Ripple is making blockchain waves

| 23-03-2018 | Carlo de Meijer |

Almost a year ago I wrote my blog “Blockchain and the Ripple effect: did it Ripple?”. Now twelve months later we may conclude it did. And even more than that. Ripple is making many waves. A lot happened both in broadening their offerings and in enlarging their network. A growing number of banks and payment providers, increasingly join RippleNet, Ripple’s decentralized global network, to “process cross-border payments efficiently in real time with end-to-end tracking and certainty”. By using the growing set of Ripple solutions they are able to expand payments offerings into new markets that are otherwise too difficult or too expensive to reach. The focus of Ripple therefor has especially moved towards emerging markets.

BROADENING RIPPLE OFFERINGS

Ripple was set up in 2012 to create a streamlined, decentralized global payments system named RippleNet, using technology inspired by the blockchain, to record transactions between banks. RippleNet is an enterprise-grade blockchain platform, that nowadays has over 100-member banks and financial institutions. These partners can use all the Ripple offerings.

Solutions

Ripple makes software products based on blockchain technology and sell them to banks, payment providers and others to be used on RippleNet. These are aimed to make cross border payments truly efficient for these players and their customers. Next to their digital asset XRP, the XRP Ledger, and xCurrent, that helps banks settle transactions, Ripple has added a number of new services/offerings to the platform including xRapid and xVia. This in order to attract more clients to enter RippleNet. Ripple is now taking the next step to help build the Internet of Value (IoV), by establishing an Infrastructure Innovation Initiative.

a. XRP: digital asset

From the outset, XRP, Ripple’s digital asset was expected to be an important part of Ripple’s decentralised payment system. Ripple uses its own XRP cryptocurrency as a payment method to make it easier for banks to move money internationally. Banks and payment providers can use Ripple’s digital asset XRP to further reduce their costs and access new markets. One rationale for using XRP is that unlike Bitcoin, the token has one narrowly defined (payments method!) but clearly useful purpose: to help banks move cash faster and more cheaply, especially across borders. The token could be used as a kind bridge currency between fiat currencies. For example South African rands in Johannesburg could become XRP, which could then be turned into baht in Thailand. That could help banks avoid the time consuming and expense of tying up money in different currencies in accounts at other banks.

b. xCurrent: processing payments

RippleNet is powered by xCurrent, for payment processing. xCurrent is the new name of Ripple’s existing enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking (and bidirectional messaging across RippleNet). It provides real-time messaging, clearing and settlement of financial transactions. The xCurrent messaging platform however does not involve XRP. It includes a Rulebook developed in partnership with the RippleNet Advisory Board to standardise all transactions across the network. That ensures operational consistency and legal clarity for every transaction. The Interledger Protocol (ILP) is the backbone of the solution and makes it possible for instant payments to be sent across a variety of different networks.

Read the full article of our expert Carlo de Meijer on LinkedIn

 

Carlo de Meijer

Economist and researcher

 

Unilever’s decision – the Ides of March?

| 22-03-2018 | treasuryXL |

On 15th March 2018, Unilever announced its decision to domicile its headquarters exclusively in the Netherlands. This will lead to Unilever having a single legal base for the first time. Traditionally, Unilever had 2 holding companies – Unilever NV, registered and domiciled in Rotterdam the Netherlands, and Unilever PLC, registered and domiciled in Port Sunlight, England. There were 2 head offices – one in Rotterdam and the other in London. Unilever was formed in 1930 by the merger between Margarine Unie and Lever Brothers and has a dual listing in both the AEX and the FTSE index. The 2 companies operate as a single business. What are the reasons behind this decision and what are the consequences?

Framework

Whilst having a dual listing, 55% of the stock are held via the Dutch NV and 45% by the UK PLC. Liquidity in share trading is 1.5 times higher in the Netherlands than in the UK. After this decision, Unilever will have 3 divisions – food and refreshment based in the Netherlands, home care and personal care which are both based in the UK. Under this split, 49% of operating profit is attributed to operations in the Netherlands, the remaining 51% to the UK. Importantly, 92% of the activities occur worldwide outside of these 2 countries.

