Enabling Treasury Trading via Trading Platforms (2F5)

Objectives

After completing this lesson, you will be able to:

  • Outline the scope of the Treasury Trading via Trading Platforms (2F5)
  • Enable Treasury Trading via Trading Platforms

Treasury Trading via Trading Platforms Overview

Trading Platform Integration Architecture

The trading platform integration is a cloud application that connects external trading platforms with your SAP Treasury and Risk Management component in your SAP S/4HANA Cloud or SAP S/4HANA system acting as your back end.

The figure, Trading Platform Integration Architecture, provides an overview of the integration of the trading platform integration application with the SAP Treasury and Risk Management component in your back-end system and the external trading platform.

The following options are available for connecting the trading platform integration application with external trading platforms:

  • Direct connection based on the 360T format
  • Connection to other trading platforms using the Generic Format interface

In addition, competitive bids are stored in the application.

Trading Platform Integration Processes

The application provides the following business processes, depending on the trading platform you use for your daily business:

  • Trading process (inbound):

    Trades closed manually on an external trading platform are automatically transferred to your back-end system using the trading platform integration application.

  • Trade request process (outbound):

    Trade requests created in your back-end system are transferred to external trading platforms using the trading platform integration application.

  • End-to-end process:

    Trade requests created in your back-end system are sent to an external trading platform (outbound), the trade is closed on the external trading platform, and then it is transferred automatically to the trading platform integration application before being sent back to your back-end system (inbound).

  • Intercompany trading and trade request process:

    Intercompany trading is needed if a subsidiary sends its trade requests to its treasury center instead of sending them directly to a trading platform (intercompany trade request). The treasury center then sends a separate trade request to the platform, receives the completed trade and forwards it to its subsidiary (intercompany trade).

    The application also offers preconfigured mappings of source fields from the trading platform to target fields in your back-end system and preconfigured mappings of source fields of your trade request coming from your back-end system to target fields on the trading platform.

The trading platform integration is a cloud application that connects external foreign exchange (FX) trading platforms with your SAP Treasury and Risk Management component in your SAP S/4HANA Cloud or SAP S/4HANA on-premise system acting as your back end.

Supported FX Instruments

If you're using 360T as your external trading platform, the above processes and FX instruments are supported in general.

The trading platform integration now supports money market transactions with the newly added instrument Money Market Fixed Term. The following scope is supported:

  • Instruments with fixed term and fixed interest rate
  • Money market activities Invest and Borrow
  • New trades only, no rollovers

If you're using the Generic Format interface to connect the application to external trading platforms other than 360T, the above processes and FX instruments are supported. To use the Generic Format interface, you might need another application to connect the external trading platforms to the trading platform integration application. Mapping between the Generic Format interface and the SAP back-end system is then done in the trading platform integration application.

Treasury Trading for FX Hedge Requests via Trading Platforms

Trading Process Steps

The Trading Process (Inbound) and Trade Request Process (Outbound) from Treasury and Risk Management can be described in the following way:

  1. Use the Hedge Management Cockpit to obtain an overview of your foreign exchange exposures and the corresponding hedging instruments that you used to mitigate a risk in a hedging area.
  2. For direct communication with your traders, the Hedge Management Cockpit enables you to create hedge requests for analysis items automatically.
  3. Afterwards you can display and review all trade requests that were generated after the release of the hedge requests in the Process Trade Requests app.
  4. In SAP Cloud Platform you handle incoming trade requests with the Manage Trade Requests app. With the app you can split trade requests, block trade them, or decline trade requests.
  5. Send the required trade requests to the external trading platform, such as 360T, for further processing.
  6. The external trading platform receives the order. You can get different quotes and choose your favorite offer. From the trading platform the completed trades are sent back to SAP Cloud Platform.
  7. In the Manage Trades app, the trader can store competitive bids and the information is forwarded to the transaction manager as an FX contract in the SAP S/4HANA Cloud system.

Automated Request Creation

For direct communication with your traders, the Hedge Management Cockpit offers you the possibility to create hedge requests for the analysis items. When you face an overhedge situation, you may decide to swap amounts from one period to another or to dedesignate hedging instruments completely or partially. For this purpose, you create FX swap requests or dedesignation requests. You can use the FX hedge request if you want your trader to hedge a specific currency amount for a specific date. In this case, you can, but you do not need to, specify the hedging instrument (FX forward transaction or FX spot transaction).

If you want your trader to hedge all open currency amounts for your hedging areas, you can create FX hedge requests automatically using the Hedge Management Cockpit app.

Open the Hedge Management Cockpit enter your hedging area and start the report. The system selects the corresponding exposures and hedging instruments. It aggregates the different amounts on the levels defined in the hedging area and layout. The result list shows all amounts or values of the key figures.

To generate a proposal list of FX hedge requests, choose Automated Request Creation.

Based on the amounts of the key figure Amount to Hedge, a list of FX hedge requests is generated and displayed in a dialog box. The status indicates whether an FX hedge request can be created automatically. If the status is not green, you have to create the FX hedge request manually.

You can change the following values that were predefined in the settings of your hedging area:

  • Amount
  • Hedge request date
  • Hedging classification
  • Instrument category
Note

If the status of the FX hedge request is green, it is automatically marked for creation. You can select and deselect all FX hedge requests that are in green status. To prevent the creation of FX hedge requests, deselect FX hedge requests from the list.

Created hedge requests are saved with a common group ID and can be found in Hedge Request Overview using this ID.

As the next step, use the Process Hedge Requests app to submit and release the FX hedge requests. For easier selection, you can filter the FX hedge request list for the corresponding group ID.

Note

Trade requests are generated automatically after the release of FX hedge requests if the Activate Trading Platform Integration checkbox was selected when you set up your hedging area.

