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In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) [1] and may use foreign exchange derivatives. An FX swap allows sums of a certain currency to be used to fund charges designated in another ...
(Fixed v Fixed) Cross-Currency Swaps: a less common customization, again synthesized by market makers trading two IRSs in each currency and a float v float XCS. Mark-to-Market or Non Mark-to-Market : the MTM element and notional exchanges are usually standard (in interbank markets) but the customization to exclude this is available.
A swap bank can be an international commercial bank, an investment bank, a merchant bank, or an independent operator. A swap bank serves as either a swap broker or swap dealer. As a broker, the swap bank matches counterparties but does not assume any risk of the swap. The swap broker receives a commission for this service.
Retail foreign exchange trading is a small segment of the larger foreign exchange market where individuals speculate on the exchange rate between different currencies. This segment has developed with the advent of dedicated electronic trading platforms and the internet, which allows individuals to access the global currency markets.
A Swap Execution Facility (SEF) (sometimes Swaps Execution Facility) [1] is a platform for financial swap trading that provides pre-trade information (i.e. bid and offer prices) and a mechanism for executing swap transactions among eligible participants.
The biggest geographic trading center is the United Kingdom, primarily London. In April 2022, trading in the United Kingdom accounted for 38.1% of the total, making it by far the most important center for foreign exchange trading in the world. Owing to London's dominance in the market, a particular currency's quoted price is usually the London ...
Central bank liquidity swap is a type of currency swap used by a country's central bank to provide liquidity of its currency to another country's central bank. [1] [2] In a liquidity swap, the lending central bank uses its currency to buy the currency of another borrowing central bank at the market exchange rate, and agrees to sell the borrower's currency back at a rate that reflects the ...
For interest rate swaps, the Swap rate is the fixed rate that the swap "receiver" demands in exchange for the uncertainty of having to pay a short-term (floating) rate, e.g. 3 months LIBOR over time. (At any given time, the market's forecast of what LIBOR will be in the future is reflected in the forward LIBOR curve.)