Nationality

Unilever has one major issue that must be resolved – it must choose its nationality. This is important in determining on what exchanges its shares are traded. As a major constituent of both the AEX and the FTSE, there are many investors and investment funds who hold shares to track the index. If there is no recognised nationality with the UK, this would imply Unilever leaving the FTSE 100 – compelling tracker funds to sell their stock. By incorporating within the Netherlands, Unilever will have one type of share – common shares with common voting rights. There will be no preference shares with extra voting rights.

Brexit

Was the decision taken because of Brexit? Unilever themselves have stated that this was not the case. It is acceptable to conclude that the free choice of the UK to leave the EU did not promote the option to stay in the UK. However, Relx (former Reed Elsevier and also a dual listed Anglo-Dutch company) recently announced that they had also chosen a single location – but they chose UK over the Netherlands.

Defensive

In 2017 Kraft Heinz (a US conglomerate) made a hostile takeover bid for Unilever. This was beaten, but accelerated the decision process within Unilever. By choosing a single listing and single nationality it would appear to be easier to defend the company. The Dutch model affords more protection to the takeover target, being based on the Rhineland model of stakeholders, rather than the Anglo-Saxon model based on shareholders.

The future

Unilever will gain clarity of oversight – the structure of the company is clearer. As a single legal entity it will be easier to issues new shares etc. It should also place Unilever in a more progressive position with regards to acquisitions. This could be interesting news for Dutch banks – allowing them to more directly participate. However, the City of London is still home to the largest financial market in Europe. It will be interesting to see who wins that battle in the future.

The 15th March is historically known as the Ides of March – a day on the Roman calendar. Traditionally it was the date when debts had to be settled. It was also the date when the emperor, Julius Caesar, was assassinated – a defining day in the history of the Roman Empire, that impacted on its future.

 

Basisbeginselen Beursgang – Treasury for Non-Treasurers

| 21-03-2018 | Pieter de Kiewit |

Cash PoolingMet het huidige nieuws rond beursgangen (IPOs = initial public offering) heb ik gezocht op het steekwoord beursgang op treasuryXL en vond geen resultaten. Wellicht omdat de treasury beroepsgroep communiceert in het Engels. Voor Non-Treasurers ga ik bij deze kort in op de basisbeginselen van een beursgang en waarom hier zoveel aandacht voor bestaat.

Om maar te beginnen met waarom er zoveel aandacht voor bestaat. Dit is omdat het natuurlijk over het algemeen over heel veel geld gaat. En wat is zo’n beursgang eigenlijk? In den beginne is een bedrijf van één of enkele aandeelhouders. Dit zijn de oprichters, de familie of investeerders die een één op één deal hebben gesloten met de oprichters. Aandeelhouders besluiten zelf of en aan wie ze willen verkopen. Totdat de beursgang er is en aandelen vrij worden verhandeld op de beurs. Oprichters kunnen niet meer bepalen wie hun eigenaar is, iets dat Akzo Nobel en Unilever recent duidelijk hebben gevoeld.

Redenen die worden aangevoerd om naar de beurs te gaan zijn, niet uitputtend:

  • Er is kapitaal nodig voor verdere groei;
  • De eigenaren willen hun bezit te gelde maken;
  • Een notering aan de beurs geeft het bedrijf aanzien;
  • Middels een notering is het gemakkelijker in de toekomst andere soorten financiering te verkrijgen;
  • Aandelen- en optieplannen voor werknemers zijn gemakkelijker vorm te geven.

Een beursgang is niet zaligmakend. Veel van bovenstaande doelen kunnen ook via een andere manier worden bereikt: een banklening, verkopen aan een strategische partij en obligaties bij institutionele beleggers. Er komen ook zeer nadrukkelijke nadelen in beeld bij een beursgang: de rapportage eisen zijn veel hoger. Dit levert hogere kosten op. Je moet inzicht geven in je onderneming en haar plannen. Dit kan de concurrent zeker waarderen. Als je verkoopt, verlies je zeggenschap. Wie betaalt, bepaalt.