The trading platform integration application can then retrieve the trade requests.

The Process Hedge Requests app is the central place to work on hedge requests. In the Process Hedge Requests app, you can search for all existing hedge requests and generate a working list. You can search for the hedge requests by their category (FX hedge request, FX swap request, or dedesignation request) and their status.

When a hedge request has been created in the Hedge Management Cockpit app, the hedge request gets the Created status. The hedge request then needs to be checked. When everything is fine with the hedge request, you can submit the hedge request. Before submitting the hedge request, you can make changes to it. The other option is to delete the hedge request. After you have submitted the hedge request, it gets the Submitted status.

Then you can release or reject the hedge request:

  • The rejected hedge requests get the Rejected status and can be changed and submitted again or they can be deleted.
  • The released hedge requests get the Released status.
  • For dedesignation requests, you can withdraw the released dedesignation request. The hedge request gets the Withdrawn status afterwards.

Released FX hedge requests are now relevant for the trader, who searches for the released FX hedge requests in the Process Hedge Requests app and creates hedging instruments, according to the information given in the hedge request.

If you have activated the trading platform integration in your hedging area, once FX hedge requests are released, they are transferred to the trade request and a corresponding Trade Request ID and a Trade Request Status is assigned to the FX hedge request.

SAP Cloud Platform Steps

The Manage Trade Requests app provides you with the function to import and process trade requests that were created in your back-end system.

You can use this app to do the following:

  • Import trade requests from your back-end system
  • Split a trade request into several new trade requests
  • Create a block of trade requests
  • Assign trade requests to a block
  • Decline trade requests that were imported from your back-end system
  • Send trade requests to external trading platforms
  • Reset trade requests to their error status to make them available for editing again
  • View trading platform details

There are also features available to share information with colleagues or to export data to spreadsheets.

Trade requests are always assigned a status in the Manage Trade Requests app. This way, you can easily tell what stage a trade request

When the app receives a trade request, the trade request is assigned the status In process. Afterwards, it is assigned the status Initiated. From there, you have several options regarding how to process the trade request. You can choose one of several activities, such as Decline or Split. Depending on the activity you perform, the corresponding status is assigned to the trade request. 

If your trade request appears to be stuck in either the status In process or Sent to trading platform, you can use the Reset activity. Resetting the trade request assigns the relevant error status according to the reason for the error.

From the details the trading team can identify the request category (Hedge Management or Cash Management). The current status of the trade request is available as well as the account assignment and the history of the item.

One of the options in the Manage Trade Requests app is to split a trade request into several new trade requests before sending them to an external trading platform.

Therefore, select a trade request from the list and choose Split. Specify the number of new trade requests that you want to create. Enter the amount that you want to move to the new trade requests.

Note

You cannot enter a negative amount. Furthermore, the remaining amount of the original trade request must be greater than 0.

The original trade request is split into several new trade requests. It is assigned a parent ID and its status changes to Edited.

The newly created trade requests are also in the status Edited and receive the same trade request ID (back-end) as the original trade request.

You can reverse the split of your trade request by selecting the newly created trade requests and choosing Undo Split.

Note

The functionality can only be executed with trade requests in the status Initiated or Edited. Also the split is only available for the Hedge Management request category.

Create a group of trade requests that are to be traded together on the external trading platform as a block trade. To do so, choose Create Block in the Manage Trade Requests app. As a result the selected trade requests are grouped together in a block with a common block ID.

To reverse the creation of a block, select the relevant trade requests and choose Undo Block.

The following prerequisites must be met to have trade requests block traded on the SAP Cloud Platform:

  • You have retrieved all trade requests created in your back-end system by choosing Get.
  • The trade requests are in the status Initiated or Edited.
  • Only trade requests with the same currency pair can be grouped together.
  • The instrument category of the trade request must be FX Spot, FX Forward, or NDF.
  • One block of trade requests may contain trade requests with the instrument category FX Spot and FX Forward.
  • Trade requests with the instrument category NDF can be grouped together only with other trade requests with NDF as their instrument category.
  • Trade requests with the instrument category FX Swap, FX Option, or FX Collar cannot be grouped together in a block.

Phone trades can only be entered for the following instrument categories:

  • FX Spot
  • FX Forward
  • FX NDF

Enter the detailed information for a trade that was completed on the phone at the Manage Trade Requests app. Upon completing the phone trade, take the trade request identification and launch the Manage Trade (inbound) app. Enter the phone trade details such as value date, counterparty, and Forward Rate.

The following options are available in the Manage Trade Requests app on how to handle a request:

  • Decline a trade request that you have received from your back-end system. The status of your trade request is set to Declined in the app and it is communicated to your back-end system.
  • Reset the status of your trade request because of technical issues. You can no longer work with your trade request due to technical issues, but the status indicates that processing is still ongoing. So you want to reset the status of your trade requests to the corresponding error status to reflect the actual situation.
  • Manually set trade requests to completed because you've already fulfilled the trade requests manually or no longer require the trade request. The trade request gets the status Completed and can no longer be edited.
  • If your trade request has mapping errors or technical errors, solve these errors and choose Reprocess. The app now reprocesses the trade requests that couldn't be processed due to mapping errors or technical errors. A success message appears, informing you that the pending trade requests are being reprocessed.

Processing of the trade request can now be repeated. If your trade request has mapping errors or technical errors, solve these errors and choose Reprocess.

Occasions where the reprocessing of trade requests is needed could be:

  • A mapping error occurs during retrieval of the trade request from the SAP back-end system.
  • An update trade request to the SAP back-end system fails due to a temporary issue.

In the Monitor Business Logs app you can view log messages about the execution of the trading platform integration.

