Current system rates are the market rates that Treasury uses to validate each deal. Every time you enter a deal, Treasury compares the rates that you enter for the deal against the current system rates and verifies whether or not the deal rates falls within the company's deal rate, interest rate, and foreign exchange rate policies.
Current system rates are also used as the default rates when you perform revaluations, as the benchmark rates when you reset floating rate deals, and for calculating limit utilization.
Current system rates can be updated as frequently as you require and can be entered manually, or using an electronic rate feed.
The following rates are current system rates:
Spot rates: Spot rates are used when you enter into an agreement to deliver some amount of one currency for another currency in two business days. There can be exceptions to this rule depending on the local market conventions and the currency combination. For example, the Canadian dollar, when traded against the US dollar, settles in one business day.
Note: Foreign exchange cross rates are automatically calculated for each currency combination using the spot rates you enter for currencies against the USD.
Forward rates: Forward rates are used when you enter into an agreement to deliver some amount of one currency for another currency at a time in the future (a date more distant than the spot settlement date of 1 or 2 days). For example, if a company in the United Kingdom needs to purchase USD $1,000,000 in three months time, the company may enter into a forward contract to exchange GBP for USD at the 3-Month forward rate. The rate is calculated by taking the GBP/USD spot rate plus a premium or discount. Defining forward rates for authorized currencies is optional.
Volatilities: A volatility is a measure by which an exchange rate or interest rate is expected to fluctuate or has fluctuated over a given period. Volatility figures are expressed as a percentage per annum.
Interest rates: Interest rates are used in money market deals such as interest rate options, FRAs, and discounted securities. To enter deals in Treasury, you must set up at least one interest rate for each currency. However, for accounting purposes, it is recommended that you set up as many different interest rates as you can for each currency (for example, a 3 month rate, a 6 month rate, and a 1 year rate). The more interest rates you define the more accurate your revaluations and deal rate tolerance calculations will be. For more information on revaluations, see: Revaluations. For more information on deal rate tolerances, see: Deal Rate Tolerances.
Bond prices: Bond prices are the current market prices for a bond. Bond prices are used to calculate the deal rate tolerance for bond deals, to revalue bond deals, and to calculate limit utilization for bonds.
Stock prices: Stock prices are the current market prices for a stock. Stock prices are used to calculate the deal rate tolerance for stock deals and to revalue stock deals.
When you set up Treasury, you must set up the following rate information in the Current System Rates window:
A reference code for each rate you are defining.
A spot rate for each authorized currency against the USD.
An interest rate for each authorized currency
Once you set up your current system rates, you can return to the Current System Rates window at any time to enter new rates or to modify existing rates.
Use the Data Feed Codes tab region of the Current System Rates window to define reference codes for each rate you are going to use.
If you use an electronic data feed to import rate information, you must define a reference code, a feed source, and an external reference code for each rate. The external reference codes and feed sources must match the data that is imported with the market data import file.
If you enter rates manually, you only need to define a reference code for each rate. If you want to track the source of your rate information, you can also enter a feed source.
Navigate to the Current System Rates window.
Choose the Data Feed Codes tab region.
In the Reference Code field, enter a unique reference code to identify the rate, for example, GBP Spot or USD 1M. This code appears in the list of values of the Reference Code field in the Current Rates tab region.
In the Description field, enter a description for the rate. For example, a US dollar 1 month interest rate.
If you are using an electronic data feed to import the rate, or if you want to track the source of a manually entered rate, in the Feed Source field enter the name of the rate source.
If you are using an electronic data feed to import the rate, in the External Reference Code field enter the rate code from the external rate source.
Save your work.
Use the Current System Rates window to enter current system rates in Treasury. Treasury uses current system rates to determine if your deals comply with your company's deal rate tolerances and rate policies, and to calculate revaluations.
Current system rates are forward rates, interest rates, spot rates, volatilities, bond prices, or stock prices.
You can enter current system rates manually, using the Current System Rates window, or you can import rates into Treasury using an electronic data feed.
Note: To use an electronic data feed to import rates, you can use the data exchange programs provided or you can create a script to import the rates from the feed source into the appropriate Treasury tables. For more information on the data exchange programs provided with Treasury, see: Data Exchange Programs.
