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TRADING
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Finance cost is a contract cost.

Letters of credit issued and received, bank guarantees, facility utilisation and limits, foreign exchange exposure, and finance cost attributed to the contract that consumed it.

The problem

Finance cost is usually treated as an overhead and spread across the business, which means a slow-settling trade looks as profitable as a fast one. In trading, days of exposure are a direct cost of the deal.

Facility utilisation is the other constraint: a trading house is limited less by opportunity than by available lines, and utilisation has to be visible before a contract is committed.

Core workflow

Facility to settled instrument.

01
Facility
Bank lines, limits and pricing recorded.
02
Instrument
LC or guarantee requested against a contract.
03
Issue / receive
Terms captured, workability confirmed.
04
Utilisation
Limit consumption visible before commitment.
05
Cost
Charges and interest accrued to the contract.
06
Release
Settled, limit released, cost closed.
What it covers

Instruments

Import and export LCsStandby LCs and guaranteesDocumentary collectionsAvalisation and discountingAmendment handling

Facilities

Bank facility registerLimit utilisation and headroomFacility pricing and chargesCollateral and securityCovenant tracking

Exposure

FX position and exposureHedge record and matchingDays of finance exposureFinance cost per contractWorking capital cycle
Operational outcomes
Per contract
Finance cost attributed
Live
Facility headroom before commitment
−11 days
Working capital cycle
0
LCs expired unused

Ranges observed on Al Jawad engagements. Targets agreed in assessment.

Attribute finance cost to ten contracts.

We cost days of exposure on ten closed trades and show how the ranking of profitability changes.