The app enables you to perform the following tasks:

  • Check if actions were performed successfully
  • See an overview of business events and analyze errors
  • See who made a change
  • See object-independent messages for asynchronous processes
  • Find all messages for a single object in one place
Note
Only users with the role Business_Process_Specialist_BL_AccessAll can see the Monitor Business Logs app on the launchpad of the trading platform integration application.

View log messages about the execution of the trading platform integration.

Common use cases for the Monitor Business Logs app are:

  • Retrieval of trade requests from the SAP back-end
  • Processing of business rules for trade request dispatching

Trading Platform Steps

If all the needed actions are taken on the SAP Cloud Platform for the trade request (such as a split) the information is sent to the external trading platform (such as 360T).

From the Manage Trade Requests app select the trading platform profile that is configured and with which you want to work.

Working on the external trading platform, pick your trade request and approve the order here.

For the placement you will be offered several forward rates. Select the most preferable offer from the list. Your deal will be commenced with the chosen partner at the given rate.

After successful completion the data is returned to the SAP Cloud Platform trading platform integration fur further processing.

Inbound Trade on SAP Cloud Platform

The inbound service of the process ensures that the transactions from the trading platform are imported to the SAP Cloud Platform. Here a matching of the acquired data to the original trade request is performed.

The trades are again assigned to a status. When the application receives a trade, the trade is assigned the status In process. From there, if no errors occur, the trade is assigned the status Successful. If an error occurs, you can use the activities provided to resolve the errors and complete the trade.

If your trade appears to be stuck in the status In process, you can use the activity Reset. Resetting the trade assigns the relevant error status according to the reason for the error. This way, you can then solve the errors and complete the trade.

If you have created a phone trade the item is assigned the status Edited. From there, either it is completed successfully or it encounters an error. If it encounters an error, you can process it further with the activities provided to complete the trade.

In the Manage Trades app, you can view and process trades that were automatically imported from an external trading platform.

In the Manage Trades app you can perform the following tasks:

  • View trades that were imported from an external trading platform
  • Create and edit phone trades directly in the app
  • Edit trades to add missing information
  • Reprocess trades that could not be imported automatically into your back-end system
  • Reset trades to their error status to make them available for editing again
  • View trading platform details

To get detailed information about a trade, you can navigate to the detail screen. The detail screen provides you with the following information:

  • Generic trade data
  • Trade details
  • Account assignment data
  • Competitive bids
  • Messages
    • Messages from back-end
    • Messages from mapping
  • Change history
  • Navigation to trading platform details
  • Navigation to back-end details

SAP S/4HANA Cloud Conclusion

Finally the information from the trade is forwarded from the SAP Cloud Platform to the SAP S/4HANA Cloud system.

After all the information from the trade is mapped between the trading platform integration and the back-end system, trading information is forwarded to update values in the Hedge Management Cockpit.

The Hedge Management Cockpit values are updated after the according information is imported from trading platform integration. This closes the cycle for the automated request creation.

Treasury Trading for Cash Trade Requests via Trading Platforms

Cash Request

In the Manage Memo Records app, you can create cash requests with an approval process, which will later trigger trade requests in treasury and risk management systems.

The process to manage trade requests on the SAP Cloud Platform is equivalent to the trade requests coming from hedge requests in SAP Treasury and Risk Management.

For the outbound process, trade requests can be split, grouped as block requests, or handled as phone trades.

These trade requests (other than phone trades) are sent to an external trading platform (for example, 360T), where the orders are placed and an offer is accepted. The completed trade information is later imported to the SAP Cloud Platform and matched against the trade request.

The cash request is a communication channel between a cash manager and the trading department. When a cash manager would like to do foreign exchange, he has to ask the trading department for an FX deal. The cost of information transfer, confirmation, and approval is quite high. The cash request scenario provides end-to-end support for this process.

The cash manager initiates the cash request with foreign exchange information. After checking by both the cash manager and trading department, the cash request is released to the trading department with a trade request. When the deal is created via trading platform or manually, the cash request is fulfilled. Cash request impacts cash position for better forecast.

A cash request entry is split into cash forecast inflow and outflow under corresponding bank accounts according to its receiving and sending information. Different statuses are mapped to different planning levels.

Furthermore the cash manager has the option to not only create a cash request for foreign exchange transactions but also for money market instruments.

The Cash Trade Requests for Money Market functionality enables you to create a cash trade request for the new instrument category Money Market: Fixed Term Deposit/Loan. After you release the cash trade request, the cash trade request is automatically passed to the treasury platform integration application.

The process for a money market transactions is started either in the Cash Flow Analyzer or the Manage Memo Records app with a Cash Trade Request. From the Cash Trade Request a Money Market Trade Request is derived which is to be transferred to the trading platform integration application.

There could be several options for how this (internal) money market trade request can be processed:

  • Intercompany trading via manual completion of deal (interest rate, …)
  • Back-to-back trading
  • External trading via phone trade

After all the deal creation in SAP Treasury and Risk Management is triggered. This step creates the financial transactions in the Transaction Manager and updates the cash request.

Starting from the Cash Flow Analyzer, the cash manager can create a cash request as a receiving bank account as a sending bank account.

There is also the option to create the cash request directly in the Manage Memo Records app.

In terms of the Money Market transactions the following instruments are covered:

  • Deposits and Loans
  • Fixed Term
  • Fixed Interest Rate

From the Cash Flow Analyzer, you are directed to the Manage Memo Records app. The cash request is handled in this app. From here, you create a cash request for a specific financial instrument, such as FX spot rate, with a specific traded amount. It is also possible to assign other information to this cash request, such as liquidity items, planning levels, certificate documents, and payment information.

Manage the status of the cash request once it's created. A cash request can have the following statuses:

  • Created:

    You create a new cash request. It can be deleted.

  • Submitted: After you create a cash request, you can submit it for approval. As a result, your request can be released, or rejected. A submitted request cannot be edited anymore. If the request is rejected, you can still edit it and submit it again.

