Non-Deliverable Forward (NDF)

Non-deliverable forwards (NDFs) are non-listed, short-term forward exchange transactions between a rarely traded or non-convertible currency and a readily convertible currency (typically USD) for which a cash settlement is always made on the due date (value date).

Unlike ordinary forward exchange transactions, NDFs apply a fixing date (for which the current market price is fixed) in addition to a value date. After the current price has been fixed, the difference between the agreed forward rate and the resulting settlement amount is calculated. The payment is made on the value date.

Note Note

You can use this feature in the the business function TRM, Hedge and Exposure Management, New Financial Instrument (FIN_TRM_LR_FI_AN_2) and implemented either Support Package 9 for ERP enhancement package 4 or Support Package 4 for SAP ERP 6.0 enhancement package 5.

End of the note.

Integration

The system checks the following authorization object when processing NDFs:

Authorization Object	Activities	Comments
T_DEAL_PD Authorization for Product Types / Transaction Types	01 Create or Generate 02 Change 03 Display 06 Delete 16 (Execute) 38 Execute 43 Release 48 Simulate 83 Counterconfirm 85 Cancel AB Settle KI Knock In KO Knock Out KU Give Notice PR Edit Correspondence PS Edit Correspondence - Special VF Expired	You use this authorization object to specify the functions and activities that users can perform for a product type or a transaction type within a company code. Usage in the Functions All transactions for transaction management (trading and back office) in the Transaction Manager (FSCM-TRM-TM) that create or edit financial transactions (including BAPIs)

Authorization Object

Activities

Comments

T_DEAL_PD Authorization for Product Types / Transaction Types

01 Create or Generate

02 Change

03 Display

06 Delete

16 (Execute)

38 Execute

43 Release

48 Simulate

83 Counterconfirm

85 Cancel

AB Settle

KI Knock In

KO Knock Out

KU Give Notice

PR Edit Correspondence

PS Edit Correspondence - Special

VF Expired

You use this authorization object to specify the functions and activities that users can perform for a product type or a transaction type within a company code.

Usage in the Functions

All transactions for transaction management (trading and back office) in the Transaction Manager (FSCM-TRM-TM) that create or edit financial transactions (including BAPIs)

Prerequisites

You need to have made the Customizing settings for NDFs. For more information, see Non-Deliverable Forward (NDF): Customizing
Master Data
To portray forward exchange transactions, you have to assign the Counterparty role to your business partners.

See also: Business Partner
Enter Market Data
For NDFs, you need the exchange rates of the relevant currencies as well as the swap rates. You can use the following options for entering this data:
- Entering Exchange Rates Manually
- Manual entry of foreign exchange swap rates in the application menu for Treasury and Risk Management under Basic Functions Market Data Management Manual Market Data Entry Currency Enter Forex Swap Rates .
- Market Data Transfer from Spreadsheet
- File Interface
- Datafeed

Features

You can use the following functions to portray the Process Flow for a Non-Deliverable Forward (NDF):

In Transaction Management (transaction FTR_CREATE and FTR_EDIT), the functions for creating and editing non-deliverable forwards are integrated.
For more information, see:
- Creating Non-Deliverable Forwards
- Editing Non-Deliverable Forwards
In the case of NDFs, confirmation letters are generally issued (for example, via SWIFT with MT300 format) when the contract is signed and when fixing occurs.
- You can use the Correspondence Framework [available with the business function TRM, Correspondence Framework (FIN_TRM_CORR_FW) and TRM, Correspondence Framework 2 (FIN_TRM_CORR_FW_2)].
  The "SHERKUNFT" and "Fixing Date" fields have been added to the correspondence objects of the correspondence framework.
- If you do not use the new correspondence framework, the existing correspondence function is available. See also: Correspondence
  
  Note
  You need to add the Fixing Date and Settlement Currency fields to the forms used for forward exchange transactions.
  
  End of the note.
NDFs are integrated in transaction and position management in Transaction Manager. You can use them as hedging instruments in Hedge Management. You can valuate them using key date valuation and edit them using the functions available for OTC transactions.
The net present value of non-deliverable forwards is calculated in the Market Risk Analyzer in the same way as the net present value of ordinary forward exchange transactions. Once fixing has occurred, the net present value of the NDF is the same as the settlement amount discounted to the key date.
See also: Forward Exchange Transaction
You can analyze your NDFs using the standard reports for transaction and position management, such as the following:
- Transaction Overview: Journal (TJ01)
- Position List (transaction TPM12)
- Subledger Cash Flow (transaction TPM13)
- Posting Journal (transaction TPM20)
Furthermore, you can define queries for your NDF financial transactions using the logical database FTI_LDB_DEALS.
BAPIs
The BAPIs available for BUS5600 Foreign Exchange for creating and editing foreign exchange transactions can also be used for NDFs.

For fixing, you can use the method NDFFixing Fixing of an NDF Transaction.

For more information, see BAPIs for the Transaction Manager.