When you set up your current system rates you must define a spot rate (against the USD) and at least one interest rate for each authorized currency. You can enter as many rates as you want, but other than the rates previously mentioned, all others are optional.
Set up reference codes for each rate in the Data Feed Codes tab region. For more information, see: Setting Up Current System Rate Data Feed Codes.
Navigate to the Current System Rates window.
Choose the Current Rates tab.
In Ref Code field, choose the reference code for the rate. The description of the rate automatically appears in the Ref Description field.
Define a period and term for the rate. For example, "1 Month" for a 1-month interest rate or "2 FX Spot" for a 2-day foreign exchange spot rate.
In the Period field, enter a period for the rate. If you are defining a bond price, leave the period field blank. If you are defining a spot rate, the default period is 2 because spot rates are generally quoted on a 2-day basis; however, you can change the value if you want.
In the Term Type field, select a term type for the rate. The term type you select determines the type of rate you are defining.
The following table lists the rates you can define and the possible term types for each rate.
| Rate | Term Type |
|---|---|
| Interest rate | Day, Month, or Year |
| Volatility | Opt Vol(Days) or Opt Vol(Mths) Note: If you are defining an exchange rate volatility, you must define both the base and the contra currencies in the exchange. If you are defining an interest rate volatility, you only need to define the ledger currency. |
| Spot rate | FX Spot Note: The term for a spot rate is calculated in days. Therefore a period of 2 FX Spot is equivalent to 2 days. |
| Forward rate | FX Fwd(Days) or FX Fwd(Mths) |
| Stock Price | Stock Price |
| Bond Price | Bond Price |
In the Base Currency field, select a currency for the rate. If you are entering an interest rate, interest rate volatility, bond price or stock price, this is the currency for the rate, volatility, bond price or stock price. If you are entering a spot or a forward rate, this is the ledger currency for the rate.
Note: You must record one spot rate for each currency against the USD.
If you are entering a spot or forward rate, in the Contra Currency field, select a contra currency for the rate. If you are entering an interest rate, interest rate volatility, or bond price, leave this field blank.
In the Day Count Basis field, select the day count basis that you want to use for the interest rate. For more information on how each day count basis is calculated, see: Treasury Terms.
In the Bid Price field, enter the bid price for the rate. The bid price holds the bond interest rate, currency rate, bond price, current stock price, or volatility.
In the Ask Price field, enter the ask price for the rate. The ask price holds the bond interest rate, currency rate, bond price, current stock price, or volatility.
Additional Information: The difference between the bid price and the ask price for a currency combination is the price spread. The spread depends on two things: the risk associated with each currency, and the liquidity of the currencies in the combination. If you want to change the price spread between two currencies, you can edit the ask price at any time.
Save your work. The Date Time field is updated with the current system date.
You can manually update the current system rates for dates prior to the last rate update (Date Time) within the Current System Rates window. Perform the following steps to update the historic current system rates:
Navigate to the Current System Rates window.
Select the Current Rates tab.
In the Ref Code field, select the reference code for the rate.
For Ref Codes with term types of FX Spot, the Cross Rates and Spot Rates button is enabled. For all other term types, the Interest Rates/Prices button is enabled.
Click the Spot Rates button to launch the Review Historic Spot Rates window or click the Interest Rates/Prices button to launch the Review Historic Rates window.
In the Rate Date field, enter the rate date and time or select the rate date and time from the pop-up calendar for the rate date to be updated or added.
In the Bid Rate field, enter the bid price for the rate.
In the Ask Rate field, enter the ask price for the rate.
Note: The Spread and Domestic Equiv fields are automatically calculated.
Save your work.
Use the Archive Parameters tab region of the Current System Rates window to define the frequency that you want to use to archive your current system rates. By default, rates are archived every time they are updated.
In the Archive Parameters tab region of the Current System Rates window, select the rate that you want to archive.
In the Archive Frequency fields, define an archive frequency for the rate.
Save your work.
If you want to view your archived rates, see: Viewing Current and Archived System Rates.