  • Released: You can only release a request after it’s submitted. The released request is transmitted to create a trade request.

  • Fulfilled: A released request is then fulfilled once a trade request is created.

  • Canceled: A released request gets canceled if the trade request is not created.

The cash trade request is equipped with an additional instrument category called FT (Money Market: Fixed Term Deposit/Loan).

The information from the cash trade request is transformed into a money market trade request which is moved to the trading platform integration application. Here the money market transactions are executed and the incoming information updates the cash trade request as well as the Transaction Manager.

From the memo record information, the Cash Flow Analyzer and the liquidity forecast information are updated. The outgoing and incoming flows with the new planning levels are shown:

  • C1 - Cash Request Created
  • C2 - Submitted Cash Request
  • C3 - Released Cash Request

This enables a more accurate cash management.

The cash request functionality comes equipped with a four-eye principle. A second person must release the cash request. With the release of the cash request, a trade request is created.

This trade request is picked up by the trading platform integration for further processing.

Trading Platform Integration — Process Steps

With the SAP Cloud Platform application trading platform integration and the Manage Trade Requests app, you can split the trade information into several smaller items. On the other hand, you can group trade requests to have them block traded with the external trading platform.

If no automatic integration to external trading platforms is needed, there is also the possibility to handle the trades via phone with an external partner.

Trade requests are always assigned a status in the Manage Trade Requests app. This way, you can easily tell what stage a trade request is at.

When the application receives a trade request, the trade request is assigned the status In process. Afterwards, it is assigned the status Initiated. From there, you have several options regarding how to process the trade request. You can choose one of several activities, such as Decline or Split. Depending on the activity you perform, the corresponding status is assigned to the trade request. 

If your trade request appears to be stuck in either the status In process or Sent to trading platform, you can use the Reset activity. Resetting the trade request assigns the relevant error status according to the reason for the error.

The trading team that is administering the trading platform integration can check the request category of the trade request to understand where the information is originating.

If there is reason to do so, the trading team can also decline the request. The status of your trade request is set to Declined in the app, and it is communicated to your back-end system.

In this example, the trade request is executed as phone trade. After populating the mandatory fields for the value date, counterparty, or forward rate, the trade can be saved.

Interest Rate Calculation

The nominal amount, interest amount, start date, and end date returned from the external trading platform are stored in the trading platform integration, but not forwarded to the back-end system. Hence, these values are calculated based on the back-end settings.

360T Custom Fields

360T supports custom fields that allow customers to group transactions more specifically. These custom fields are mapped to ACCOUNT_ASSIGNMENT fields for trades received by this app.

The Money Market Fixed Term instrument category supports only these account assignment fields:

  • ACCOUNT_ASSIGNMENT
  • ACCOUNT_ASSIGNMENT_PORTFOLIO
  • ACCOUNT_ASSIGNMENT_INTERNAL_REFERENCE
  • ACCOUNT_ASSIGNMENT_CHARACTERISTICS

SAP S/4HANA Cloud Treasury Management

Finally, the cash manager in the SAP S/4HANA Cloud system gets the information from the inbound service of the trading platform integration that the cash request that he started is fulfilled.

Counterparty Management

Overview

You can manage your counterparties centrally in the trading platform integration application using the Manage Counterparties app. Counterparties are business partners with the role Counterparty assigned. This role identifies them as a party that participates in a financial transaction.

The Counterparty Management functionality provides best-in-class processes for the following:

  • Counterparty Maintenance

  • Deriving preferred Counterparties for transactions

  • Additional features for phone trades

Note

Once you start editing the IDs of your counterparty entries, this app acts as your single source of truth for your counterparties.

When setting up your counterparties in this app, you assign your trading platform and back-end profiles to the relevant counterparty entries. By doing so, the mapping of the target fields COUNTERPARTY_ID and PARTNER is set to read-only for these standing profiles in the apps for mapping configuration, so the configuration under Configure Mappings is no longer used.

Maintain Counterparties

You have two options for maintaining your counterparties. You can either replicate the counterparty business partners from your back-end system, or create new entries manually in the Manage Counterparties app.

  • Replicating Counterparties from Your Back-End System

  • Maintaining Counterparties in the Trading Platform Integration Application

Note

You cannot edit instrument authorizations directly in this app. Existing authorizations for back-end counterparties (origin type not Internal) are only displayed. Internally-created counterparties are authorized for all available instrument categories by default.

If you choose to replicate business partners from your back-end system, you need to configure the Derivation of Counterparty Role business rule. This rule defines which business partner role is used to recognize a business partner as a relevant counterparty for the trading platform integration application. If a business partner does not have this role, it is ignored by trading platform integration.

Authorizations are replicated along with the business partners with the counterparty role. Depending on the authorization detail level of the assigned authorizations, more mappings can be necessary. If the business partner only has authorizations for instrument categories assigned on contract type level or product category level, no additional mapping is required. If the assigned authorizations are done on product type and transaction type level, you need to configure the Derivation of Authorized Instrument Categories business rule to make sure that the correct authorizations are derived and stored.

You can edit the ID and Name fields of the replicated counterparties, but not the replicated authorizations. Therefore, it is important that you configure the Derivation of Authorized Instrument Categories business rule carefully to make sure that all authorizations are replicated properly.

Replicated counterparties cannot be deleted in this app, but counterparties flagged for deletion in the back-end system are set to inactive.

Prerequisites

  • You have configured your back-end system.

  • You have configured your external trading platforms.

  • You have set up the Derivation of Counterparty Role business rule.

  • You have set up the Derivation of Authorized Instrument Categories business rule.

Procedure

If you want to synchronize your counterparties between your back-end system and the trading platform integration application, you need to set up the data replication of business partners.

