Did You Know? | Cross-Currency Transactions

Using Arbor Portfolio Management Systems, you can easily book cross-currency trades for equities and CFDs.

Cross-currency transactions – what they are

A cross-currency transaction is a trade in which local and settlement currencies are different. This can be a base cross-currency trade, if the settlement or trade currency is the same as the fund’s base currency. It can also be a non-base cross-currency trade, if all 3 currencies are different (for example: local currency, EUR; settlement currency, GBP; base currency, USD).

How to enter a cross-currency transaction

As with all other trades, you should:

  • Select Trade Entry
  • Complete the required fields

By selecting different currencies for Ccy (local) and Ccy (settlement), you will be able to introduce the necessary rates for this transaction, under ‘Rates’. If the trade is a cross-currency transactions, a ‘Cross FX’ rate is required. If the trade is a non-base cross-currency trade, then two ‘To Base FX’ rates are also necessary.

Non-base cross-currency

Example
Base Currency: USD
Local currency: EUR
Settlement currency: GBP

On the right-hand side of Ccy (local), you will be able to introduce the desired ‘To Base FX’ rate – in this case, EURUSD.

You can then do the same for the ‘To Base FX’ rate for Ccy (settlement).

Finally, for ‘Cross FX rate’, you can introduce the rate for currencies in Ccy (local) and Ccy (settlement) – in this example, EURGBP.

Triangulation

Be aware that, to avoid P&L distortions, FX rates used in this cross-currency operation need to triangulate. If two rates are provided, Arbor is able to triangulate the third rate automatically at the time of trade entry.

If you need more information on this topic, check out our online documentation on FX Triangulation for Non-Base FX Trades.

If you need help logging in to access this document, please contact us for your log-in details.

This entry was posted in Did You Know?. Bookmark the permalink. Both comments and trackbacks are currently closed.