MIDDLE OFFICE TRAINING COURSE (MOTC)

MIDDLE OFFICE TRAINING COURSE (MOTC)

Middle Office Training Course (MOTC) is a primer course aimed at introducing this specialised discipline in wholesale banking to career converts, recent graduates and banking practitioners redeployed into this part of banking operations. With Singapore’s rapid rise as risk management and operations hubs, the need for proficient middle office professionals in investment banking, private banking and asset management has becoming increasing acute. MOTC seeks to provide foundational training in middle office functions, paying particular attention to profit/loss reports production while giving general coverage on product control, regulations and compliance. MOTC content mix is expected to undergo some streamlining soon. We will update you as soon as possible.

MOTC COURSE CURRICULUM

Module 1: Foundation and Basic Principles

Objectives: Understand the organizational structure of banks, roles & responsibilities and standards of conduct

& practice of the Middle Office Product Control department. Create the awareness of a few compliance issues that have impact to the Bank. Explain the “Framework of Internal Control Systems” published by BIS. Understand the reporting requirements on the effectiveness of the internal control structure and the

related procedures under the Sarbanes-Oxley Act. Provide a practical approach on implementation of sound internal control process. Appreciate the importance of high standards of conducts & practice and internal control through

case study on huge losses incurred by “China Aviation Oil Ltd”.

Topics Introduction to banking & Middle Office Product Control

Organizational Structure of banks Roles & responsibilities of middle office product control (MOPC) department Standards of Conducts & Practice of MOPC staff

Compliance “Anti-Money Laundry” Policy “Know your client” policy Banking Secrecy Handling of confidential proprietary information

Market Conformity Transaction monitoring P&L production (Stop Loss limit; Substance over form)

Regulators International Regulatory Body - Bank for International Settlement and its roles National Regulatory Bodies:

Central Banks Supervisory Body - MAS Collaboration between Home National regulator and Host National regulator Issues relating to reporting currency

ACI Singapore – The Financial Markets AssociationLevel 3 40/41 Duxton Hill Singapore 089619

Tel +65 67320430 Fax +65 67320425Email [email protected] URL www.acisin.com UEN S72SSOO38G

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http://www.aisin.com/

mailto:[email protected]

Internal Control BIS - Framework of Internal Control Systems Reporting requirements on the effectiveness of the internal control structure and the related procedures under

the Sarbanes-Oxley Act. Implementation of Sound Internal Control Process:

Segregation of Duties and Responsibilities New Product Approval Process Monitoring of unusual business practices Limit and Risk Control Management Information System (M.I.S)

Case Study: Huge Losses incurred by China Aviation Oil Ltd Back ground Discussions:

Conducts & practices of Senior Managers Internal Control Issues

Module 2: Trade Support & Control

Objectives: Give an overview of requirements to set up systems to support capturing of trades in systems. Provide an overview on trade flow Highlight the importance of trade control functions and various ways of exception management. Explain the various types of reconciliations and highlight their importance.

Topics Trade Cycle

Overview of typical trade cycle Various types of dealing systems – Reuters, Bloomberg, EBS, Bonds dealing, etc Linkage of Front Office System to Downstream Systems Multiple booking of trades

Types of portfolios Spot trading, proprietary trading Arbitrage trading Strategic investment Funding

Types of counterparties and accounts Inter-banks Corporate & Institutional clients Private Banking clients Retail Customers Nostro accounts Vostro accounts Custodian Banks



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Set up of reference data in systems Set up portfolios Static data on instruments Data related to counterparty Other critical data

Event Monitoring Importance of event Monitoring Types of events

Collation of Market Data Source of market data Capturing Market Data:

Automation of data feed from financial information service providers Manual Input and adjustments

Trader’s Surveillance Report Off market rate reports Trades exceeding credit limit reports Back trade dated reports Back value dated reports List of amended / cancelled trades Early termination reports “After office hours” Trades reports

Reconciliations Trade reconciliation Position reconciliation Inter-systems Reconciliation Internal Transaction Reconciliations

Module 3: Fundamental on P&L Production and Control & Risks

Objectives: Understand market risk and control process. Explain the daily P&L Production process and relevant control points. Provide a practical tool to reduce risk via P&L Reconciliation process. Provide an understanding of PV01 (or DV01), its implication to participants. Explain VaR concept.