Voor treasurers is een beursgang vaak het hoogtepunt van zijn/haar loopbaan.
Weet dat als je als aandeelhouder wilt instappen, dat dit niet zonder risico is. In de hausse van beursgangen bij Facebook, AliBaba en anderen is er meer geld verloren dan verdiend. En zoals een investor laatst zei in het FD: “Waarom zou een private equity huis verkopen als de kansen voor de business case heel sterk zijn?”. Onderzoek waar je instapt en wat de motieven zijn van de verkopende partij.

Binnenkort staan er een aantal nieuwe bedrijven genoteerd aan de beurs. Ik ben benieuwd hoe de noteringen zullen verlopen. Later zullen we hier vast dieper op ingaan.

Pieter de Kiewit
[email protected] / +31 6 1111 9783

Pieter de Kiewit

 

 

Pieter de Kiewit
Owner Treasurer Search

 

 

 

How To Optimize Your Cash Management – upcoming event

| 19-03-2018 | treasuryXL | TIS Treasury Intelligence Solutions |

Treasury Intelligence Solutions GmbH (TIS)- a partner of treasuryXL, are organising a very engaging event that is being held in Amsterdam on Tuesday 27th March 2018, for corporate treasury. We have been kindly invited to attend and shall report back to you later, with our thoughts and experiences on what promises to be an interest evening. Read on for more information about this event and sign up if you find this event relevant to you and your company.

TIS will be joined by Cashforce, at the TIS Experts Evening in Amsterdam. The main focus will be on TIS client Archroma and their presentation on the global implementation of TIS.

TIS is the leading cloud platform for the management of company-wide payments and cash flows. TIS enables companies to make more efficient, more secure and more cost-effective payment transactions while also enabling customers to make better decisions when analysing financial and operational performance in real time.

Bas Coolen, Head of Treasury at Archroma, will present challenges in his department and his key objectives for a consolidation of bank account management and an optimization of payments.

Archroma is a global colour and specialty chemicals company headquartered in Reinach near Basel, Switzerland. It operates with 3,000 employees over 35 countries and with 24 production sites.

Cashforce will inform you about the art of automating your cash forecast with minimal effort.

TIS and Cashforce are very much looking forward to stimulating discussions and ideas with their comprehensive agenda and lectures. Reports on trends, achievements and real-world examples from the industry will round up the program for this evening.
During the networking section you will have the opportunity to further exchange with Bas Coolen and the experts from Cashforce and TIS. You can take this opportunity to ask your questions about how to operate an elaborate cash management system, that offers the functionality you require.

The event is being held in the Dylan Hotel, built on the site of a famous theatre – so we can expect a good performance.

Register now for one of the last remaining seats via the following link: Expert evening Amsterdam

treasuryXL wishes everyone – both participants and attendees – a productive evening and will report back later with our findings.

Smart contracts – oxymoron or the future for business?

| 16-03-2018 | treasuryXL |

On Tuesday 13th March 2018, RTL Z – a television channel – broadcast a “Cryptoshow” to explain how the Blockchain works and what it could mean for the future. They attempted to make the technology and information as simple as possible to show what uses the Blockchain could have in the world for consumers and businesses. One of the main areas of interest relates to Smart contracts. What are they? What are the advantages and disadvantages? What changes can they bring?

Definition

Wikipedia defines a Smart contract as “a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible”.

These contracts facilitate the transfer of goods, services, property, money – in fact anything of value – in a manner that is transparent and direct. It removes the role of an intermediary.

