Money Market

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Created on August 17, 2014
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Table of content
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Table of content
1 Money Market
1.1 Fixed-Term Deposits
1.2 Deposits at Notice
1.3 Commercial Paper
1.4 Interest Rate Instruments
1.5 Cash Flow Transactions
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1 Money Market
Purpose
Money Market transactions are used for short to medium-term investments and for borrowing liquid funds.
Integration
The Money Market area is a sub component of the Transaction Manager and is closely integrated with other components.
You can implement cash management decisions in the Money Market area based on the liquidity surplus or deficit determined in Cash Management. The system
records the impact transactions have on the liquidity of a company by value date, for each flow in Cash Management. To do this, the data from the Money Market
is transferred to Cash Management automatically. This integration simplifies the work processes involved in transaction management from entering potential
transactions through to the related accounting activities. The Money Market area comprises functions for period-based accrual/deferral, key date valuation and
foreign currency valuation, and for disclosing profits and losses.
It is also closely linked to the Financial Accounting (FI) component since all the data that is relevant for posting in the Money Market area is automatically
transferred to FI.
You can maintain current market data (exchange rates, securities prices, reference interest rates, indexes etc.) in various ways:
Manually
Using a Market data file interface: You maintain the relevant data in an external application (such as Microsoft Excel), either manually or via a data provider,
and then import the data into the system in a format compatible with SAP.
By transferring the market data to the system from a spreadsheet
Datafeed: You can use the datafeed connection to make real-time market data available in the system.
To access the market data management functions in the application menu, choose Treasury and Risk Management -> Basic Functions -> Market Data
Management . Alternatively, you can access them in the Money Market area under Environment -> Market Data .
You access the Money Market component by choosing Accounting Treasury and Risk Management Transaction Manager Money Market.
The following graphic shows how the above-mentioned components relate to each another:
Features
Trading
The trading area contains functions for entering money market transactions. It also enables you to also call up information on transactions or make changes at a
later date. Collective processing functions are available to help you manage your transactions efficiently.
The product types in the Money Market area are:
Fixed-Term Deposits
Deposits at Notice
Commercial paper
Interest rate instruments
Cash flow transactions
Facilities
Back office
Once you have entered financial transactions in the trading area, you settle them in the back office. The back office area also contains functions for checking and
changing the transactions. Transaction postprocessing primarily involves:
Adding any missing transaction data that is needed to process the transaction further
Preparing for posting and payment (for example, by checking the accounts used)
Generating correspondence in the form of internal or external confirmations.
The collective processing functions are also available in the back office. This area also includes functions for netting transactions and for entering and editing
references.
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Accounting
Once you have entered the transactions in the Trading area and checked them and added any missing details in the Back Office , you then need to process
them for accounting purposes. The accounting area includes functions for transferring data to Financial Accounting, such as posting reports or position
management postings. It also includes functions for parallel valuation.
Master Data Management
Financial transaction processing in the Transaction Manager is based on master data.
Information System
The information system provides a range of reports for analyzing your money market transactions. The Money Market Information System is part of the Transaction
Manager Information System, which offers analyses and evaluations across the whole of the Treasury and Risk Management dataset.
The link to the SAP drilldown reporting tool and SAP Query also allows you to define your own reports in addition to those provided by SAP.
See also:
Information System

The following diagram represents the architecture of the financial transactions.





1.1 Fixed-Term Deposits
Use
The trading of fixed-term deposits (including overnight money and eurocurrency) includes transactions with fixed interest rates and an end of term arranged at the
start. This includes the transaction types fixed-term deposit investment and fixed-term deposit borrowing. If the authorized business partners and corresponding
payment details are already defined in the standing instructions, the required entries are restricted to the required entries in the structural characteristics. In
addition to functions for entering and changing fixed-term deposits, the system also supports functions for rollovers and reversals.
You only have to define the standard interest calculation method and the calendar you want to use once, and these will then be used as default values for the
transaction.
Prerequisites
Before you can use the Money Market component, you have to maintain master data. You have to
Create your business partners , assign the corresponding roles to these partner and maintain the transaction authorizations.
Set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the product type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You
create financial transactions and manage positions on the basis of product types. A fixed-term deposit is one example of a product type in the Money
Market area.
Define the transaction type . Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the
transaction and position management process. An example of this is the Investment or Borrowing of fixed-term deposits.
Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount
You must assign flow types to transaction types.
Define the condition type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest
For more information, see the relevant section in the Implementation Guide.
You can then define Money Market transactions in the system.
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Features
For more detailed information, see Processing Fixed-Term Deposits and Creating Fixed-Term Deposits.