Topics Concept on Different Types of Books

The Banking Book The Trading Book Differences between “banking book” and “trading book

Daily Trading P&L Purpose of Daily Trading P&L Source of data for daily trading P&L production

Concept of “books-and-records” systems Extraction and control of data

What is “Daily Trading P&L”? Concept on “Realized P&L” and “Unrealized P&L”



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Components of Daily Trading P&L Breakdown of “unrealized P&L Typical daily trading P&L report format

Production of daily trading P&L Identification of reliable source of data Collation of P&L figures from reliable source Perform manual computation of P&L figures Presentation and computation of daily trading P&L Submission of daily trading P&L reports

Production Control Process Valuation Principles Control on Market Prices / Rates Revaluation Process

Verification and Control of P&L “Full P&L” and “Clean P&L” Risk based P&L Analysis Monitoring of Profit and Loss Limit Validation of VaR

Accounting Methodologies Booking of Realized P&L Booking of Unrealized “mark-to market” P&L . Booking of trading expenses

P&L for Marketing & Sales Desk

Income of Marketing & Sales Desk Preparation of P&L for Sales & Marketing Desk Control Process

P&L Reconciliation The needs to perform P&L Reconciliation Types of P&L Reconciliation Resolution of Discrepancies Escalation process to resolve discrepancies

Types of Risks Business risks Strategic risks Financial risks:

Market Risks Credit Risks Liquidity Risks Operational Risks Legal Risks



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Market Risk Measurement Methodologies Notional amount or volume of contracts Duration Value of a Basis Point (PVo1) Value at Risk (VaR)

Module 4: Products: Foreign Exchange

Objectives: Explain the product characteristics, pricing and application of major types of Foreign Exchange

(FX) & Money Market (MM), Non-Deliverable Forward (NDF) and FX Time Option. Provide an insight to the source of market data and revaluation process. Explain the daily P&L production and control process relating to these financial instruments.

Topics: Types of Foreign Exchange

FX Spot FX Forward FX Swap Non-Deliverable Forward (NDF) FX Time Option FX Margin Trading (new) Prime Brokerage (new)

Pricing of FX FX Spot Rate FX Forward Rate FX Swap Point Onshore and Offshore rates

Application of FX Swap To rollover net open spot FX positions To cover net open Forward FX positions To exploit interest arbitrage opportunity

P&L for FX Trades Source of Market Data Computation of market value Control on revaluation & P&L production Reconciliation

Module 5: Products: Money Market & Equities

Objectives: Explain the various types of interest rate computation Explain the product characteristics and pricing of Money Market (MM) Loans & Deposits, MM

securities and Equities Provide an insight to the source of market data and revaluation process. Explain the daily P&L production and control process relating to these financial instruments.



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Interest Rates Nominal and effective interest rates Simple Interest Compounded Interest Discount Factor

Money Market Lending and Borrowing Trades Inter-bank MM Corporate MM Inter-company MM

Money Market Securities Computation on Discounted Instruments Certificate of Deposit; Treasury Bills; Promissory Note; Bills of Exchange; Commercial Paper and Bankers’

Acceptance

P&L Production – Money Market Source of Market Data Accrual method Vs Net Present Value method Treatment of “margin” for Corporate Money Market trades Control on P&L production

Equities Ordinary and preference shares Warrants Covered Warrants Convertibles

P&L Production – Equities Source of Market Data Computation of “book” cost Revaluation process Recognition of Corporate actions Control on P&L production & Reserve requirements

Module 6: Products: Fixed Income

Objectives: Provide an overview on the relevant accounting guidelines that are related to securities. Highlight the different types of interest curves and its impact to valuation and pricing Explain the product characteristics, pricing and application of Equity products; MM & FI Securities;

Repos; Securities lending & borrowing. Provide an insight to the source of market data and revaluation process. Highlight the issues that have impact to the daily P&L Production relating to these financial

instruments.

