Foreign Exchange and Money Market OperationsIndustry Trends and Challenges In the last decade the Foreign exchange and money markets have undergone significant changes. Volume growth and emergence of new class of investors is now making FXMM instruments a distinct asset class. FXMM is now seen not only as a hedging instrument but also as a specific class of asset for trading and speculation. Last decade also has seen emergence of hedge funds and retail investors as key con-tributors to demand. Cross border investment activity has also resulted in increasing demand for FX instruments. Wide spread usage of Electronic trading networks and innovative trading strategies necessitated changes to infrastructure, workflows and overall resiliency of IT systems. These key trends are shaping new approaches to risk management, collateral management, regulation and client servicing.

Success of FXMM operations is heavily contingent not only on a scalable, reliable system but also on controls and risk management fea-tures these systems provide. Reducing Cost per trade and improving STP rates continues to be high on the agenda for bank executives as the industry adopts a commoditized operations model and the variety and the complexity of the products / instruments increases. Risk management and compliance to new regulations without escalation in costs continues to shape not only investments in the new systems but also the back office operations. These challenges are driving Change The Bank (CTB) initiatives to focus on optimization of existing operations infrastructure and workflows, increased adoption of outsourcing and off shoring strategies, and underlying platform improvement.

Cognizant’s Capabilities across Foreign Exchange and Money Market OperationsCognizant has strong experience of supporting marquee clients across instruments and products in the FXMM operations. Cognizant provides 85% offshore coverage for FXMM Operations of a leading investment bank, making this engagement one of the largest third party outsourcing operations.

Middle and back office experience:

Confirmations and settlements

Reconciliations

Checking with Counterparties/Clients for Trade confirmation for open trades within timelines

Ensuring on-time and accurate payments as per market cut-off timelines and Capturing all SSI updates that are received from Clients/Agents

Investigations for re-effecting duplicate payments, Updating Omgeo alerts

Reconciliation between Front Office and Operations systems, Internal Books and passing of Internal Ledger and Journal entries

Reporting and clearing of breaks, investigating Non-Receipt/Non-Payment cases

Liaising with Business for P&L write offs and Maintenance of Suspense account

Compute and make Margin calls for counterparties

Managing fails and interest processing

Prime Brokerage Margins: Approving payments, Setups, Exceptions Processing, Margin calls, Pricing issues management

Margin Management

World Headquarters

500 Frank W. Burr Blvd.Teaneck, NJ 07666 USAPhone: +1 201 801 0233Fax: +1 201 801 0243Toll Free: +1 888 937 3277Email: inquiry@cognizant.com

European Headquarters

1 Kingdom StreetPaddington CentralLondon W2 6BDPhone: +44 (0) 20 7297 7600Fax: +44 (0) 20 7121 0102Email: infouk@cognizant.com

India Operations Headquarters

#5/535, Old Mahabalipuram RoadOkkiyam Pettai, ThoraipakkamChennai, 600 096 IndiaPhone: +91 (0) 44 4209 6000Fax: +91 (0) 44 4209 6060Email: inquiryindia@cognizant.com

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Theme Impact

Consolidation 45% productivity benefits through various process improvement projects for past 3 years notably through consolidation of operations into a single 24x7 team. This allowed for benefiting from cross team buffers and effectively managing spikes in specific instrument volumes

Standardization 80% reduction in failed payments and claims by standardizing operations across instruments and products

Tool implementation Error Financing Costs brought down by 96%. This was achieved through standardization of error codes and implementing a CRM workflow tool. Set up a Zero tolerance group that identified error patterns and worked with operations team in bringing down the errors through personalized improvement plans and feeding CTB initiatives

Dispute Management

Trade reconciliation with clients and managing all types of portfolio disputes

Identification/ resolution of Valuation differences and Unmatched trades

Valuation and Accounting

Valuations: Prepare statements for clients and counter parties

Daily P&L Generation – reconcile between risk management system, ledge and P&L, review balance sheet movements, preparing trader packs

Review attributions, book accruals and allocations

Timely Reporting of Trade Volumes/STP/Clearance/Outstanding etc.

Weekly KPI performance reporting

Reporting of Basel II items and Impact resolution of Outstanding

MIS Reporting and Control

Clients serviced Products supported Regulations Confirmed

Inter BanksCorporates Hedge FundsPension FundsFund AdministratorsBroker/Agent Banks

T-Bills, Commercial Papers (CPs), Certificate of Deposits (CDs) Unsecured Loans & DepositsReverse ReposSwapsForeign Exchange: Forwards, Spots, NDFs/NDOsMoney MarketVanilla Options Precious Metals Options

Collateral and dispute management

MASHKMA SECFed ReserveFINMA

Confirmations, settlement and recon

BAFINFSASECMAS

Product controlSECFASB FSAIASB

Products Supported Geographies Data Sources

FX PerspectiveMorning AdvisorWeekly Calendar Emerging Markets Navigator Emerging Markets- India Nutshell

Asia Europe US

BloombergThomson Reuters

Haver Yield bookEqargs

Research capabilities:

Change – The – Bank (CTB) FocusCognizant delivers significant benefits to clients through CTB initiatives by leveraging deep operations experience, a pool of techno functional CTB Consultants and Lean six sigma experts.Below table summarizes some of the benefits we delivered through CTB initiatives to our clients.

Basic Maintenance &

Designing

Data monitoring & tracking news from various sources to analyze the impact on FX and commodities under coverage

Economic calendars (Weekly, Monthly), building data models and update periodically

Analysis/ Brief write-ups

Creating reports which include technical analysis on FX and precious metals (Daily, Weekly, and Quarterly) and writing commentary on various economic releases and implications in different markets