Reply To: Call-Notice / Nostro Accounts to capture (Cash)Realised PnL from Matured Trades

Gareth Evenson

I have used call-notice accounts for position / P&L management on precious metals books at CS. Not used for matured trades really – but just because we wanted to see settled balances as a separate bucket and manage this into the P&L and position reporting. Overall they work fine from a position (delta) / MTM perspective. The only issue I had was with P&L reporting – which may have been corrected in later versions. The standard P&L was not correct because of the following:

MTM(t) = settled balance cob t-1.
Base MTM(t) = MTM(t) * fx(t-1) [balance t-1 * fx(t-1)]
Base PNL = Base MTM(t) – Base MTM(t-1) => but this incorrectly includes any flows settling T-1.
Base PNL should be = MTM(t-1) * [ fx(t-1) – fx(t-2) ] i.e. balance cob t-2 * move in fx rates

To get around this I developed a UDSR top correct the PNL on call notice, and this may still be required.

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