The Dealing Room:
Dealers deal and have certain dealing room policies which they should adhere like;
- Restricted access and ensuring confidential information or any client’s information is not exposed to any external person has to be maintained.
- Different organization have their own dealing room mandates and policies drafted however the central bank also has some mandatory policies like 12 consecutive holidays requirements set in place.
- SLA’s are put in place where the operations is outsourced as many international bank’s have done to save on cost.
- Password policy, restricted system access, calls recording etc. are some other ways to control and ensure that no sensitive information is leaked.
Dealers are the first point of contact with the market participants. They must act professionally and prudently to ensure bank’s reputation and rating is not impaired.
Dealers may deal via different methods by their counterparties like recorded telephone calls, Bloomberg chats, Reuters chat and other electronics means.
It is a vital control that all deals done today are input in the banks booking system today to maintain control and monitor the position, dealer and credit limits. Recording and issuing confirmations of the deals is very important to ensure an off market trade or hideous position.
Few dealers are permitted to do off business hours trades, however they should record them in the system first thing in the morning next business day.
Dealing room is split in various desks which are segregated as per product or role.
The ALM desk:
The main role of ALM desk is to raise money at the cheapest rate possible and to lend any idle cash available in the bank, looks easy but it’s NOT. Managing balances in Nostro/Vostro accounts, fulfilling reserve requirements as per BIS and central bank are another roles played by the ALM desk.
Gap analysis and other methods are used to maintain short and long term liquidity demands.Pls refer to the Learning Material tab to learn more about Gap Analysis.
ALM also supports the bank in interest rate hedging to manage interest rate exposure.
ALM has various products at its discretion to function the above like Money Market borrowing/Lending, EMTN, CDs, ECP, Repo-Rev Repo and Central Banks OD’s.
There is an interesting concept of FTP – Funds Transfer Pricing which is played here in this desk.
To learn more about it refer to FTP section in Learning material section.
Click here to learn more about ALM
These are the Wolfs of the Wall Street, selling not MIS- selling is the core principle of this desk.
They provide plain vanilla to complex synthetic structured products to customers who wish to hedge, speculate or arbitrage their positions.
Since wherever there is sales, there are targets, they are expected to generate revenue and sales flow based on the targets set by Treasurer.
They don’t take any position per se on their own and their commission/P&L is generally the spread between sales and trading desk.
They cater to different segment of clients depending upon the structure in the bank like Private banking clients, SME, big Corporates etc.
They generally work with hands in gloves with the RMs who face the client and are on the frontline.
Additionally banks might do some sales and marketing campaigns to offer products to their clientele.
Credit limits, KYC, customer suitability, due diligence, ISDA,CSAetc are some basic checks done to onboard clients.
Tough job, glued to the screen, never missing a moment, desk goes by the saying, No PAIN- No Gain.
Risk to reward theory of the market plays here , however each dealer has limits assigned to him/her to safeguard banks overall position.