Early Settlement

The management of early settlements takes place within a well-defined context, for which market principles organize the limits. The FX module complies with these requirements through the following operating rules:

• Early settlements are only possible for Forward Outright Transactions. You cannot exercise early settlements for loans, borrowings or swap forward legs.
• The FX module meets the requirements specific to early settlements of transactions. So, the action is only authorized if the maturity date is passed, if the back-office validation was effective and if the transaction is settled.
• Early settlement is not authorized if the transaction has already been totally carried forward. The initial transaction was actually settled when carried forward.

When it is a partial carry forward, the non-carried forward part of the initial transaction can be early settled, up to the amount that was not carried forward. The transaction can be subject to multiple early settlements, up to the amount of the initial transaction. Moreover, the transaction resulting from a carry forward, cannot be early settled. In this case, you need to create a swap transaction.

In the management page for Forward Exchange Transactions, double-click the line corresponding to the transaction to select.

For more information on accessing the management page for Forward Exchange Transactions, see topic Forward exchange.

The transaction cannot be early settled in the following situations (an error message appears):

• The accounts to debit and to credit for the transaction settlement have not been entered.

You need to enter these elements. They are available in the Settlement tab of the management page for Forward Exchange Transactions. For more information about this tab, click here.

• The transaction was not back-office validated.

For more information on back-office validation, see topic Back-office Validation.

• The maturity date of the transaction is passed. In this case, you need to use the function of manual settlement.

If the transaction can be early settled, the page for the early settlement of the transaction opens up.

The Characteristics tab enables you to enter information on the early settlement: total or partial, amount of the settlement in case of partial early settlement, transaction dates.

The following table describes the elements of the header and the Characteristics tab.

The crosses in the E column indicate that the fields are editable.

View Table

Field	Description	E
Header
Buy/Sell	Direction of the forward leg for the early settlement This field cannot be edited.
Transaction	This field enables you to select a transaction type for the forward leg of the early settlement, depending on the defined direction of the leg. Click the button to view the list of the existing transaction types then, in the contextual window, double-click a line to select it. The code and description of the selected transaction type, are displayed in the Transaction field.
No.	Transaction Identifier
Link No.	This optional field enables the grouping of commercial transactions and FX transactions together, under a common link number. This number shows the assigned category (activity type, geographical area, project, etc.). It can then be used as a criterion of accounting or filtering processes, depending on your hedging strategy (micro-hedging or macro-hedging). For more information on link numbers, see Setup documentation. To select a link number, use the button as explained previously. The link number is assigned to the spot leg and to the forward leg of the early settlement.
Type	Type of the forward leg for the early settlement This type is always "Initial" for early settlements. For more information on the FX transaction types, see topic FX Transaction Types.
Analysis area
Folder	Number of the file For more information on folders, see the Setup module documentation.
Portfolio	To select a portfolio number, use the button as explained previously. For more information on portfolios, see Setup documentation.
Participants area
Company	Applicant (Company)
Counterparty	Counterparty with which the transaction is concluded
Contact	Enter the name of the contact for the counterparty. If you defined a name when setting up counterparties, this field is automatically completed. However, you can change the name which will be used in the confirmation letter.
General area
CTRV Modes	Mode of entry and calculation for the amounts and the rate The default and non-editable value for Early Settlements, is Enter Rate. In case of partial early settlements, you can edit the transaction amount in the main currency and the currency rate. The countervalue is automatically calculated.
Partial Early Settlement	Enable this option in case of partial and non-total early settlement. If you enable this option, and depending on the selected entry mode (as described previously), the Settlement Amount field is enabled.
Settlement Amount	These fields display the main currency and the early settlement amount in the main currency. The main currency cannot be modified. If you enabled the Partial Early Settlement option, you can lower the displayed amount by entering a value or using the calculator. For more information on how to use the calculator, click here. When you modify this amount, the amounts in the Settlement Countervalue, Remaining Amount and Remaining Countervalue fields are automatically calculated.
Settlement Countervalue	Countervalue currency and amount of the early settlement expressed in the countervalue currency
Remaining Amount	Amount of the initial transaction remaining after the deduction of the early settled amount This amount is null in case of total early settlement.
Remaining Countervalue	Amount of the countervalue remaining after the deduction of the early settled amount This amount is null in case of total early settlement.
Settlement TRX Date	Date on which the early settlement is set up This date will also be used as the transaction date of the spot and forward legs. The default value for this field is today's date. You can replace this date by the next day, either by entering the date directly in the field, or by using the calendar. For more information on how to use the calendar, click here.
Settlement Value Date	Delivery date for the spot leg of the early settlement This field will not be used for the spot leg of the early settlement. It is the date on which the exercised currencies are actually delivered. It falls two days after the date of the early settlement. You can replace it by the early settlement date or by a later date. To change this value, enter a date in the field or use the calendar.
Settlement Maturity Date	Maturity date of the forward leg for the early settlement This field will not be used for the spot leg of the early settlement. It cannot be modified. This date is automatically completed based on the delivery date of the initial transaction. If you replace the delivery date of the spot leg by a later date, this date is updated and corresponds to the delivery date of the spot leg.
Settlement Delivery Date	Delivery date of the spot leg and the forward leg of the early settlement This field cannot be edited. The default date is the delivery date of the initial transaction. It is recalculated at the same time as the maturity date of the forward leg and set two days after the latter.
Rate area This area displays information on foreign exchange rates.
Rate	In this field, select the type of exchange rate to apply to the forward leg created to cancel the initial transaction. Market Rate: the default rate is the current spot rate. Historical Rate: the reference spot rate displayed for a carry forward is the forward rate of the initial transaction.
Spot Leg Rate	Exchange rate of currencies for the spot leg of the early settlement
Forward Leg Spot Rate	Spot exchange rate of currencies for the forward leg of the early settlement
Swap Points	Difference in points between the forward exchange rate and the spot exchange rate for the forward leg of the early settlement
Forward Rate	Forward exchange rate of the currencies for the forward leg of the early settlement

The Cross Rates, Settlement, Back Office and User Field tabs are the same as for Forward Exchange Transactions. For more information about these tabs, click here.

In these tabs, the following elements can be edited: bank details of the settlement, information on G/L assignment and notes. The default values are those defined for the original transaction.

To know the balance of a transaction which was subject to an early settlement, refer to the transaction amount in position in the Exchange Ledger. For more information on this report, see topic FX Transactions Ledger.

The initial transaction and the spot leg of the early settlement cannot be modified after the early settlement.

As long as the leg is not settled, the following elements concerning the forward leg of the early settlement, can be modified:

• link number,
• portfolio number,
• name of the counterparty's contact,
• bank accounts and value dates of the settlement,
• reference,
• information on the G/L allocation,
• notes.

For more information on these fields, refer to topic Forward exchange.

The initial transaction cannot be deleted after the early settlement.

You can delete the spot leg or the forward leg of the early settlement: deleting one of the two legs involves the automatic deletion of the other one, while the original transaction takes the "Initial" status instead of the "Exercised" status. The early settlement is now cancelled.