How they work

  • You agree to enter into a transaction
    You draw up an agreement electronically
    The agreement is encrypted and placed on a secured shared ledger accessible to the counterparty
    As this is the Blockchain, the data is backed up at various other locations
    Both parties perform as per the agreement
    Costs are reduced by the absence of intermediaries
    As both parties have agreed to the contract they are faster and less expensive to administer
    Being electronic there is less possibility of errors occurring due to manual input

Advantages

  • Both counterparties receive an identical agreement
    You decide who can access and amend documentation
    Rules that have been agreed upon define how changes can be made
    Any agreed change in one document is automatically made to all relevant documents
    Encryption and the methodology of the Blockchain ensures that transactions cannot be altered after being agreed and the block validated

Disadvantages

  • Are they enforceable by law
    No action written in a contract can be against the law of the land
    Contracts still have to be written – electronically. This entails human involvement that could lead to errors
    Considerable knowledge of computer coding is required
    Lawyers still need to be involved in the formation of the contracts
    Costs – employing these specialists will come at a steep price

What further uses can the Blockchain provide

Digital identity – it will be possible to identify an agreed counterparty and all their static data can be stored
Proof of provenance – especially for ethical businesses, it will be possible to issue certificates proving the source of goods
Communication within the supply chain – discrepancies will show up and can be proactively addressed
Payments – removing financial intermediaries implies quicker payments and reduced costs
Ownership – Smart contracts enforced by law make it possible to register the legal owners of goods and property
Loyalty programmes – with all the details present from all transactions, it is possible to initiate programmes to reward clients/customers

The greatest savings will be seen in processing – both in time and costs. Some reports suggest savings of up to 40% can be established, together with a real-time overview of positions. However, the whole system relies on one major factor – trust. Where we previously met people, negotiated, agreed etc., now we will do more of that online. Furthermore, implementation of a Blockchain strategy will require a company to complete revaluate their current way of working, leading to considerable planning and strategic positioning.

The proposed future looks exciting – it is now up to industry to determine the road on which they wish to travel.

Term sheets – glossary of terms

| 15-03-2018 | treasuryXL |

Whenever entering into transactions with banks, both parties need to know and understand what they are trading. A relatively simple transaction like a FX spot has few terms – you buy one currency against selling another currency at an agreed rate and an agreed settlement date. The only other major factor relates to where the settlement has to take place – on what bank account are you receiving and to what bank account do you have to pay the counter currency.

However, when entering into a loan or derivative it is always prudent to draw up a term sheet stating all the relevant criteria to enable the bank to quote a price. Once the trade is effected, then a confirmation is sent which should have the same terms and conditions as the term sheet. Here is a list of terms that are regularly used and their meaning. They mostly apply to physical products as well as to derivatives.

American Option – an option that can be exercised on any working day until the expiration date

Bermudan Option – an option that can be exercised on more than one specified date before the expiration date

European Option – an option that can only be exercised on the expiration date

Binary Option – an option whose payoff is either an agreed amount (monetary or asset) or nothing at all

Call Option – The right, but not the obligation, to purchase a specified underlying asset, at a specified price (Strike price) on a specified date in the future

Put Option – The right, but not the obligation, to sell a specified underlying asset, at a specified price (Strike price) on a specified date in the future

Cap – an option that pays out when a specified interest rate price exceeds a pre-agreed level (Strike price)

Floor – an option that pays out when a specified interest rate price falls below a pre-agreed level (Strike price)

Collar – the simultaneous purchase of a Cap and sale of a Floor on the same specified interest rate for the same nominal amount, protecting the purchaser from rate rises whilst negating the cost of the option by selling the Floor

Strike price – the price (level) at which an option holder can exercise their rights under the agreed option

Premium – the cost of buying an option

Trade date – the date when the specifications of a contract are transacted

Effective date – the start date of a contract

Termination date – the end date of a contract

Payment date – the date on which a payment is made

Fixing date – the date on which a floating rate is set/fixed

Forward start – a contract agreed on a trade date, that becomes effective on a specified future date

Tenor – the length of time that a contract is valid

Reference rate – the specified interest rate (or FX spot)  index upon which future cash flows are based

Fixed rate – an agreed interest rate that cannot vary over the lifetime of the contract

Float rate – an agreed index rate that can be periodically reset over the lifetime of the contract

Derivative – a financial instrument that derives its value from the value of an underlying asset

Break clause – a clause written into the contract, that releases both parties from the contract in the event of a pre-agreed relevant event taking place

If you are interested to know what the effect of these terms can have on a contract, please contact us for more detailed information.

