Swap trades

    With Akcenta, you can hedge your company against exchange rate risk for up to 1 year in advance as standard. We will prepare a tailor-made offer for each client.

    A swap agreement is a derivative transaction with foreign currency.

    This fixed negotiated trade with foreign currency is composed of two parts. The trade results in the immediate purchase or sale of funds in currency A for a specific amount of funds in currency B. The purchase or sale of the funds in currency B for a certain amount of funds in currency A then takes place as of a specific contractual future business day, at the swap rate agreed at the time of completing the given trade.

    What is a swap good for?

    In the event that the client receives payment for his goods in advance, the existing forward may be partially or fully settled early by means of a swap. When using a swap as an additional instrument, the client must take into account the cost of the swap rate, which will be based on the current rate adjusted by forward points.

    Normally, a swap is used to overcome a temporary liquidity shortage in one currency while simultaneously having excess liquidity in another currency. For example, if an importer or exporter has misjudged the maturity of future collections or obligations and has already entered into a forward trade against the collection/repayment, there is the possibility of extending (postponing the settlement of the trade) or shortening (settling the trade early) the forward trade via a swap.

    Example of a swap trade

    Exporter (based on the forward example):

    The Client hedged using a forward based on initial parameters, where a foreign consumer had undertaken to pay EUR 100,000 by 30 June, i.e. by 30 June they will need to add EUR 100,000. The consumer reports that the payment for the goods will be delayed by 14 days, and therefore the client does a swap and extends the settlement terms of the originally negotiated forward by 14 days. By 30 June the client purchases EUR 100,000 at the present exchange rate, and thereby settles the original forward and at the same time, in the same moment, sells EUR 100,000 with a new settlement date 14 days from now. The value of the new forward exchange rate will be based on the current exchange rate, modified by forward points.

    TradeDateType of operationEURParty to the tradeCurrencyEURCZK rate

    execution

    30.3.

    forward

    100 000

    sell

    30.6.

    23,980

    settlement

    30.6.

    swap 1st leg/spot

    100 000

    Buy

    30.6.

    24,050

    execution

    30.6.

    swap 2nd leg/forward

    100 000

    sell

    14.7.

    24,000

    If, however, the company receives payment for goods in advance, the existing Forward may be settled in advance in full or in part using a Swap.

    A swap may also be used if a company has excessive reserves of one currency and yet a deficit of a different currency which it requires to pay its obligations due. Using a swap, it can carry out two operations (spot and forward) where it temporarily purchases the insufficient currency by selling the surplus currency At the set date in the future, it conducts the opposite exchange at the previously agreed exchange rate.

    What are the conditions for entering into a swap deal?

    By entering into currency derivative transactions, the client assumes some types of risks (market risk – currency and interest rate risks, counterparty risk, liquidity risk, leverage). Everything always depends on the purpose and method of use of the derivative transaction concerned. Before signing a Framework Agreement and closing a transaction or at any time on request, dealers will be glad to explain you the individual types of risks, whether orally or in writing.

    By doing a forward contract, a company acquires immediate security against the future exchange rate at which the currency will be exchanged in 3 months (i.e. 30 June). This is the ideal solution if the forward exchange rate conforms to expected exchange rate trends and is a suitable instrument in terms of the financial planning of the company. In the event that an importer or exporter has incorrectly estimated the payment dates of future receivables or obligations and at the same time has already made forward contracts against the receivable/payment, there is the option to extend (postpone the settlement date of the trade), or reduce (prematurely settle the trade) of the forward using a swap. The conditions and principle of setting the swap price is the same as with a forward, i.e. the forward rate differs from the spot rate by forward points.

    Our exchange rates

    Currency

    Buy

    Sell

    The exchange rates shown are informative in nature; for the most up-to-date rates, please call +420 498 777 800. You can find current exchange rates in our Online Broker anytime.