For more information on how to set this up, see SAP Note: 2959101.

For manually created counterparties, you can define the authorizations yourself when creating the new entry by assigning the relevant profiles.

Open the Manage Counterparties app and create a new entry using the following parameters:

  • ID: Specify a name for your counterparty. This ID must be unique throughout the system.
  • Name: Enter a descriptive name for your counterparty.
  • Trading Platform Profiles: Set up which trading platform profile to map with which Counterparty ID (Trading Platform).
  • Back-End Profiles: Set up which back-end profile to map with which business partner.

Prerequisites

  • You have configured your back-end system.

  • You have configured your external trading platforms.

Preferred Counterparties

With the Preferred Counterparty functionality, you can only edit your preferred counterparties for individual trade requests in the Manage Trade Requests app. Quotes are requested on the trading platform.

Through the configuration of business rules, you can create a derivation of preferred counterparties. When a trade request is loaded into the app, these preferred counterparties are assigned in case the trade request attributes match your rules.

This business rule lets you assign preferred counterparties based on the following attributes:

  • Company ID

  • Instrument Category

  • Currency Pair

  • Traded Currency

For this rule, you use the counterparties created under Manage Counterparties. Once the preferred counterparties are assigned to trade requests, they can also be updated based on the Manage Preferred Counterparties action under Manage Trade Requests.

To set a preferred counterparty in a trade request, open the Manage Trade Requests app. Select the trade request from the list for which you want to manage your preferred counterparties. On the detailed screen, choose Manage Preferred Counterparties.

In the dialog box, you have the following options:

  • Add a new counterparty to the list
  • Derive your counterparties again in accordance with the Derivation of Preferred Counterparties business rule set up in your system. This action will override the existing list of counterparties.

Prerequisites

  • You have set up the Derivation of Preferred Counterparties business rule.

  • You have replicated your counterparties from your back-end system or created them manually in the Manage Counterparties app.

The trade request must have one of the following statuses:

  • Initiated

  • Edited

  • Mapping Error

  • Technical Error

  • Validation Failed

  • Failed to Send

Phone Trades

When working on phone trades in the trading platform integration, the counterparty information can be leveraged as a search help in the Manage Trades app. The system will autocomplete the ID when working on a new phone trade.

Counterparty Limit Utilization

As a trader, you want to have a clear overview of the free limits of your counterparties to be able monitor your counterparty risks and prevent trading beyond the limit for each counterparty. The trading platform integration application provides the Counterparty Limit Utilization app to enable you to monitor your counterparty limits and make better decisions.

There are some prerequisites for the Counterparty Limit Utilization in both the SAP S/4HANA Cloud back-end system and the Business Technology Platform app Trading Platform Integration.

Trading Platform Integration

Set the Derivation of Counterparty Limit Types business rule to derive from your back-end system the limit types that you want to display in this application.

SAP S/4HANA Cloud Back-End System

Make sure you are using the limit management in your back-end system. Make the following settings in your back-end system. Set up your limit types and make special note of the following settings:

  • Currency of the limit type
  • Exchange rate type

Depending on your configuration in the back end, a warning threshold is displayed in this app. The warning threshold corresponds to the settings you make under Define Limit Types Check Limit Utilizations in your limit management. You can choose between not including a warning threshold, creating a percentage barrier, or creating a warning threshold, which is referred to as an external limit in the back end.

Note

While you can assign as many dimensions in your back-end system as you see fit, the display of dimensions is limited in the trading platform integration. This application supports limit types with up to three dimensions, namely:

  • Counterparty

  • Limit Product Group

  • Company Code

The Counterparty dimension is mandatory. The other two dimensions are optional. All other dimensions are displayed in aggregated form. You can still display them normally in your back-end system.

Set the Derivation of Counterparty Limit Types business rule to derive the limit types that you want to display in this application from your back-end system. With this business rule, you can set up which limit types you want to include from your back-end system when displaying counterparty limits in the Counterparty Limit Utilization app.

Make the following settings in your back-end system:

Set up your limit types and make special note of the following settings:

  • Currency of the Limit Type

    Enter a currency for the limit type as follows:

    • If you use an SAP S/4HANA Cloud back-end system, go to FinanceTreasury and Risk ManagementRisk ManagementDefine Limit Types.
    • If you use an SAP S/4HANA back-end system, go to Financial Supply Chain ManagementTreasury and Risk ManagementCredit Risk AnalyzerLimit ManagementDefine Limit Types.
  • Exchange Rate Type

    Enter an exchange rate type for Settings for Exchange Rate Type For Limit:

    • If you use an SAP S/4HANA Cloud back-end system, go to FinanceTreasury and Risk ManagementRisk ManagementDefine and Set Up Evaluation Type.
    • If you use an SAP S/4HANA back-end system, go to Financial Supply Chain ManagementTreasury and Risk ManagementCredit Risk AnalyzerLimit ManagementBasic Settings for Limit Management.

The Counterparty Limit Utilization app displays only external counterparties maintained in the Manage Counterparties app. You recognize these counterparties by their assigned trading usage category External Trading.

To view the limit utilization, open the Counterparty Limit Utilization app. By default, the chart view is displayed. You can choose between different chart types by selecting Selected Chart Type: Bar Chart. You can also select View By and select the dimension you want to display your counterparty limits for, such as Company ID or Counterparty.

The bars in the chart identify the following:

  • Good

    The limit utilization is still below the warning threshold for your internal limit. You can still use this counterparty for trading.

  • Warning

    The limit utilization exceeds the warning threshold, but is still below the internal limit. You can still use this counterparty for trading, but you should be careful not to exceed the internal limit.

  • Bad

    The limit utilization exceeds the internal limit. You should not use this counterparty for trading anymore.