Hoe banken hun ondernemersrisico uitbesteden.

| 14-03-2018 | Frank Wijn |

 

Als oud-bankier ben ik vanaf 2008 bezig om mooie ondernemingen bij te staan in hun contacten met de bank, hen uit te leggen wat bankafspraken daadwerkelijk inhouden, bezig om ondernemers te behoeden voor “foute afspraken” en hun bankafspraken (waaronder financieringen) te optimaliseren.

 

 

Mijn werkwijze is simpel en doeltreffend. Alle afspraken met de bank worden gescreend en de teksten of afspraken die voor mij verrassend of onbegrijpelijk zijn, worden geel gearceerd. Zo kreeg ik mijn eerste derivatencontract onder ogen in het voorjaar van 2012. Het hele contract werd geel gearceerd. Ik begreep werkelijk niet waarom deze MKB-onderneming een cap met een knock-in-floor had gekocht ter afdekking van zijn renterisico. Niet veel later bleek dat zowel de klant, als de accountmanager van de bank het mij ook niet uitgelegd kregen. Mijn interesse was gewekt en het speurwerk begonnen. Dit was de opstap naar het mede-oprichten van Kennis Centrum Rentederivaten.

In de jaren 2012 en 2013 was ik vooral roepende in de woestijn, totdat ik mijn opgedane kennis en verbazing op liet tekenen door een journalist van Follow The Money. Het 2 pagina tellende artikel werd verkocht aan de Volkskrant en de deksel van de beerput kwam enigszins los.

In 2014 zag het tijdelijke samenwerkingsverband KCR het daglicht en in die samenstelling trokken wij door het land. Langs Nederlandse Vereniging van Banken, hoofddirectie van grootbanken, Autoriteit Financiële Markten, journalisten van dagbladen en de laatste 2 jaar ook de Derivatencommissie. Ondernemersverenigingen als MKB Nederland (en later ONL) gaven niet thuis. Te complex en te vervelend voor de banken.

Nu, vier jaar later, is het Uniform Herstel Rentederivaten (een broertje van Deltaplan KCR) in ontwikkeling. Voor een te kleine doelgroep, met teveel invloeden van de banken en te complex voor MKB-ondernemers om te begrijpen. Het niet-begrepen derivatencontract was destijds 6 pagina’s en de “oplossing” inmiddels 244 pagina’s. Maar goed er wordt wat gecompenseerd, dus beter dan niets.

Brengt mij bij de verbazing van vandaag de dag. Dat rentederivaten en niet-professionele / niet-deskundige klanten een moeilijk houdbare combinatie is, lijkt steeds duidelijker. Maar nu kwam ik zeer recent een staaltje renterisicomanagement van de bank zélf tegen. De ABN Amro Bank om precies te zijn. Hoe gaat deze bank om met het renterisico dat zijzelf zegt te lopen?

Lees en verbaas u. Let op hun woordkeuze “interpretatie van”. Tegen zo’n tekstblok in een financieringsofferte is geen derivatenproduct opgewassen.

“Klant centraal” was het toch?

frankwijnfoto1

 

Frank Wijn

Expert in financiële duidelijkheid 

 

IPOs – how to bring your company to the market

| 13-03-2018 | Lionel Pavey |

In the last week, 3 Dutch companies have announced that they will be floating on the stock exchange via Initial Public Offerings (IPOs). Alfen – an energy storage company; B & S – a cosmetics wholesaler; and NIBC – fifth largest Dutch bank in terms of assets. In America, Dropbox and Spotify, among others, are looking to float. Future issues in the Netherlands are expected to include Leaseplan, Varo Energy and Ayden. It is a very busy start to the year for investment banks with plenty of activity in IPOs and mergers and acquisitions (M&A). Here is a summary of how an IPO works.

What is it?

