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