Frances Maguire
Frances Maguire

NDFs – Extending the benefits of automation to Non-Deliverable Forwards

With increasing interest in emerging market currencies, the use of NDFs is set to grow. Frances Maguire finds out if automation will follow for these over the counter instruments

The growth of emerging markets investment and the massive shift of manufacturing to low-cost countries such as China have led to an increased demand for trading in emerging markets currencies. Non-Deliverable Forwards (NDFs) have quickly become an essential trading instruments in the emerging markets, where a currency is either non-deliverable or where national regulations prevent or hinder the use of the forward FX market to hedge FX risk. Stamos Fokianos, global head – eChannels, Financial Markets, Standard Chartered Bank, says these factors are driving the use of NDFs. He says:  “Without our NDF offering for these non-convertible currencies, our clients would not be able to hedge their underlying exposure. As a result a substantial FX risk would potentially burden their core business, putting their investments and profitability at risk.” He adds that the growth of these instruments is directly related to underlying business activity and the positive momentum these markets...continued

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