An IPO is when a company offers its shares to the public, which are normally purchased by institutional investors as well as, though usually in smaller amounts, to retail investors – individuals. A company first needs to issue a prospectus to potential buyers – this is a financial document that discloses all relevant information and financial statements about the company, in order that investors can determine the value of the company. 2 critical issues need to be determined – the share price and the number of shares to be issued. Shares are underwritten by one or more banks – they undertake the risk of bringing the shares to market and placing them with buyers. They also carry the risk of having to hold shares if they do not get sold at the time of the IPO.

Why do it?

Companies that have grown eventually start looking for alternative ways of raising funds – either for expansion or investment. The normal routes include bank loans, private placements, or capital injections via new shareholders, along with going public. It allows them to raise equity, offer incentives to management and employees, as well as increasing the awareness and profile of the company. There are large pools of liquidity – specifically pension funds and investment funds – that are looking for attractive investment opportunities. A major consideration for selling shares as opposed to private placements and loan products is the fact that, normally, there is never a need to repay shareholders their capital. As a shareholder you gain access to the increase of the value in the shares as well as dividend payments, both of which reflect the growth of the company. A shareholder has a future claim on a share of a company.

What are the advantages?

A cheaper route to long term capital
Diversification of ownership
The potential ability to attract better management
Alternative source of funding for acquisitions
A simple metric to determine the value of a company – share price * amount of shares

What are the disadvantages?

Considerable paperwork – business information, statements of accounts
Major costs relating to legal, marketing and accounting work
Primary information about your company that is freely published – your competitors
Large amount of time and effort needed to prepare everything
Dilution of power to shareholders
Compliance to new reporting methods – everything must be delivered on time
The issue might not be a success

Considerations

As a public company, reporting has to take place within certain time frames. This could, therefore, entail considerable investment in updates to accounting and reporting software – and processes – to comply with the regulations. Additionally, whilst preparing for an IPO, the company must still be run and managed as before. All these extra steps are on top of the daily management. Time must be found to make presentations and answer question from accountants, lawyers, investment banks and regulators.

Going live

If all has gone according to plan, an IPO will be successful and the share price will rise. The company’s profile has been increased and business grows. However, there are new responsibilities to shareholders, management and employees. There is a lot more communication necessary.

Final point
In a normal IPO, a company offers a mix of existing shares and new shares into the offering. This allows existing shareholders to realise a profit on their previous investment whilst also offering the company new capital. For the 3 Dutch companies mentioned at the start, all 3 issues are, basically, secondary offerings – no new shares are being created.

Lionel Pavey

 

Lionel Pavey

Cash Management and Treasury Specialist

 

 

MiFID II regulering van de georganiseerde handel

| 12-03-2018 | Michiel van den Broek |

 

De Europese MiFID regels hebben als hoofddoelstellingen om de Europese financiële markten efficiënter en transparanter te maken en om de bescherming van beleggers te vergroten. De MiFID II regels trachten zoveel mogelijk handelsvormen te reguleren. Deze regulering heeft betrekking op de dienstverlening en beleggingsactiviteiten van beleggingsondernemingen en exploitanten van gereglementeerde markten. Bij het verlenen van beleggingsdiensten kan een beleggingsonderneming op verschillende manieren transacties in financiële instrumenten uitvoeren: (1) als tussenpersoon en (2) voor eigen rekening.

Transacties uitvoeren via een tussenpersoon

Hierbij voert de beleggingsonderneming als tussenpersoon een klantorder uit voor rekening van de klant op basis van execution only, dan wel in het kader van beleggingsadvies of vermogensbeheer.

Transacties voor eigen rekening

Bij handel voor eigen rekening sluit de beleggingsonderneming een transactie af met eigen rekening en voor eigen risico.

Klantorders afhandelen als tussenpersoon op de georganiseerde markt

De beleggingsonderneming kan een klantorder:

Doorgeven aan een externe handelsplatform.

  • Een gereglementeerde markt (beurs)
  • Een alternatief handelsplatform, oftewel een Multilateral Trading Facility (MTF)
  • Een georganiseerde handelsfaciliteit, een Organised Trading Facility (OTF)

Uitvoeren zonder inschakeling van een externe partij.

