Manual Generation
Updating Back-to-Back Trades
Overview
ChathamDirect can accommodate our clients who need to set up back-to-back trades to effectively transfer the hedge from the parent to the chosen subsidiary. The elevated trade volume creates a small operational burden with an increased transaction count, but it allows companies to meet their accounting & economic objectives using only a single trading entity.
The process for setup is built in to our FX Transaction Loader template, allowing you to specify which of your internal legal entities will be involved in the back-to-back relationship along with counterparty banks. You can manually build each leg of the trade and denote which one is the Street, Offset and Accounting trade. Alternatively, you can simply indicate the setup is Back-to-Back, specify your internal trading entity and ChathamDirect will automatically generate the rest!
While either of the above approaches to back-to-back trading will require that you have the Accounting Strategy selected for each row in your file, the process is seamless after everything is set up.
Template Setup
From the welcome page, navigate to the Trading > FX Transactions menu option:
Next, click the Download Template button and then select Blank Template:
There are two ways to set up you back-to-back trades using the Excel template file. Each will be covered in detail below.
Automatic Generation
To load back-to-back trades using the automatic method, you can follow the guidance on the Back-to-Back Trades columns in the load file (row 3 in columns D, E, F). You only need to enter the details for the street facing leg of the trade using this method. Set column D to Back-to-Back, and column E to the internal entity which will be party to the accounting leg of the trade. Once you fill out all remaining required columns in the file, ChathamDirect will use the Back-to-Back trade type and Client's Internal Entity information to generate all three legs of the Back-to-Back trade upon upload.
Note: Whichever Accounting Strategy you select in column BL will be applied to the designated leg of this trade. The non-designated legs will have their accounting applied automatically based on your Back-to-Back setup within the Trade Settings menu.
Manual Generation
To load back-to-back trades using the manual method, follow closely the directions on the Back-to-Back Trades columns in the load file (row 3, columns D, E, F). In this case, you will need to enter the details for all three legs of the trade. Column D requires all three unique trade types to be entered (Street, Offset, Accounting). It also requires that you identify the Internal Reference Number (column C) for each leg. The Back-to-Back Id column must be the Internal Reference Number of the street trade for all three rows. Lastly, the Legal Name of Client's Internal Entity is not required in column E, rather, these will be specified in columns H and J according to the structure of the trade. Fill out all remaining required columns and upload the file.
Note: Unlike the Automatic Generation method, you must select the Accounting Strategy in column BL for all three legs of the trade.
Updating Back-to-Back Trades
For both the manual and automatic generation methods, if you wish to update details for your transactions using the file, all columns in the Back-to-Back Trades section (columns D, E, F) need to be cleared first. The system will not accept the file if there are any values in those columns .
Economic Field Update for Manual and Automatic method
If you experience any errors or issues while performing any of the above processes, or you have any questions or concerns, please reach out to your ChathamDirect representative.