FX all inclusive: trading, matching, EMIR reporting, payment and portfolio reporting in tm5
WEPA is a mid-sized family business. Founded in 1948 as a paper wholesaler, WEPA started producing hygiene paper products in 1958 – today’s core business. Thanks to forward-thinking investments, WEPA continued to grow with now approx. 3,800 employees at 12 locations across Europe. The company’s product portfolio includes toilet paper, paper towels, napkins and other products made from cellulose and recycled paper. Products are mainly sold by retailers as private label products and to the away-from-home sector. With a turnover of around 1.2 billion euros and a production capacity of 800,000 tons, WEPA is the third largest manufacturer of hygiene papers in Europe and operates as a European Company (or Societas Europaea SE).
WEPA faces high energy and raw material costs for production and logistics operations and a very price-sensitive market environment, making risk hedging one of WEPA’s main treasury tasks. Trading on the cellulose market is conducted exclusively in USD but none of WEPA’s revenue is generated in USD, so there is a substantial need for FX hedging. With terms of up to two and a half years, USD hedge volumes alone amount to around USD 700 million. WEPA’s strategy to achieve optimal hedging results is to split this amount into many different contracts, frequently using derivatives. The many manual and error-prone activities for each individual deal, the constant increase in volume and number of positions and, last but not least, the resulting increase in time and effort required at each month-end valuation prompted WEPA’s search for system support.
WEPA wanted to introduce a system which would manage and control the entire life cycle of a derivative. The technology should avoid manual operations as much as possible to reduce sources of error during data entry. The decision was made to select tm5 with a direct connection to the 360T trading platform. The matching service in the tm5 system enables WEPA to control the entire process chain for a derivative entirely within the treasury management system. This also includes EMIR reporting, payment processing and valuation.
Head of Treasury, WEPA
Step 1: Direct trading on the trading platform with automatic data import into tm5
Trading takes place on the 360T trading platform which is directly connected to tm5 and the deals are automatically imported into the tm5 system. Michael Gronarz, Head of Treasury explains,
Step 2: Digital matching service from the tm5 system
WEPA decided to carry out digital matching of deals directly from tm5 after trading. WEPA’s treasury department thus has complete control of the matching process and can see precisely which data the bank or trading platform provides.
Step 3: Built-in EMIR reporting in tm5
tm5 then sends the reports directly to REGIS-TR without the need to re-enter the data or create access to a new platform, enabling WEPA to meet EMIR requirements efficiently and seamlessly at the click of a button.
Step 4: Automated payment processing on the due date
WEPA also uses tm5 to process payments for derivatives trading. The treasury department can initiate payment at the click of a button using forms held with WEPA’s banking partners. The standard settlement instructions (SSIs) are stored in tm5 so that the payment can be sent directly to the bank. If several deals are in progress with a trading partner, the amounts are aggregated and the deals are ultimately concluded using a single payment.
Step 5: Integrated market data for reporting in tm5
WEPA can also create reports for the entire portfolio at any time with one click using tm5’s built-in market data package. The group uses this feature at month-end to calculate a final value for the deals and book the figures to the accounts. “It’s really a very convenient solution,” says Michael Gronarz.
Overview of total exposure with due date reminders at every stage of the process chain
The calendar function in tm5 provides the treasury department with an overview of which deals are due to be settled and need to be processed. This feature prevents missed payments that can be caused from the large number of deals and ensures maximum transparency with in-progress deals. With the total exposure overview, WEPA’s treasury department can stay ahead of the curve and deal with unexpected market fluctuations.
- Direct trading on 360T with automatic data import into tm5
- Matching service directly from the tm5 system
- EMIR reporting to REGIS-TR at the click of a button
- Calendar function for monitoring overall exposure and due dates
- Automated payments via SSIs in tm5
- Aggregation of payments in tm5
- Direct valuation of deals in tm5 with integrated market data service