Topics Accounting Guidelines relating to securities

Application of Guidelines Classification, Recognition and Measurement Determination of fair value Transfer between categories Impairment Test



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Different types of market Primary market Secondary market Onshore and offshore

Term Structure of Interest Rate Annuity Pricing of coupon security Types of Yield Curves Different Shapes of Yield Curve Factors influencing the shape

Fixed Income Securities Government Securities Corporate Bond - Eurobond; Convertible Bond and Bonds with option Islamic Securities Asset-backed securities

FI Securities P&L Process Application of Annuity & Present Value to derive price of coupon security Classifying FI securities for accounting treatment Source of Market Data Revaluation process Recognition of Corporate actions into P&L Control on P&L production Reserve requirements

Repurchase Agreement (Repo) and Securities Lending and Borrowing Various Types of Repo Purposes of Repo Structure of Repos Securities Lending and Borrowing (SLB) P&L Process for Repos and SLB

Recognition of Repos trades P&L on Repos versus P&L on SLB Report & Control Interest due to Beneficiary Owners Control on P&L production

Module 7: Products: Exchange Traded Derivatives and Options

Objectives: Explain the product characteristics and application of major types of Exchange Trade Derivatives

and Options Provide an understanding on the P&L production and control process for ETD. Explain the valuation of options and factors that have impact to the valuation of options.

Topics Exchange Traded Derivatives (ETD)

Futures Long Term Interest Rate Futures Short Term Interest Rate Futures FX Futures Index Futures Energy Futures

Options on Futures Definition



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Identification of Options of Futures Applications of Exchange Traded Derivatives

Short Hedges Long Hedges Rolling the Hedge Forward

P&L for ETD Source of Market Data Mark to market process Control on P&L production P&L Computation for ETD

Options Characteristics

Put or Call options Pricing Options

Two components of option premium. Intrinsic Value Time Value

Factors affect the option premium Underlying Asset Price Strike or Exercise Price Time to expiration Interest rates Volatility The Black and Scholes Model

Option Valuation Model The Black and Scholes Model Arbitrage-free Pricing – Put-Call Parity The binomial model

Understanding the Greeks Application of Options

Module 8: Products: Plain Vanilla OTC Derivatives

Objectives: Understand financial arithmetic used in plain vanilla OTC derivatives. Explain the product characteristics, pricing and application of major types of OTC Derivatives. Understand event monitoring process and its impact to daily P&L. Provide an overview on the relevant accounting guidelines that are related to derivatives. Explain the source of market data and the different methods of revaluing OTC derivatives. Highlight factors impact the revaluation of OTC derivatives.

Topics Financial Arithmetic

Forward Interest Rate Discounting and Net Present Value



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Interest Rate Derivatives Product Characteristics

Forward Rate Agreement FRA Interest Rate Swaps Cross Currency Interest Rate Swap (CRS) Interest Rate Floor (Floor) Interest Rate Cap (Cap)

Pricing and Application

FX Derivatives Product Characteristics

Non-Deliverable Swap (NDS) FX Options


Equity Derivatives Product Characteristics

Equity Swaps Equity Options


Event Monitoring Calculation of reset or fixing rates Exercise of Options Termination Maturity

Pricing of Swaps Generation of cash flows Deriving the zero coupon curve Interpolation of discount factors for the value dates Computation of net present value

Accounting Guidelines relating to Derivative Instruments Relevant Guidelines Definition of Derivatives Accounting relating to Derivatives

P&L Process for OTC Derivatives Accounting Treatment of OTC Derivatives Source of Market Data Control on P&L Production

Independent verification of market data Using Analytic Tool to verify fair value Impact on occurrence of event to P&L

Other Factors affecting Market Value of OTC Derivatives



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Module 9: Products: Exotic & Credit Derivatives

Objectives: Explain the product characteristics, pricing and application of major types of the following products:-

Exotic Derivatives Credit Derivatives

Highlight the impact to the daily P&L upon occurrence of events.

