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Sampath Treasury

"Sampath Bank Treasury offers innovative products and services in foreign exchange, money and fixed income markets to its clients. In providing these services, Sampath Bank Treasury ensure that the clients’ unique requirements are addressed and incorporated with global best practices in service standards and technology in a client friendly working environment.

We offer a wide spectrum of products in foreign exchange services to meet your funding requirements such as payment/receipt of trade bills, remittances, fund transfers and loans whilst the corporate FX sales provides corporate customers with foreign exchange products and services to manage their FX needs.

1. A spot contract

 

Purpose

Companies which have foreign currency exposure may use a spot deal. Most commonly, companies which are exposed to transactional risk also use them. 

 

Key Factors

  • No minimum deal size
  • No maximum deal size
  • Contract can be done in any currency where there is a liquid market.

 

2. A forward exchange contract

Is a binding obligation to buy or sell a certain sum of foreign currency at a pre agreed rate of exchange, on or before a future date. Theoretically, the forward price for a currency can be identical with the spot price. However the forward price in practice is either higher (premium) or lower (discount) than the spot price.

Purpose

To cover or hedge a foreign exchange exposure from future adverse fluctuations. 

 

Why do you need forwards

Commercial reasons

Avoiding risk exposure

Covering a mismatch of cash

Arbitrage

Speculation

 

Value Dates

All forward dates are set, based on the spot trading date for the currency pair involved.

 

3. Repo & Reverse Repo

A repo, also known as a repurchase agreement, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a specific date and a price. The repurchase price should be greater than the original sale price, the difference effectively representing the interest, called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A Reverse repo is simply the same repurchase agreement from the buyer's (the lender) viewpoint, not the seller's. Hence, the seller executing the transaction would describe it as a "repo", while the buyer in the same transaction would describe it a "reverse repo".

 

4. Treasury Bills

Treasury Bills are short term debt instruments issued by the Central Bank of Sri Lanka on behalf of the Sri Lanka Government fixed interest rates and maturity periods of 3, 6 and 12 months. They are issued at a discount.(Face Value – Interest).

 

5. Treasury Bonds

Treasury Bonds are long term debt instruments issued by the Central Bank of Sri Lanka on behalf of the Sri Lanka Government with fixed rates and maturity periods from 2 to 20 years. Interest payments are made every 6 months and the face value is repaid on the maturity date.

Glossary

 

Appreciation - A currency is said to ‘appreciate ‘ when it strengthens in price in response to market demand.

Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Around - Dealer jargon used in quoting when the forward premium/discount is near parity. For example, “two-two around” would translate into 2 points to either side of the present spot.

Ask Rate - The rate at which a financial instrument if offered for sale (as in bid/ask spread).

Asset Allocation - Investment practice that divides funds among different markets to achieve diversification for risk management purposes and/or expected returns consistent with an investor’s objectives.

Back Office - The departments and processes related to the settlement of financial transactions.

Balance of Trade - The value of a country’s exports minus its imports.

Base Currency - In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

Bear Market - A market distinguished by declining prices.

Bid/Ask Spread - The difference between the bid and offer price, and the most widely used measure of market liquidity.

Big Figure - Dealer expression referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. “30/35”.

Book - In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.

Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.

Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies

Bull Market - A market distinguished by rising prices.

Bundesbank - Germany’s Central Bank.

Cable - Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800’s.

Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

Central Bank - A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.

Clearing - The process of settling a trade.

Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the ‘Asian Contagion’.

ommission - A transaction fee charged by a broker.

Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.

Contract - The standard unit of trading,

Counterparty - One of the participants in a financial transaction.

Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

Cross Rate - The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan it would be one of the primary currency pairs traded.

Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

Currency Risk - the probability of an adverse change in exchange rates.

Day Trading - Refers to positions which are opened and closed on the same trading day.

Dealer - An individual who acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Deficit - A negative balance of trade or payments.

Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.

Depreciation - A fall in the value of a currency due to market forces.

Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.

Devaluation - The deliberate downward adjustment of a currency’s price, normally by official announcement.

Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

European Monetary Union (EMU) - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On January 1st, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes and coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

European Central Bank (ECB) - the Central Bank for the new European Monetary Union.