  • Warning Threshold

    Once this amount is reached, you receive a warning that the internal limit will be reached soon. If you receive this warning, you can still use the counterparty for trading, but you should pay close attention to avoid exceeding the internal limit.

  • Internal Limit

    The defined limit configured for a counterparty. It should not be exceeded to avoid making this counterparty a high-risk counterparty. Therefore, once this limit is reached, you should consider using other counterparties for trading.

Intercompany Trade Requests

Overview

Intercompany trading allows a subsidiary to trade with its corporate treasury center instead of trading directly on the market. The treasury center then decides when and how much to trade on the market.

The trading platform integration application supports different intercompany scenarios. The treasury center can trigger an external trade (back-to-back) or decide later, typically based on a consolidated view across subsidiaries, when to trade externally (risk transfer). In addition, the trading platform integration also supports sending intercompany trade requests to an external intragroup trading application.

Note

Currently, the trading platform integration application supports 360T's iTEX platform for this purpose.

Process and Scenarios

The trading platform integration application lets you configure the trade requests that are traded externally and which ones are routed as intercompany trade requests. This applies to all trade requests, whether they are based on hedge requests, cash trade requests, or manually created trade requests.

Intercompany trade requests are traded with a legal entity in the same organization instead of an external counterparty. When the application imports trade requests from the back-end system, the business rule Decision for Trade Request Routing Category sorts them as internal or external. Internal trade requests appear in the Manage Intercompany Trade Requests app. External trade requests appear in the Manage Trade Requests app.

When an intercompany trade request is fulfilled, the application creates two intercompany trades, one for the subsidiary and one for the treasury center. For example, if the treasury center closes an FX forward to sell a certain amount in USD against EUR, the subsidiary creates an FX forward to sell the same amount in USD against EUR, so that both legal entities have their own view of the same contract. The trade data is also sent to your back-end system.

Use the interactive graphic to explore the different intercompany trading scenarios.

Intercompany Trading Scenarios

In the back-to-back scenario, the treasury center closes a trade with an external counterparty, either on a trading platform or on the phone, for each intercompany trade request received from a subsidiary. It is also possible to use the back-to-back scenario for trade requests that are traded by the treasury center on behalf of the subsidiary.

For cases where the external trade happens later based on a consolidated view across subsidiaries or is not needed, this application provides risk transfer scenarios.

Intercompany trades in risk transfer scenarios can be used to transfer exposures from subsidiary to treasury center. You can use the Hedge Management Cockpit in your back-end system to create the consolidated view on the treasury center level and initiate external trades, where needed.

The trading platform integration application also supports using an external trading platform for the creation and processing of intercompany trades. In this case, the trade requests are forwarded to the external trading platform and the trading platform integration application then receives the trades from the external platform.

Back-to-Back Trading

The trading platform integration application supports two variants of the back-to-back trading scenario. Both scenarios are available for all foreign exchange, excluding FX NDS, and for money market instruments.

Back-to-back trading is triggered by a trade request from a subsidiary (Scenario 1: Back-to-Back Trading (Subsidiary))

The application creates an intercompany trade request, which triggers the creation of an external trade request. This scenario can be used to initiate the trade with an external counterparty.

The trading triggered by a trade request from the treasury center (Scenario 5: Back-to-Back Trading (Treasury Center)) is the second scenario for the back-to-back trading.

A trade request is created in the company code of the treasury center in the back-end system. Typically, this is because the FX exposures are uploaded into the treasury center company code. From this trade request, the application creates an external trade request directly and assigns the related trading scenario. In this case, the application expects that the subsidiary company code is stored in the On Behalf of Company Code field of the trade request. When the external trade is successfully processed, the application triggers the creation of the related intercompany trades.

Risk Transfer

Manual trading (Scenario 2: Risk Transfer Through Manual Trading)

The treasury center can assign the exchange rate or the interest rate for the intercompany trade with its subsidiary manually.

Examples could be that the subsidiary closes a spot transaction for EUR against USD with its treasury center or takes out an intercompany loan.

For some instrument categories (FX Spot, FX Forward, FX NDF), you can let the system propose an exchange rate based on the spot and swap rates stored in your back-end system. You can configure a business rule to add a markup or markdown.

The scenario is available for all FX instruments, excluding FX NDS, and for money market instruments.

Automated trading (Scenario 3: Risk Transfer Through Automated Trading)

The application retrieves a pre-agreed rate calculated from the available spot and swap rates in your back-end system and completes the intercompany trade automatically. You can configure a business rule to add a markup or markdown.

One example could be that the subsidiary wants to hedge FX exposures by transferring the risk to its treasury center.

The scenario is available for the following instrument categories: FX Forward, FX Spot, FX NDF.

Trading Platform (360T iTEX)

Trading Using an External Trading Platform (Scenario 4: Trading via Trading Platform)

With this intercompany trading scenario, you can make use of an external platform for the creation and processing of your intercompany trades. Currently, the following two use cases are supported:

Inbound and Outbound

Forward intercompany trade requests to the external trading platform and receive the related trades from the external trading platform.

Inbound Only

Directly trade on the external trading platform. Receive and process only the trades within the trading platform integration application.

The scenario is available for FX instruments, excluding FX Option, FX Collar and FX NDS, and for all MM instruments.

Money Market Funds Management

Overview

The trading platform integration application supports securities instruments that are received from an external trading platform based on the product category 020 Securities in the SAP Treasury and Risk Management. The current scope within the trading platform integration includes the instrument category Securities: Money Market Fund. It can manage purchases and sales for the trading process (inbound).

The scope also includes dividend re-investments and rebate re-investments triggered by the external trading platform. With a dividend reinvestment, the accrual dividend is re-invested to increase the unit of money market funds in your corporate security account. With a rebate investment, the company of the money market fund offers a rebate on the fees they charged. That rebate is then also reinvested in the unit of the money market funds in your corporate security account.