Topics Exotic Derivatives

Product Characteristics Barriers Options Digital Options Average Options Overnight Index Swaps (OIS) Amortizing Swap Forward Swaps Cancellable Swap Quanto Swaps Swaptions


Credit Derivatives Product Characteristics

Asset Swap Total Return Swap (TRS) Credit Default Swap (CDS) Credit Link Note (CLN)


Impact on Occurrence of Event to P&L Trigger of Barrier Trigger of Credit Events Trigger of Cancellation or Redemption

Module 10: Structured Products & Relevant Accounting Guidelines

Objectives: Explain the product characteristics, pricing and application of major types of structured products. Provide an overview on the relevant accounting guidelines on exotic derivatives and hybrid

products.

Topics Structured Products

FX linked Products – Dual currency deposit, FX index linked investment Equity linked Products – Equity Index linked investment Interest Rate Linked Products - Cancelable deposit, Range Accrual Deposit, Inverse floater Deposit, Target

Redemption Deposit Credit linked Products – Bond linked investment, credit linked investment



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Emerging Issue Task Force 0203 (EITF0203) Overview of EITF0203 – issues involved in accounting for derivative contracts held for trading purposes and

contracts involved in energy trading and risk management activities Recognition of P&L under EITF 0203

FASB 133 - Derivatives Implementation Group (DIG) Implementation Issue No. B6 Embedded Derivatives Definition in FASB 133 Allocation basis of a hybrid instrument to the host contract and the embedded derivatives

FASB 155 – Accounting for certain hybrid financial instruments Bifurcation Application of the guidelines

FASB 157 – Fair Value Measurements Definition of Fair Value Application of Fair Value to exotic derivatives Application of Fair Value to hybrid products

Module 11: Risk and P&L Control for Exotic & Structured Products

Objectives: Aware of factors that will impact the market risk of exotic and structured products. Understand issues that affect the revaluation of these products. Provide an insight to the control on P&L production for these products. Understand the issues relating to P&L of credit derivatives via case study

Topics Control on Market Risk

Review of market parameters Account for impact caused by volatility skew Take into account correlation Situation whereby adjustments to be made Control Process to ensure correctness of market risk report

P&L Control Market Data for Valuation Use of In-House Model for Valuation Independent verification of valuation models Obtaining “credit spread” to compute P&L on credit derivatives Pricing on Long Term Derivatives Control on multiple booking of structured products in different systems P&L Analysis on Derivatives portfolios Reasonableness Test Requirements of Valuation reserves

Case Study on Credit Derivatives Credit Default Swap

Valuation model Available Market data for revaluation Occurrence of credit event – physical delivery or cash delivery Impact on P&L upon occurrence of credit event



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Module 12: Audit & Regulatory Control

Objectives: Understand different types of audit process. Explain the regulatory capital adequacy requirements under Basel Accord II. Provide an overview of capital adequacy computation for financial instruments. Provide an overview on the regulatory control on treasury activities. Explain some critical regulations imposed by MAS relating to treasury activities.

Topics Audit Process

Internal audit External audit Regulatory audit – home country and host country auditors

Regulatory Capital Requirements under Basel II Accord Why there is a need to ensure adequacy in regulatory capital? Understanding what is Basel I Accord Development of Basel II Accord Differences between Basel I Accord and Basel II Accord Main features of Basel II Account - Pillar 1, 2 and 3 of Basel II Accord Regulatory Definitions of Capital & Regulatory Capital Ratios Components of risk-weighted assets & capital adequacy computation for financial instruments.

Regulatory Control FX Position Control Liquidity Gap Concentration Risk

Critical Regulations imposed by MAS Concept of ACU & DBU Minimal Cash Balances and Liquid Assets Lending of Singapore Dollar to Non-Resident Financial Institutions



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APPLICATION GUIDELINES (FOR FINANCIAL INSTITUTIONS)

ADMISSION CRITERIA1. Financial Institution sponsored trainees must possess at least diploma, degree or professional qualification.2. Financial Institution sponsored trainees may be of any nationality but must be based in Singapore and

should preferably have relevant working experience in order to fully reap the benefits of this training programme.

