The transaction approval process is initiated at the request of a Beneficiary or Obligor who express interest to enter into a trading relationship with the support of Frontclear (origination). Frontclear conducts due diligence and participates in documentation negotiations. Transacting is subject to country approval (determines eligible collateral, haircuts, etc.) and counterparty approval (credit approval, approval of eligible instruments, collateral terms).
Where the guaranteed party is deemed to have insufficient knowledge and/or systems to enter into the contemplated transactions, Frontclear can offer Technical Assistance funding derived from grant contributions to address capacity concerns. Once the counterparty is approved by the Investment Committee and the terms are agreed by Frontclear, the Beneficiary and the Obligor, documentation is concluded.
Execution of trades are done bilaterally between the transacting parties, but subject to final approval by Frontclear’s Chief Risk and Finance Officer. Post-trade, Frontclear requires a copy of the transaction confirmation and collateral confirmations. Frontclear periodically conducts plausibility tests to compare its mark-to-market valuations of transactions with those of the Beneficiary.