TMA Treasury Markets Certificate cheat sheet

Money market instruments price on a discount or yield basis: a 90-day bill quoted at 4.00% discount has a price of 100 × (1 − 0.04 × 90/360) = 99.00; the true yield is higher than the discount rate because proceeds, not face value, are the invested amount.

Yield to price conversion: P = FV / (1 + y × d/365) for GBP-style money markets; for EUR and USD use d/360. The day-count convention must match the currency, not the instrument's issuer.

Bond price sensitivity: modified duration approximates percentage price change per 1% yield move; DV01 = modified duration × dirty price × 0.0001 gives the cash value of one basis point.

FX forward points derive from interest rate differentials: F = S × (1 + r_quote × d/basis) / (1 + r_base × d/basis); the currency with the higher interest rate trades at a forward discount.

Covered interest parity means the forward premium or discount offsets the rate differential; a persistent deviation is a basis, not free money, and reflects balance sheet, funding and credit costs.

Repo economics: cash lender earns repo rate; the haircut protects against collateral price falls and counterparty default; a repo rate above unsecured rate signals collateral scarcity or balance sheet cost.

Yield curve inversion (short rates above long rates) historically precedes easing cycles; the 2s10s spread is the standard headline measure, but 3-month to 10-year is the more reliable recession signal.

Central bank policy transmission runs from policy rate to overnight cash, then short money market rates, then the curve via expectations and term premium; quantitative tightening raises term premium at the long end.

Cash conversion cycle = days inventory outstanding + days sales outstanding − days payables outstanding; shortening it releases working capital without new funding.

Liquidity buffers must be high-quality liquid assets (HQLA) convertible to cash within 30 days under stress; LCR = HQLA / net cash outflows over 30 days, minimum 100%.

NSFR = available stable funding / required stable funding, minimum 100%; it constrains reliance on short-term wholesale funding for long-dated assets.

Interest rate risk in the banking book (IRRBB) is measured by repricing gap and EVE sensitivity; a positive gap gains when rates rise, a negative gap loses.

Cash pooling: notional pooling nets balances without physical transfers (legal right of set-off needed), while zero-balance pooling sweeps cash into a header account daily.

FX exposure management: transaction exposure (known cash flows) is hedged with forwards or futures; translation exposure (accounting) is managed with balance sheet hedges; economic exposure needs strategic responses.

Payment settlement risk is managed with CLS for eligible FX pairs, netting agreements, and Herstatt-style cut-off discipline - pay only after confirming receipt where possible.

Treasury policy sets counterparty limits by credit rating and tenor, defines permitted instruments, and separates dealing, settlement and confirmation functions to prevent fraud.

TMA membership obliges firms to deal with integrity, act in the client's best interest where agency is agreed, and avoid conflicts of interest or disclose and manage them.

Market abuse covers insider dealing, market manipulation and unlawful disclosure; suspicious transactions must be escalated to compliance, not discussed with counterparties.

Front-running - dealing ahead of a known client order - is prohibited; personal account dealing requires pre-clearance and is restricted around client flow.

Communications about transactions must be accurate and not misleading; recorded lines and electronic records are retained per regulatory requirements.

Confidentiality: client information may only be shared on a need-to-know basis or where legally required; cross-selling requires consent and clear disclosure.

Confirmation and settlement controls: independent verification of trade economics, dual authorisation for payments, and reconciliation of nostro accounts daily.

Gifts and entertainment must be within policy thresholds and logged; inducements that impair independence are prohibited.

Breach reporting is a duty: escalate to compliance promptly, cooperate with investigations, and do not retaliate against reporters.

FX Global Code principles: ethics, governance, execution, information sharing, confirmation and settlement, and confirmation of the last look practice.

Last look must be applied consistently, disclosed to clients, and not used to exploit latency arbitrage; firms should publish their last-look policy.

Market data sourcing: primary dealer quotes, interdealer brokers, and electronic venues; data must be timestamped and sourced consistently to avoid look-ahead bias.

Benchmark fixing (WM/Reuters 4pm London) uses a five-minute window; orders around fixings must follow fixing risk controls to avoid manipulation.

Pre-hedging is permitted only where disclosed and consistent with client interest; trading ahead of a client's fixing order without disclosure is manipulation.

FX settlement risk is mitigated by CLS, netting and payment-versus-payment arrangements; the Code expects firms to assess and manage this risk.

Algorithmic trading controls: pre-trade limits, kill switches, and testing before deployment; the Code expects governance of algo behaviour and monitoring.

Information sharing: disclose whether you are acting as principal or agent, and do not misuse confidential information about client orders.