Federal Deposit Insurance Corporation (FDIC ) - The regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed) - The Central Bank for the United States.

Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.

Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.

Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.

Forward points - The pips added to or subtracted from the current exchange rate to calculate a forward price.

Fundamental analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.

Futures Contract - An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange-Traded Contacts – ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

Good ‘Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

Hedge - A position or combination of positions that reduces the risk of your primary position.

Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.

Interbank rates - The Foreign Exchange rates at which large international banks quote other large international banks.

Leading Indicators - Statistics that are considered to predict future economic activity.

LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e., 101.50)

Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.

Liquidation - The closing of an existing position through the execution of an offsetting transaction.

Long position - A position that appreciates in value if market prices increase.

Margin call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.

Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk - Exposure to changes in market prices.

Mark-to-Market - Process of reevaluating all open positions with the current market prices. These new values then determine margin requirements.

Maturity - The date for settlement or expiration of a financial instrument.

Momentum investor - A market participant who increase market exposure when the market is rising and decreases exposure or goes short when the market is declining.

Offer - The rate at which a dealer is willing to sell a currency.

Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open order - An order that will be executed when a market moves to its designated price. Normally associated with Good ‘til Cancelled Orders.

Open position - A deal not yet reversed or settled with a physical payment.

Over the Counter (OTC ) - Used to describe any transaction that is not conducted over an exchange.

Overnight - A trade that remains open until the next business day.

Pips - Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor’s position.

Position - The netted total holdings of a given currency.

Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Price Transparency - Describes quotes to which every market participant has equal access

Quote - An indicative market price, normally used for information purposes only.

Rate - The price of one currency in terms of another, typically used for dealing purposes.

Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.

Risk - Exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.

Settlement - The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency traders may or may not involve the actual physical exchange of one currency for another.

Short Position - An investment position that benefits from a decline in market price.

Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days.

Spread - The difference between the bid and offer prices.

Sterling - slang for British Pound.

Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself.Opposite of resistance.

Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

Swissy - Slang for Swiss Franc.

Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.

Transaction Cost - the cost of buying or selling a financial instrument.

Transaction Date - The date on which a trade occurs.

Turnover - The total money value of all executed transactions in a given time period; volume.

Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.

Uptick - a new price quote at a price higher than the preceding quote.

Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers

Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Variation Margin - Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility (Vol) - A statistical measure of a market’s price movements over time.

Whipsaw - slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Yard - Slang for a billion.

Wije Dambawinne

Deputy General Manager- Treasury

dambawinne@sampath.lk
+94 11 2300 145
+94 11 4730 347
+94 11 2358 347

Prasantha De Silva

Chief Dealer - FX / MM

prasantha@sampath.lk
+94 11 2300 146
+94 11 4730 336
+94 11 2358 336

Darsha Hendahewa

Senior Dealer - Bank Notes

darsha@sampath.lk
+94 11 2300 146
+94 11 4730 634
+94 11 2358 634

Rajindra Tillekeratne

Senior Dealer - FX / MM

rajindra@sampath.lk
+94 11 2300 146
+94 11 4730 337
+94 11 2358 337

Manjula Ekanayake

Dealer - FX / MM / ALCO Officer

mekanayake@sampath.lk
+94 11 2300 146
+94 11 4730 631
+94 11 2358 631

Vajira Abeysundara

Dealer - FX / MM

vajira@sampath.lk
+94 11 2300 146
+94 11 4730 338
+94 11 2358 338

Vijitha Kulatunga

Dealer - FX / Bank Notes

vijithak@sampath.lk
+94 11 2300 146
+94 11 4730 632
+94 11 2358 632

Nalin Basnayake

Dealer - FX / MM

nalinbasnayake@sampath.lk
+94 11 2300 146
+94 11 4730 339
+94 11 2358 339

Shehana Pereira

Assistant Dealer

shehanapereira@sampath.lk
+94 11 2300 146
+94 11 4730 341
+94 11 2358 341

Kawshana Sahabandu

Assistant Dealer

kawshanasahabandu@sampath.lk
+94 11 2300 146
+94 11 4730 633
+94 11 2358 633

Amanda Kasthuriratne

Assistant Dealer

amandakasthurirathne@sampath.lk
+94 11 2300 146
+94 11 4730 702
+94 11 2358 702