  • Via interne afhandeling, oftewel Systematische Internalisatie (SI)

Ad a en b Gereglementeerde markt en MTF

Voor de gereglementeerde markt gelden de MiFID II regels voor gereglementeerde markten. Voor overige exploitanten van een MTF zijn de MiFID II regels voor beleggingsondernemingen van toepassing. De MiFID II regels voor gereglementeerde markten en MTF zijn vergelijkbaar maar niet helemaal identiek. Belangrijke verschillen zijn de vergunningsvereisten, de prospectusverplichting voor toelating tot de handel en de afwikkeling van transacties.

Samenvattend is een gereglementeerde markt aan meer regels gebonden, biedt meer beleggersbescherming en is duurder dan een MTF. In de praktijk zijn MTF’s geduchte concurrenten van beurzen. Deze concurrentie sluit aan bij een hoofddoelstelling van de MiFID regels, het efficiënter maken van handel op Europese financiële markten.

De handel op gereglementeerde markten en MTF’s verloopt via niet-discretionaire regels. Niet-discretionair betekent dat er geen enkele mogelijkheid mag zijn de aan- en verkoopbeslissingen te beïnvloeden.

Een beleggingsonderneming moet de nadrukkelijke toestemming van de klant hebben om klantorders buiten een gereglementeerde markt of MTF uit te voeren.

Ad c: Handel via een Organised Trading Facility (OTF)

Om binnen de Europese Unie de financiële markten transparanter en efficiënter te maken en concurrentieverhoudingen tussen handelsplatformen meer gelijk te maken, introduceert MiFID II de georganiseerde handelsfaciliteit (Organised Trading Facility, OTF). MiFID II definieert de OTF ruim om te bereiken dat elk handelssysteem onder toezicht komt naast de gereglementeerde en de MTF handel. Aangezien de G-20 de handel in bepaalde OTC-derivaten in de toekomst verplicht via een elektronisch handelsplatform wil laten verlopen, is het te verwachten dat deze ook onder de MiFID II regels voor OTF gaan vallen.

De OTF handel verschilt in twee belangrijk aspecten van de gereglementeerde en MTF handel: verhandelde producten en regels van handel.

OTF verhandelbare producten

Op een OTF mag geen handel plaatsvinden in aandelen (equity) of daaraan verbonden instrumenten. Er mag alleen worden gehandeld in non-equity instrumenten, zoals obligaties, gestructureerde financiële producten, emissierechten en derivaten.

OTF regels van handel

Op een OTF handelsplatform is er sprake van het afsluiten van orders via matching op basis van discretionaire regels. Matching bestaat uit het bijeenbrengen van tegengestelde klantorders. Discretionair betekent dat de beleggingsonderneming die de OTF exploiteert invloed heeft op welke orders met elkaar worden gematcht.

Deze invloed om een order te plaatsen, in te trekken of te matchen is mogelijk omdat de OTF exploitant bij de transactie handelt voor rekening van zowel koper als verkoper. De OTF exploitant kan ook de totstandkoming van een potentiële transactie faciliteren door partijen bij elkaar te brengen. Omdat beïnvloeding mogelijk kunnen kan er voor de exploitant een belangenconflict optreden waardoor de exploitant niet in het belang van de klant handelt. Om de belegger hiertegen te beschermen gelden er strenge zorgplichtregels.

OTF voorbeelden: agency crossing en matched principal trading

Een agency crossing system is een voorbeeld van een OTF waarbij matching van orders tot stand komt doordat de exploitant voor rekening handelt voor beide klanten. Een variant op de OTF is matched principal trading (back-to-back handel), waarbij de exploitant twee tegengestelde posities van klanten bijeenbrengt door transacties voor eigen rekening af te sluiten met dezelfde looptijd. Hierdoor wordt hetzelfde bereikt als bij matching via een agency crossing. Echter, bij matched principal trading moet de opdrachtgevers toestemming geven om de transactie af te sluiten, hetgeen bij agency crossing niet nodig is. Om de opdrachtgevers te beschermen, mag de exploitant bovendien geen marktrisico lopen. Dit betekent dat de bemiddelaar geen winst of verlies maakt, afgezien van de vooraf bekendgemaakte provisies, vergoedingen of kosten van de transactie

