SD-11.3 — FX Execution & Share-Class Hedging

Business Domain: BD-11 Treasury, Cash & Collateral (Middle office) · Applies: BOTH

Purpose

Executes the currency transactions the funds and portfolios need, and runs the operational share-class-hedging programme. SD-11.3 is the treasury execution layer for FX: it converts currency for trade settlement and income repatriation, and it runs the rules-driven hedging of currency-hedged share classes — mechanically hedging a hedged share class’s currency exposure back to the share-class currency each NAV cycle. It is not the currency-overlay decision — deciding a portfolio’s net currency exposure and hedge ratio is a portfolio-construction capability, BD-05’s SD-05.4 Overlay & Hedging Management, executed through BD-06; SD-11.3 executes the FX the front office and the share-class structure require, it does not decide the exposure.

Service Operations

Execute settlement FX — convert currency to settle trades that cross currencies, on the spot and forward markets.
Execute income and cash-flow FX — convert income, distributions and other cash flows into the required currency.
Run the share-class-hedging programme — calculate and execute the FX hedges that keep a currency-hedged share class hedged to its share-class currency, each NAV cycle.
Manage hedge roll and rebalancing — roll the forward hedges as they mature and rebalance them as the hedged position changes.
Net FX exposure for execution — net offsetting currency requirements across the funds before executing, to reduce cost.

Inputs and outputs

Inputs: settlement and income cash flows requiring conversion; the static hedged flag and class_currency from FO-02 (via SD-13.3) that identify which classes require a hedge programme; overlay-hedging instructions from SD-05.4; FX market data from SD-13.4. The hedge-programme operating state — target ratio, currency pair, per-period P&L — is SD-11.3’s own operating domain, produced each NAV cycle from those static flags.
Outputs: executed FX transactions and share-class hedge positions — consumed by SD-12.4 Trade Settlement, SD-12.9 Fund Accounting & NAV (the hedged share-class NAV), and SD-12.1 IBOR.

Entities

Consumes: E-06 Cash Flow Event, E-08 Price & Market Data (FX rates), E-03 Portfolio / Mandate, FO-02 Share / Unit Class (the class record for currency-hedged classes — hedged flag and class_currency on FO-02 identify which classes require a hedge programme; FO-02 supplies only this static configuration, not the programme’s operating state); the SD-05.4 overlay-hedging instructions; the SD-13.4 FX market data. The hedge-programme operating state — target ratio, currency pair, per-period P&L — is produced each NAV cycle by SD-11.3 itself; it is SD-11.3’s own operating-domain figures, not attributes of the FO-02 share-class master record.
Owns: none directly — the FX transactions are recorded as E-05 Transaction; the share-class hedge positions are E-04 Holding / Position. The per-class hedge P&L is an operating-state input produced each NAV cycle and applied at the SD-12.9 class-NAV strike (class-grain E-07 Valuation); it is not separately stored as a figure of record by SD-11.3.

Standards

The share-class-hedging conventions of the fund-administration practice (the openfunds share-class taxonomy).
ISDA documentation for the forward FX the hedges use; ISO 20022 / SWIFT for FX confirmation and settlement.

Open extensions

The share-class-hedging sub-model — hedge ratio, roll, rebalancing tolerance.
The boundary with SD-05.4 — SD-05.4 decides the overlay, SD-11.3 executes the FX.
The Service-Operation-level input/output contracts.