Process

The trading platform integration currently supports trades, so the instrument category Securities: Money Market Fund is only available in the Manage Trades app. To fix the price and number of units for a money market fund transaction, use the Manage Trade Change Requests app. The trading platform integration offers a direct integration with external trading platforms for money market funds.

The following trading activities are available for money market funds:

  • Purchase
  • Sale
  • Dividend reinvestment
  • Rebate reinvestment
  • Update price and number of units after payment for money market funds with variable net-asset value (VNAV)
Note

The Money Market Fund integration is supported through the ICD Portal.

Trade Change Requests

The app, Manage Trade Change Requests, lets you process change requests for trades, especially for securities transactions that are priced after purchase.

Some securities transactions that are traded on external trading platforms, such as money market funds (MMFs) with variable net asset value (VNAV), are priced after purchase. This means that the purchase amount is known in advance, but the price and number of units are settled later. This process is also known as price fixing.

After you fix the price for a trade with the instrument category Securities: Money Market Fund on the external trading platform, the trading platform integration receives a trade change request that contains the final price and number of units. You can fix errors and then reprocess the trade change request to update the relevant trade under Manage Trades and the transaction in your back-end system.

Setup

Before you start trading money market funds, configure a trading platform profile for your provider under Configure Trading Platforms.

You must also configure the mappings of some particular fields, such as the security ID type and value. For more information, see Configure Mappings - Back-End Format and Configure Mappings - Trading Platform Format. When you have configured the trading platform profile, you can start trading money market funds.

After you complete a money market fund transaction on the external trading platform, a trade is sent to the trading platform integration. Here you can find it under Manage Trades. The instrument category is Securities: Money Market Fund, and the Trade ID is the same as the transaction ID used by your external trading platform.

If the money market fund trade under Manage Trades has the status, Successful, you can see your back-end system's transaction ID in the Financial Transaction field of the trade detail screen. This means that the corresponding back-end transaction has been created. You can use this transaction ID to find the trade in the relevant back-end app. If the status of your trade is not assigned the status, Successful, you can use the actions Edit, Reprocess, Reset, or Set to Completed to change values or fix errors.

To process your money market fund trade in your back-end system, search for the transaction ID in the Process Securities Transactions: Collective Processing app. To fix the price and number of units after payment for a money market fund with variable net-asset value (VNAV), use the app, Manage Trade Change Requests, in the trading platform integration.

Balance Sheet Exposure Hedge Requests Integration

Balance Sheet FX Risk Process Overview

The Hedge Management of Balance Sheet FX Risk process supports you in managing the risks arising from the revaluation of monetary balance sheet items in foreign currency​.

Balance sheet FX risks arise from the revaluation of monetary balance sheet items in foreign currency​. The Hedge Management of Balance Sheet FX Risk process provides the following features:

  • Analyze the balance sheet FX risk your company is exposed to using the Review Balance Sheet FX Risk app, which enables you to gain an overview of the balance sheet FX exposures and of the hedging instruments you used to mitigate that risk. In detail, you can do the following:
  • Quantify balance sheet FX exposure positions for all entities over all potential currencies​. Obtain detailed insights into the origin/structure of the exposure positions for each currency within the company codes.
  • Quantify balance sheet FX risk hedges. Obtain detailed insights into the structure of the hedging transactions for each currency within the company codes.
  • Gain an overview of the amount of absolute FX net exposures, FX exposures, and hedging transactions in your company codes. The aggregated net exposure positions are available in the transaction currency and are converted into the reporting currency.
  • Further drilldowns to single line item level are possible in order to evaluate exposure and hedge positions in detail.​
  • Take snapshots of your balance sheet exposures and their hedges. The snapshot data is stored in database tables.
  • Generate balance sheet exposure hedge requests based on the snapshot data. Based on the snapshots for balance sheet FX risk, you can generate balance sheet exposure hedge requests (B/S hedge requests) to trigger the conclusion of financial transactions to hedge the net open exposure (balance sheet FX risk). For the B/S hedge requests generated, the system automatically creates a trade request.
Note

If you are using the Trading Platform Integration app, these trade requests are transferred to the trading platform and the closed trades (financial transactions) are imported automatically into your SAP S/4HANA Cloud system.

Note

The following data sources are available for defining your exposure and hedge key figures:

  • FI Balances: Reads total values from G/L accounts (One Document) as of the report key date
  • FI Open Items: Reads open items from G/L accounts (One Document)
  • Financial Transactions: Reads nominals of financial transactions in the Transaction Manager of Treasury and Risk Management
  • One Exposure: Reads operational data from One Exposure, identified by their attributes, such as certainty level, planning level, planning group, liquidity item, and transaction date. Example: You can read memo records.

To get started with the overall Balance Sheet FX Risk process you can use the SAP Fiori app Review Balance Sheet FX Risk.

Use this app for two purposes:

  • Gain an overview of the amount of absolute balance sheet net open exposures, absolute balance sheet exposures, and their hedges in your company codes.
  • Obtain detailed insights into origin/structure of the balance sheet exposures and hedges for each currency within those company codes.

The sources for the calculated key figures are the balances and open items in foreign currency on your G/L accounts in Financial Accounting (One Document) and the operational data from One Exposure (FX exposures) as well as financial transactions (hedges) managed in the Treasury and Risk Management.