3. Financial Institution sponsored trainees may include newly hired staff or existing staff.

COURSE FEEThe course fee for the ACI Singapore Middle Office Training Course (MOTC) is S$6,420.00 (S$6,000.00 course fee plus S$420.00 GST) per person. The course fee covers tuition and course materials, as well as an ongoing question-and-answer service via web/email during the course, structured at ACI Singapore’s discretion.

PAYMENT METHODS

Cheque / Bank DraftA cheque/bank draft made payable to: “ACI Singapore – The Financial Markets Association” must be attached to your application and mailed to:

ACI Singapore – The Financial Markets Association Level 3, 40/41 Duxton HillSingapore 089619Attn: The Secretariat

Interbank GIROAccount No. : 001-001368-8Bank Account Name : ACI Singapore – The Financial Markets AssociationBank Name/No. : DBS Bank / 7171Branch Name/No. : Shenton Way / 001

For Interbank Giro, please send us a credit advice once payment has been effected.

APPLICATION SUBMISSION CHECKLISTIn order to avoid delay in processing, please ensure that you have submitted the following:

1. Duly completed original application form. 2. Your payment via cheque/bankdraft or short note if it is via interbank GIRO.

You are encouraged to photocopy a set of the above for your own record.

CLOSING DATEThe closing date for submission of the application form is Friday, 31 July 2009. Applicants are encouraged to submit their application forms early.

CANCELLATIONIf the applicant is unable to attend the course, his/her institution may nominate another staff to attend the course in his/her place. The course fee will not be refunded for cancellation. The replacement staff will be screened for eligibility.



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A BRIEF ON ACI AND ACI SINGAPORE

ACIThe ACI - The Financial Markets Association began as an international association of exchange dealers on the initiative of the Bank of England and the Banque de France in 1955 with the first International Congress held in Paris on 11 May 1957. Today, a total of 81 countries (65 with fully affiliated associations) are represented with membership approaching 18,000. Hence, ACI is the largest international professional body for dealers and back office personnel in the wholesale financial markets. (Information correct as of 18th March 2008, from The Financial Markets Association of Canada).

Our MissionThe Association has a clear mission statement to be a leading global association of wholesale financial market professionals contributing to the market development through education, market practices, technical advice and networking events

ACI SingaporeFounded in 1973 in Singapore, ACI Singapore currently serves about 500 members. Since 1973, Singapore emerged as a leading financial centre in the world.

Rapid developments in technology, improvements in telecommunications, advances in the theoretical understanding of the financial markets, created a greater and constant need for personnel to be able to understand and keep abreast of the changes within the financial services industry.

No transaction can be consummated without the support of the deal processing function. The Operations Department provides a vital service to the front office by ensuring that all funds flow in a timely and correct manner and all the necessary documentation is completed. Settlements Operations Training Course (SOTC) has been designed since 2004 as a primer course in all aspects of the operations process. ACI Singapore also organizes Middle Office Training Course (MOTC) and Currency Derivatives Analysis (CDA) Course.

The wholesale financial markets’ fast and dynamic changes demand highly qualified people with wide-ranging market skills and knowledge. These changes demand a greater level of understanding on the part of dealers, treasury managers and the support staff. Hence, the education programmes by ACI Singapore set out syllabi in three subject areas that test:

Skills Knowledge and the Understanding Of Wholesale Financial Market Products The Market Environment And Professional Behaviour

To meet these changing demands, the levels of education and training have to increase in tandem. One way of achieving these educational objectives is to measure knowledge and skills through an examination process.

Learning is a lifelong process, essential for even the most experienced practitioner willing to maintain her/his professional value. This is especially true in a financial environment characterized by not a slow and linear innovation process, but periods of ‘product explosions’ followed by steadier times. Quick updates of know-how leads to a competitive advantage, always key for success. ACI Singapore therefore promotes continuous education efforts through conferences, workshops, seminars.



