Photo of Nevin Lettens and Andy Hottowy, eBay and Rajesh Dhulashia, J.P. Morgan.
Nevin Lettens
Manager, Treasury
Agnieszka Wright
Manager, Treasury
eBay Inc is an e-commerce marketplace that connects buyers and sellers and is headquartered in San Jose, California, USA.
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The challenge
Behind every cross-border purchase we make, complex treasury processes are hard at work. Like at online marketplace eBay, where FX settlement risk was increasingly front of mind – especially in Asia Pacific. The company’s global footprint across 190 markets, plus its cash flow hedging programme, left it increasingly vulnerable to FX settlement risk, particularly during quarter-end settlements.
eBay’s treasury team wanted to broker a solution to stop:
QE financial risks – eBay faced the risk of reporting overdrawn notional pool balances as debt and late receipts instead of cash, reducing free cash flow on cash flow statement.
Interest expense – eBay faced the risk of not recovering the interest expense incurred on eBay’s overdrawn accounts from lateness claims to counterparty banks, owing to variances in benchmark rates utilised.
Delayed settlements – eBay faced the risk of loss of interest income due to delayed settlements.
Heightened counterparty exposure – eBay faced the risk of the entire notional trade value rather than just the mark-to-market.
Manual inefficiencies – eBay’s cash management team was releasing around 3,500 payments via their TMS annually and monitoring the settlements on the value dates, diverting resource-intense time towards counterparties’ follow-ups, and organising back-valuations.
The solution
eBay wanted to set up a continuous linked settlement (CLS) and began by evaluating providers based on comprehensive selection criteria. It decided to establish a unique, automated funding process to facilitate seamless FX settlements while augmenting the existing liquidity structure, yielding:
Trading platform innovation – the project encompassed 17 currencies alongside which hundreds of counterparty bank accounts and ~3,000 system rules were configured.
Upgrades and adjustments – eBay upgraded its TMS to enable CLS FX trades and adjusted trading platform rules to accommodate MT 304 messages (standardised messages used by banks for CLS).
Streamlined funding – eBay created a new multi-currency notional pool in Luxembourg for CLS accounts and implemented end-of-day sweeps to clear balances between the existing notional and the new J.P. Morgan pool. Net balance sweeps prevented negative balances in the J.P. Morgan pool due to APAC currency D-1 cut-off times. The net balance sweep ensures that eBay concentrate maximum liquidity in one place. This is the first time such an automated liquidity structure has been used in conjunction with CLS.
Transparency and collaboration – eBay informed 11 counterparties about the transition to CLS, conducted 300+ CLS test trades to validate the setup, drafted nine agreements with legal teams to formalise CLS integration, and switched the existing portfolio of CLS-eligible trades with counterparties’ assistance.
TMS configuration – eBay auto-matches and reconciles FX deals by integrating relevant reference numbers from CLS account statements, ensuring accurate and efficient reconciliation, removing the previous manual efforts.
Accelerated settling – eBay settled 1,700+ trades via CLS within the first two months of implementation. Tailored to CLS, the automated funding solution ensures uninterrupted processing to daily operational activity and liquidity levels.
“By integrating CLS into our existing infrastructure in conjunction with the fully automated liquidity solution, we innovated a new way of mitigating FX settlement risk,” explains Agnieszka Wright, Manager, Treasury.
Best practice and innovation
eBay achieved remarkable results quickly: over 1,700 trades seamlessly settled via CLS within the initial two months post-implementation.
Key benefits
Cost savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Improved visibility.
Manual intervention reduced.
Increased system connectivity.
Future-proof solution.
Exceptional implementation (budget/time).
“Beyond the tangible benefits, our CLS initiative embodies a paradigm shift in risk management philosophy, underscoring a commitment to innovation, resilience, and proactive risk mitigation,” concludes Nevin Lettens, Manager, Treasury.
Adit Gadgil
Managing Director, Global Head of e-Commerce & Tech, Media and Telecom, J.P. Morgan Payments
eBay continues to embody a culture of self-improvement and this is evident with the ambitious Continuous Linked Settlement (CLS) project that they undertook. This project has allowed eBay to reduce QE financial risks, interest expense, counterparty exposure and manual processes – all of which couldn’t have been implemented without excellent project and stakeholder management. eBay went one step further and crafted a bespoke funding solution to further optimise their FX settlement process. The entire J.P. Morgan team congratulates eBay on their vision and receipt of this award.
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The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
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