Key functions of the SAP Fiori app include:

  • You can see at a glance the amount of the absolute balance sheet net open exposures, absolute balance sheet exposures, and absolute hedges at company code level on the key date.
  • You can branch to a company code and obtain a detailed view of the origin/structure of the balance sheet exposures and hedges for the various transaction currencies of a company code (amounts in transaction currency) as well as the resulting net exposures in both transaction currency and display currency. When calculating displayed values, the absolute amounts are not used but the plus/minus sign is taken into account. For the specific key figures a further drilldown to the single line item level is possible in order to evaluate exposure and hedge positions in detail:
  • For key figures of the data source FI Balances, you can drill down to the display of line items in general ledger
  • For key figures of the data source FI Open Items, you can drill down to the display of open line items in general ledger
  • For key figures of the data source One Exposure, you can drill down to the contributing cash flow items in Cash Management.
  • For key figures of the data source Transaction Management, you can drill down to a list of the contributing financial transactions in Treasury and Risk Management.

Take the net exposure information into a snapshot which could be used for the basis of Balance Sheet FX Risk Hedging. This stores the balance of balance sheet exposures and their hedges on a specific key date in database tables.

The snapshot is taken by executing the Take Snapshot - Balance Sheet FX Risk job template available in the Schedule Treasury Middle Office Jobs app. The snapshot is created as follows:

  • Selects balance sheet exposures (B/S exposures) and their hedges according to the settings in the job template. If you have defined periods, the exposures and hedges are assigned to their relevant period by due date/value date.
  • Saves the selected data under a specific snapshot ID in the database table as follows:
  • The selected B/S exposures and hedges are aggregated to a snapshot item if they have at least the same company code, key figure ID, and currency. Depending on your settings in the job template, additional criteria are relevant for the aggregation:
    • If you have selected specific dimensions in this job template, these dimensions are also relevant for the aggregation.
    • If you have defined periods in this job template, the relevant period of an exposure or hedge is also relevant for the aggregation.
  • Each snapshot item is saved with the amount in the transaction currency and also the amount in the reporting currency that you have specified in the job template.

For the job template you need to give, for example, a description, key dates, certain filter parameters, and the dimensions for the aggregation of the exposure. For One Exposure items these could be the planning level, certainty level, or liquidity items.

Result

If the job template has been executed successfully, the selected exposures and hedges are saved as snapshot items of the snapshot (under a specific snapshot ID) in database tables.

You can now run the Generate Balance Sheet Exposure Hedge Requests job template based on this snapshot:

  • FXM_SNAP: the header information of snapshot
  • FXM_SNAP_ITEM: the detail items of snapshot

Use the app Schedule Treasury Middle Office Jobs to execute the job template Generate Balance Sheet Exposure Hedge Requests. Thereby you generate balance sheet exposure hedge requests for your net open balance sheet exposures based on snapshot data to trigger the conclusion of the required hedges.

For direct communication with your traders, you can create balance sheet exposure hedge requests for your net open balance sheet exposures based on snapshot data to trigger the conclusion of the required hedges.

The balance sheet exposure hedge requests is created by executing the Generate Balance Sheet Exposure Hedge Request job template available in the Schedule Treasury Middle Office Jobs app.

The balance sheet exposure hedge request has a B/S Hedge Request ID and a Hedge Request Status.

Features

  • Generates a hedge request for your net open balance sheet exposures. The net open balance sheet exposures are calculated by comparing the total amounts of the selected snapshot items for hedges and the selected snapshot items for balance sheet exposures on the level of the analysis item. Where the analysis item is defined by the company code, the risk currency of the exposures and hedges, and, if you define periods for the snapshot, the period they belong to.
  • You can specify in the report a minimum amount for a balance sheet exposure hedge request (B/S Hedge Request) and the relevant rounding rules.
  • For the generated balance sheet exposure hedge requests automatically also trade requests (with trade request category B/S Hedge) are created. If you are using the Trading Platform Integration app, these trade requests are transferred to the trading platform and the concluded trades (financial transactions) are automatically imported into your SAP S/4HANA Cloud system.
Note

Within the Integration with External Trading Platforms integration scenario, these trade requests are handled in the same way as the trade requests created for the hedge requests of the Hedge Management Cockpit.

Result

If the job template has been executed successfully, the created hedge requests are stored in the database table for the balance sheet exposure hedge request with the status Released. In addition, a trade request was created automatically for each balance sheet exposure hedge request. Use the Process Trade Request app for further processing of the trade requests.

With this app Process Trade Requests, you can display, change, fulfill, and check all trade requests that were automatically created after the release of hedge requests, B/S hedge requests, cash trade requests, or manually.

If you implemented the Integration with External Trading Platforms integration scenario, the trading platform integration application can then retrieve the trade requests. The application supports the end-to-end business process with which trade requests created in your SAP S/4HANA Cloud are sent to an external trading platform and with which, trades are then concluded on the external trading platform and automatically transferred through the trading platform integration application to your Treasury and Risk Management system.

Trading Platform Integration

The trading platform integration application allows you to connect external trading platforms easily to your Treasury and Risk Management system.

The trading platform integration application connects your SAP S/4HANA Cloud system to an external trading platform. It supports the end-to-end business process with which trade requests created in your SAP S/4HANA Cloud are sent to an external trading platform and with which, trades are then concluded on the external trading platform and automatically transferred through the trading platform integration application to your Treasury and Risk Management system.

With a trade request you trigger the conclusion of a financial transaction (trade) on an external trading platform. For the Hedge Management of Balance Sheet FX Risk, a trade request with the trade request category B/S Hedge is created as a balance sheet exposure hedge request. The balance sheet exposure hedge request is created with the status Released and the corresponding trade request is automatically generated.

The requested trade of these kind of trade request can have one of the following instrument categories:

  • FX Forward
  • FX Option
  • FX Non-Deliverable Forward
  • FX Collar

Trade requests created in your SAP S/4HANA Cloud are sent to an external trading platform, the trades are concluded on the external trading platform, and then they are transferred automatically to the trading platform integration application before being sent back to your SAP S/4HANA Cloud system.

The trade request is created with the request category Balance Sheet Exposure.

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