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APPLICATION FORM (FOR FINANCIAL INSTITUTIONS)MOTC 31st Intake (15 August 2009 to 26 September 2009)

COURSE STRUCTURE

Modules Saturday Dates Duration

Module 1 15 Aug 2009 9.00 am to 12.00 pm

Module 2 15 Aug 2009 1.00 pm to 4.00 pm





Module 7 05 Sept 2009 9.00 am to 12.00 pm

Module 8 05 Sept 2009 1.00 pm to 4.00 pm



NO CLASS ON 19 SEPT 2009



MOTC Course fee for the above 12 Modules S$6,420.00 (S$6,000.00 course fee

plus S$420.00 GST)

Note: ACI Singapore reserves the right not to start a class, or to combine any intake(s), if the minimum class size is not reached. The minimum class size is determined by ACI Singapore at its sole discretion.

1 COMPANY INFORMATION

Company Name

Company’s Registered Address

Date of Commencement of Operations in Singapore (dd/mm/yyyy)



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2 PERSONAL INFORMATION OF CANDIDATE

Please print clearly in BLOCK LETTERS and complete all the fields. Please tick/circle where applicable.Name as in NRIC or Passport(Dr/Mr/Mrs/Ms) Residential Address

Home Telephone No Mobile Phone No Office Telephone No

Your Office Email Address Date of Birth (dd/mm/yyyy)

Gender: Male / Female Age

Nationality Country of Birth

NRIC Number (For Singapore citizen) UIN Number (For Singapore PR)

For Singapore-based ForeignersDo you currently possess a valid work pass? ( ) Yes ( ) NoPlease provide your Foreign Identification Number

3 PLEASE LIST HIGH SCHOOL / POLYTECHNIC / COLLEGE / UNIVERSITY EDUCATION

From (mm/yy)

To(mm/yy)

Name of Institution, Country Qualifications achieved

4 PLEASE LIST PROFESSIONAL QUALIFICATIONS: (You can also include professional courses that you are currently undertaking)

From (mm/yy)

To(mm/yy)

Professional Body Discipline Status



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5 EMPLOYMENT HISTORY

5a Current EmploymentDesignation

Date of joining (mm/yy)

Industry (eg, Banking & Finance, Insurance, Consulting, IT, Law, Accountancy, etc)

Description of Current Job Responsibilities

5b Is the candidate currently placed in a job in middle office?

( ) Yes Date joined: _____________________________

( ) No Will candidate be placed in a middle office product control roleafter he/she completes MOTC?( ) Yes ( )No

Description of the candidate’s key job responsibilities of the middle office product control role

5c Previous EmploymentPlease provide previous employment history based on recent years prior to your current employment.Indicate only full-time work experience.Exclude full-time national services and part-time, temporary and vacation jobs.

From (mm/yy)

To(mm/yy)

Organisation Designation Industry

Job Description

From (mm/yy)

To(mm/yy)

Organisation Designation Industry

Job Description



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6 FUNDING

The Financial Sector Development Fund (FSDF) offers grants to financial sector organizations thatsponsor eligible participants to training programmes that meet qualifying criteria. For enquiries, please contact the FSDF Secretariat at 6229-9396 or via email at [email protected].

7 DECLARATION

7a Will this candidate be placed in a middle office product control role that is based in Singapore.(This section is to be confirmed by Financial Institution.)

( ) Yes ( ) No

7b I declare that the information provided in this application form are true to the best of my knowledge and belief and that I have not willfully suppressed any material fact. I also understand that if after the approvalof the application, it is found that I have made a false declaration or willfully suppressed material facts, the subsidy awarded will be recovered.

Name of Company’s Authorised Signatory (Dr/Mr/Mrs/Ms) Designation E-mail

Telephone No Fax No

Authorised Signature(unsigned applications will not be processed)

Company Stamp(without company stamp, application will not be processed)

Date

Contact Person of Personnel/Human Resource/Secretary handling this application (Dr/Mr/Mrs/Ms)

Company name in full (for billing purpose)

Mailing Address

Designation E-mail

Telephone No Fax No

For Official UseProcessed by Authorised Signature

Date Contact no.



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MIDDLE OFFICE TRAINING COURSE (MOTC)

Documents

huge losses

china aviation

relevant accounting

organisation

minimum class

middle office

financial

internal control