlement Netting, if applicable for the contract. These preferences can be captured individually for the contract if there are no existing agreements with the parties and the preferences are negotiated at the time of booking. Otherwise, agreements applicable for the contract are selected and only specific preferences were captured as override at the contract level. The details that can be captured for Collateral-Netting include, Collateral and/or Netting Agreements applicable for the contract Contract specific preferences for the Netting Agreement(s) selected Contract specific preferences for the Collateral Agreement selected Contract preferences for Collateral and Netting if there are no existing agreements List of securities eligible as collateral for the contract, if securities collateral is applicable and there are no existing agreements with the parties
Collateral Assignment (SRDMRONL)	Collateral Margin transfer can be performed using ‘Collateral Assignment Process’ function, available specifically for transferring different types of Collateral as margin for different purposes for positions on different types of instruments. Both Cash and Securities can be transferred as collateral using this function. Collateral can be assigned for, an Agreement, if collateral assignment is for the net collateral required to be exchanged for all the contracts linked to the same agreement a Portfolio, if collateral assignment is for the net collateral required to be exchanged for all the contracts booked in the same portfolio a Contract, if collateral assignment is for the collateral required to be exchanged for a specific contract The details that can be captured for Collateral Assignment Process include, Collateral party, Margin process and Settlement date for the collateral assignment Agreement, Portfolio, or a specific Contract for which collateral would be assigned Collateral type and purpose (Margin type) of the collateral assignment transaction For Cash collateral, Margin currency, Margin Account, Collateral Amount, and netting details (if applicable) Settlement details to be used for funds transfer, as agreed with the party For Securities collateral,
	Details about Securities transferred, price applied for valuation, hair cut (if applicable) and portfolio Custodian and settlement party details as applicable for securities transfer User Defined Fields configured for collateral assignment process User can view the details for, Margin preferences applicable for the Agreement, Portfolio or a specific Contract selected Margin available and required to be transferred as Cash or Securities List of contracts linked to the Agreement or Portfolio selected with individual exposures considered
Cash-Margin Netting Initiation (MGDCMINI)	Net settlement of Cash components can be initiated by performing pre-netting for all transactions linked to an Agreement or Portfolio, using ‘Cash-Margin Netting Initiation’ function. All uninitiated cash margin transfers and unsettled deal cashflows of the contracts linked to the same Agreement or Portfolio are eligible for pre-netting can be netted based on the applicable preferences configured for the respective Agreement or Portfolio. Pre-netting operations can be initiated for, Initial Margin to be provided for the net margin required for all the deals with the Initial Margin accounts linked to the selected scheme Variation Margin to be provided for the net profit loss to be settled from all the deals with the Variation Margin accounts linked to the selected scheme Deal cashflows to be settled for the net amount of the Cash components for all the deals linked to the selected scheme The details that can be captured for Cash-Margin Netting Initiation include, Party, Settlement Scheme, Currency, Module and Agreement or Portfolio for which pre-netting is initiated Type of operation as pre-netting for Deal cashflows, Initial or Variation Margin Margin Type and Margin Account for cash margin transfer Component type and Due date for deal cashflows Settlement Amount to be net settled User Defined Fields configured for cash-margin netting initiation process
	User can view the details for, List of deals, linked to the Agreement or Portfolio selected, that are available for pre-netting for the selected operation Events triggered for the pre-netting transaction along with accounting entries posted and advice(s) generated for each event
Cash-Margin Net Settlement (MGDSETLM)	Net settlement of Cash components can be performed using ‘Cash-Margin Net Settlement’ function. All cashflows that are marked for netting, including cash margin transfers, can be settled together for the net amount. All pre-netting transactions initiated using ‘Cash-Margin Netting Initiation (MGDCMINI)’ function are available for Net Settlement The details that can be captured for Cash Net Settlement include, Settlement Scheme, Party, Currency, Amount and Value date for the net settlement Optionally can filter the pre-netting transactions for the selected Agreement or Portfolio Settlement details to be used for funds transfer, as agreed with the party and applicable for the scheme selected User Defined Fields configured for cash net settlement process User can view the details for, Pre-netting transactions for Initial Margin, Variation Margin and Deal cashflows considered for net settlement using the selected scheme Events triggered for the net settlement transaction along with accounting entries posted and advice(s) generated for each event
Securities Netting (SEDSDMNT)	Net settlement of Securities can be performed using ‘Securities Netting’ function. All security contracts that are marked for netting, including security contracts created for margin transfers, can be settled together for the net quantity. The details that can be captured for Securities Netting include, SK Location, Account, Agreement or Counterparty, Security and Settlement date Optionally can filter the contracts for the selected Module or Portfolio Select the contracts to be included for netting
Queries:	Following are the description for Queries function/ process.
Margin Transaction Query (SRDMRTRQ)	All margin transactions that are authorized, including cash and securities margin transfers can be queried and viewed, using ‘Margin Transaction Query’ function. The filters that can be captured for querying margin transactions include, Collateral type, Margin event type and Agreement or Portfolio or Contract Margin transaction Date range User can view the details for, All authorized margin transactions for the selected Agreement or Portfolio or Contract
Settlement Scheme Balance Query (MGDQCBAL)	Net amount of cash that need to be settled for the selected settlement scheme can be queried and viewed, using ‘Settlement Scheme Balance Query’ function. User can view the details for, Current balance in the scheme that need to be settled as of date Balances as of each value date for settlement Cash-Margin Netting transactions for each value date that resulted in the balance for that date