Foreign Exchange Swap 

Definition

When you create a foreign exchange swap, the system creates a spot transaction and forward transaction at the same time. The foreign currency bought at the spot rate is sold again at the forward rate. The foreign currency sold at the spot rate is bought back again at the forward rate.

You enter a forex swap by entering a spot exchange transaction combined with a forward exchange transaction.

Use

Rate and Swap Proposal

The forward rate is automatically determined by an incoming premium or discount. The conditions for the authorized business partner, like the payment details, correspond to those for spot and forward transactions. If you have a real-time datafeed link, you can also use the rate and swap proposals to simulate transactions, and compare them to the rates agreed. You can use copy functions to speed up entry. These functions allow you to copy identical data from the first transaction (spot/forward) into the corresponding field of the second transaction (forward/spot).

Premature Settlement and Rollover

When you roll over a forex swap, this prolongs the forward transaction - the initial transaction is cleared and a forward transaction is created with a changed due date. The relevant data is transferred as a default value to the forward transaction to be generated. In the case of premature settlement, clearing the old transaction is linked to the creation of a new transaction with an earlier value date than the original end of term. The Liquidity effect field can be used to clear any rate differences between the original transaction and the netting transaction.

Foreign currency valuation

You perform foreign currency valuations on the basis of single transactions that have been generated. With a forward exchange transaction, you can also have a split valuation with spot and swap transactions provided that you have made the required settings.

For more information, see Object Links

Procedure

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       1.      Choose Forex Swap.

       2.      You have to make the same entries here as you do for single spot or forward transactions: Company code, Product type, Transaction type, Partner.

       3.      The screen for entering a forex swap appears. The swap entry screen saves you time by enabling you to enter two forex transactions next to each other as follows:

       4.      Select the copy function in the following lines: Purchase, Sale, Spot.

       5.      Enter the following data for the first transaction: Currency ID, Amount traded, Spot rate, Value date.

       6.      Enter the following data for the second transaction: Swap rate, Alternative value date.

       7.      Since the screen for entering a currency swap is a form of input help, you are not allowed to enter payment details here. You enter these in the individual transactions.

       8.      Press the Enter button. The system calculates the corresponding forward rate, enters the missing amount details and any missing transaction data. You can then save the data.

       9.      You can also map a forex swap as a mirror transaction.

Four transactions are created when a forex swap is mirrored. A spot transaction and a forward transaction are created in each of the two company codes involved. The reference category SWP (forex swap) also appears in this context. The spot transaction and forward transaction in one company code are linked by the SWP reference.

You do not need to make any special Customizing settings to mirror forex swaps.  You need to change Customizing settings for other transactions in foreign exchange trading.

For more information on creating mirror transactions, see Mirror Transactions.