Ad d: Systematische internalisatie (SI)

In plaats van inschakeling van een externe partij kan een beleggingsonderneming een klantorder ook intern (in-house) uitvoeren zonder gebruik van een multilateraal handelssysteem systeem. Er is dus sprake van een bilaterale handel om klantorders af te sluiten. In plaats een klant als tegenpartij te zoeken om een tegenovergestelde klantorder uit te voeren, treedt de beleggingsonderneming zelf op als tegenpartij. Deze handelsvorm is een combinatie van de beleggingsdienst handel voor rekening van de klant met de beleggingsactiviteit handel voor eigen rekening van de beleggingsonderneming volgens niet-discretionaire regels. Een verschil met een OTF is dat ook aandelen (equity) of daaraan verbonden instrumenten mogen worden verhandeld.

Bij multi dealer platform treden meerder beleggingsondernemingen op als handelaar voor eigen rekening. Een single dealer platform is een handelsplatform waarbij één beleggingsonderneming steeds optreedt voor klanten door voor eigen rekening posities in te nemen.

In vergelijking tot beurs, MTF en OTF gelden er voor interne afhandeling minder regels voor transparantieplicht voorafgaande aan de handel.

Michiel van den Broek - foto

Michiel van den Broek

Owner of Hecht Consult

 

Corporate governance – it is all about the rules

| 08-03-2018 | treasuryXL |

Corporate governance is the rules and processes by which a company is controlled and directed. It is a balancing mechanism between different stakeholders – directors, shareholders, management, government, external financiers etc. The treasury function performs highly skilled and complex tasks to ensure continued and harmonious execution of all cash related functions. At the same time, there is much interaction with both internal and external stakeholders. The corporate governance within the treasury function should always be performed in accordance with predetermined and approved metrics as laid out in Treasury statutes. This means undertaking operations that are consistent with the governance within the corporation.

Corporate governance helps to define the strategies of a company, and highlight how these strategies will be implemented throughout the policies, procedures and working processes. Normally, Treasury statutes are drawn up by treasury and management – detailing the accepted methodology to perform the approved tasks – whilst responsibility and approval is granted by the directors. Once agreed upon, the statutes have to be observed by staff carrying out their duties and responsibilities.

As the treasury function is highly complex – both in financial products as well as regulatory frameworks – both directors and management need to fully comprehend the functionality as well as the implications of different financial products and services. The onus lies on the treasury department to ensure that other stakeholders not only have enough knowledge about the products, but also awareness and understanding of the relevant risks. This is vital to ensure that the right decisions are made at the highest strategic level.

Directors and management need to understand:

  • Financial risks undertaken whilst running the business on a day-to-day basis
    Operational controls to protect the business from fraud
    Risks inherent in approved financial instruments
    Strategies used to identify and mitigate financial risk
    How risk is measured and reported
    Potential exposure as a result of the agreed policy
    Acceptance that not all risks can be qualified and quantified
    The influence of external factors – market risk, counterparty risk, interest rate risk etc.

Proactive role of the Treasury

  • Accurate valuation of financial products used – if you cannot value it, you should not be using it
    Quick recording of all transactions
    Ensuring with controllers that all financial products are correctly input for accounting purposes
    Implementation and management of agreed Treasury policies
    Determining if bank covenants are being maintained
    Ensure compliance with all external regulatory frameworks
    Collaborating with auditors – both internal and external

Policy is influenced by strategy and objectives. The role of Treasury is to help to fulfil those objectives. Treasury has a dual function – it both mitigates risk as well as being the source of risk. Treasury enters into financial transactions on behalf of the business in order to mitigate risks; however, something like an unauthorised trade could subject the business to financial loss.

It is essential that directors and management understand both the risks that treasury manage, together with the potential risks that those transactions can create.