Andy Kidd Customer Relations Director, Eurobase Banking Solutions
Andy Kidd Customer Relations Director, Eurobase Banking Solutions

Tackling the technical challenges of electronically trading Non-Deliverable Forwards

The desire to electronically trade Non-Deliverable Forwards has really increased in recent years. This has been greatly facilitated by the bilateral Master Confirmation Agreement for Non-Deliverable Forward FX Transactions, which not only provides participants with the legal framework within which they operate but also underpins the business processes and rules to which automated trading systems must adhere.

This move towards standardisation in terms of definitions and market practices has been a pre-requisite of the growth in trading NDFs electronically, essentially enabling them to be treated as a normal outright – though with a few challenges from a technical perspective. Although NDFs use a standard forward price, for example, it won’t be the same forward price as that of the outright, so the system has to be able to effectively stream two sets of forward prices. It also has to be able to support the ability to trade currency pairs on an onshore and offshore basis – and the rules that are applied to the transactions such as price fixing mechanisms – as well as price streaming to a myriad of multi-bank and trading platforms and channels. Fortunately, this is grist to the mill for those turnkey systems that take a gateway approach, especially where they have been designed to ease deployment of non-standard asset classes by adding functionality through off-the-shelf or bespoke...continued

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