FX Forward transaction
Buying and selling foreign currency at a specified price and amount at the moment of making a trade for a future date. It provides a simple solution for fixing the exchange rate of the currency conversion due in the future, thereby making it easy to plan the future movement of money.
Forward rate = spot rate + swap points (pro rata spread between two currencies).
A forward foreign exchange transaction is leveraged, i.e. it is not necessary to have the full amount of capital in order to conclude it, but it is enough to place a predetermined percentage of the value of the transaction as collateral.
Forward transaction
- The client expects the forint to strengthen against the euro in the next six months, so it opens a EURHUF selling, i.e. a short position, for 6 months.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Forward rate EUR/HUF for 6 months | 329.55 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Forward rate EUR/HUF for 6 months329.55
Example transaction for EURHUF long transaction
- The client expects the forint to weaken against the euro in the next six months, so it opens a EURHUF buy, i.e. a long position, for 6 months.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Forward rate EUR/HUF for 6 months | 329.80 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Forward rate EUR/HUF for 6 months329.80
Benefits
- Currency conversions at a pre-fixed exchange rate.
- We can speculate on the movement of almost any currency pair.
- We can open both buying and selling transactions, regardless of whether we have any currency in the currency pair.
- The transaction can be closed during the term with a reverse transaction, settlement at maturity.
- Due to the possibility of leverage, many assets can be used as collateral, such as government securities, stocks, mutual funds.
- The market is continuous except for a short weekend closure, so there is less risk of opening with a gap (when the price at the close and opening of the market differs).
Risks
- Due to the possibility of leverage, you may incur losses even greater than your capital.
- If, for any reason, the bank considers that the collateral you have
provided no longer covers open and held positions, it may require additional
collateral. At the request of the bank, you are obliged to provide the
additional collateral in accordance with the contractual terms and conditions,
and if you incur a loss as a result, it will be borne solely by you.
Long-Term Investment Account T+3 FORWARD transaction
Long-Term Investment Account T+3 FORWARD (’TBSZ
T+3 FWD’ or ’LTIA T+3 FWD’) is a fully collateralised T+3 day foreign exchange
forward transaction concluded in a Long-Term Investment Account (’TBSZ
account’ or ‘LTIA account’), i.e. an Individual Transaction entered into
against 100% collateral, settled in a Long-Term Investment Account, whereby you transfer a given amount of Hungarian Forint or foreign exchange to OTP
Bank, against a cash amount in another currency or Hungarian Forint, determined
by applying the forward rate fixed at the time of the transaction, on the third
banking day following the conclusion of the transaction as the settlement day.
This forward foreign exchange transaction provides an opportunity for
the investor to convert Hungarian Forint / foreign currency, available in the Long-Term Investment Account, at a pre-fixed forward exchange rate, on
the third banking day following the conclusion of the transaction.
As a prerequisite for concluding the transaction, you have to
provide the full amount of Hungarian Forint / foreign currency to be converted
in your Long-Term Investment Account.
TBSZ T+3 FWD transactions can be concluded for all
currency pairs in which OTP Bank opens and maintains Long-Term Investment Accounts for private individual customers.
TBSZ T+3 FWD transactions only are available to customers who have concluded a Global Markets Framework Agreement and/or a Private Banking Master Agreement with OTP Bank, through a Global Markets dealer and/or Private Banking advisor.
The transaction may be closed, partially of in full, by concluding a new TBSZ T+3 FWD transaction in the opposite direction, or a foreign exchange conversion transaction concluded for T+1, or T+2 settlement date.
Benefits
- The transaction provides an opportunity to take advantage of short-term shifts in the exchange rate.
- The forward rate is determined when the transaction is concluded.
- Since the amount of Hungarian Forint / foreign currency to be converted has to be fully collateralised at the time of concluding the Individual Transaction, there is no additional collateral requirement in case of an unfavourable shift in the exchange rates.
- It is not mandatory to purchase securities from the amount of Hungarian Forint / foreign currency credited upon settlement of the TBSZ T+3 FWD transaction.
Risks
- You have a sale or purchase obligation at the pre-defined exchange rate. Based on the terms and conditions agreed at the time of concluding the TBSZ T+3 FWD Transaction, you are obliged to purchase/sell the agreed currency on the settlement date, at the forward rate agreed upon at the time of concluding the transaction. The spot rate valid at the time of settlement may be more favourable than the forward rate defined at the time of concluding the transaction.
- The transactions can only be concluded and settled with full collateralisation. Collateral has to be provided at the time of concluding the transaction, and remains blocked until the settlement thereof.
- The amount of Hungarian Forint / foreign currency credited upon settlement of the TBSZ T+3 FWD Transaction may not be used to initiate placement of a deposit, since it is not allowed by the applicable (tax) legislation regarding long-term investment account agreements, in force at the time, to place a deposit order and register a deposit transaction in a Long-Term Investment Cash Account.
Please refer to the Product Information on TBSZ T+3 FORWARD Transaction for a detailed description of the product.
In order to make an informed investment decision, we recommend
you to consult the relevant Product Information and Key Information
Document (KID), before making an investment.
Experts
To purchase the products or if you would like to become a client of OTP Global Markets, feel free to contact us.
Zsigmond Csillag
Head of Department
Frigyes Soós
Sales
Budapest
Balázs Péntek
Sales
North Transdanubia region and Budapest
Botond Varga
Sales
South Transdanubia region and Budapest
Tamás Szabó
Sales
Northeast region and Budapest
Csaba Szemán
Deputy Head of Department
Southern Great Plain region and Budapest
Krisztián Tóth
Sales
Budapest
Ottó Izbéki
Sales
Equity Specialist
Sándor Andrási
Sales
Equity Specialist
Bálint Torda
Sales
Equity Specialist
Useful documents
These documents in English language to the person concerned
shall be for information purposes only. OTP Bank Plc shall fulfil its obligations imposed by the
legal regulations or requirement of supervisory authority by the documents in
Hungarian language.
In the
event of any discrepancy between the English language and Hungarian language
versions, the Hungarian language version shall prevail.
Information on the suspension of the market making obligation (available only in Hungarian)
Cross-Currency Interest rate swap
Dual currency structured investment
Forward deal in precious metals (gold and silver) transaction
Long-Term Investment Account T+3 FORWARD
Stock exchange spot transaction
Securities Lending Transaction
Senior Preferred Debt Securities Qualifying as Eligible Liabilities issued by OTP Bank plc
Notice on the uEMIR Notice se of LEI CODES
Disclosure of information pursuant to Article 11 (11) of the EMIR Regulation
Information for Clients on MiFID
Global Markets ex-ante cost transparency information (available only in Hungarian)
Systematic internaliser - quotes
Notice on the use of LEI CODES
Direct and indirect clearing services in respect of certain derivative transactions announcement
Notice - on the impacts of the pandemic emergency on the money and capital markets
Terms and conditions
Announcements