1.2 Deposits at Notice
Use
In trading with deposits at notice, investment and borrowing takes place without defined due dates. The deposit at notice function therefore not only includes the
functions available in the fixed-term deposit area, but also a function for giving notice; in other words, in addition to entering the amounts and conditions, you enter
the notice period and the interest payment date and frequency.
Prerequisites
Before you can use the Money Market component, you have to maintain master data.
Create your business partners, assign the corresponding roles to this partner and maintain the transaction authorizations.
Set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the product type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You
create financial transactions and manage positions on the basis of product types. A Deposit at notice is an example of a product type in the Money Market
area.
Define the transaction type . Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the
transaction and position management process. Example: Investment or borrowing for deposits at notice.
Define the condition type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest
Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount
For more information, see the relevant section in the Implementation Guide.
You can then define Money Market transactions in the system.
Features
For further details, see Processing Deposits at Notice and Creating Deposits at Notice.



1.3 Commercial Paper
Use
Commercial Paper transactions are transactions on which no interest payments are made during the term of the transaction. Instead, two business partners agree
on a repayment amount to be repaid to the investor by the borrower at the end of the life of the contract.
A company requires 1 million for three months. The amount is discounted using a pre-defined yield. The company receives the discounted amount, 980,000
from an investor. At the end of the term, the company repays the full amount of 1 million.
Activities
You specify the nominal amount and the yield that you are looking to achieve. The system calculates the payment amount the investor must pay to the creditor at
the start of the term by discounting. Alternatively, you can specify your own interest calculation on the basis of a given rate. In the cash flow, the system displays
the principal increase (based on the nominal amount and the discounting amount) at the start of the term and the repayment of the nominal value at the end of the
term.
Alternatively, you can display the discounted principal increase at the start of the term and the repayment of the NPV and the interest flow at the end of the term.
You have to set this up in Customizing when you define the transaction types.
Prerequisites
Before you can use the Money Market component, you have to maintain master data. You have to
You have to create your Business Partners, assign the corresponding roles to these partners and maintain the transaction authorizations.
You have to set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the Product Type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You
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create financial transactions and manage positions on the basis of product types. Deposit at Notice is one example of a product type in the Money Market
area
Define the Transaction Type . Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the
transaction and position management process. An example of this is the Investment or Borrowing of deposits at notice.
Define the Condition Type . This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest
Define the Flow Type . These describe the various changes to the cash flows. Example: Increase in the nominal amount
For more information, see the relevant section in the Implementation Guide.
You can then define Money Market transactions in the system.
Features
For more detailed information, see Processing Commercial Paper and Creating Commercial Paper.
You can also use the Net Present Value to help you determine the payment amount.


1.4 Interest Rate Instruments
Use
An interest rate instrument is a money market transaction with additional structural characteristics, such as variable interest and installment repayment.
In order to calculate the corresponding interest receivables or payables, you must carry out an interest rate adjustment. See Interest Rate Adjustment.
Prerequisites
Before you can use the Money Market component, you have to maintain master data.
You have to create your Business Partners, assign the corresponding roles to these partners and maintain the transaction authorizations.
You have to set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the Product Type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You
create financial transactions and manage positions on the basis of product types. An example of a product type in the money market area is an interest rate
instrument .
Define the Transaction Type. Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the
transaction and position management process. Example: Investment or borrowing transaction for an interest rate instrument.
Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount
You must assign flow types to transaction types.
Define the Condition Type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest
For more information, see the relevant section in the Implementation Guide.
You can then define Money Market transactions in the system.
Features
To manage interest rate instruments, you can use the standard functions and processes for entering, editing and processing transactions, managing their status,
and transferring data to Financial Accounting.
Activities
For details on the relevant activities, see Processing Interest Rate Instruments and Creating Interest Rate Instruments.



1.5 Cash Flow Transactions
Use
With cash flow-based transactions you can manage transactions whose structural characteristics cannot be mapped by the standard product categories.
You can enter and process transactions by entering their cash flow. A cash flow is a chronological sequence of flows: you enter the term alongside the cash flow
that results from the transaction structure. This enables you to map your financial transactions flexibly.
Integration
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On the basis of this, the system not only supports the processes for entering and processing these types of transactions in the trading area, but also the
processes that build on these in the back office and accounting areas.
Prerequisites
Before you can use the Money Market component, you have to maintain master data. You have to
You have to create your Business Partners, assign the corresponding roles to these partners and maintain the transaction authorizations.
You have to set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the Product Type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You
create financial transactions and manage positions on the basis of product types. An example of a product type in the money market area is a cash flow
transaction .
Define the Transaction Type. Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the
transaction and position management process. Example: Investment or Borrowing for cash flow transactions.
Define the Condition Type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interest
Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount
For more information, see the relevant section in the Implementation Guide.
You can then define Money Market transactions in the system.
Features
For more detailed information, see Processing Cash Flow Transactions, Creating Cash Flow Transactions and Cash Flow.



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