5.23.3 Process Internal Swap Transactions
The FX Spot Contract created will be a cash deal settling on the Spot Value Date itself.
All the transactions will have the internal swap customer as the counterparty and the settlement instructions will be defaulted based on that.
The day count fraction for finding out the interest amount and the interest rate for the corresponding MM transactions will be derived from the currency of the respective MM contracts.
The interest rate type is fixed for MM contracts.
If the Spot FX transaction is a Buy, then the other two Forwards will be Sells.
If the Spot FX transaction is a Sell, then the other two Forwards will be Buys.
FX spot, FX Forward, and FX forward interest deals booked from internal swap must have the same booking date as of the internal swap deal.
MM Lending and Borrowing contract booked from internal swap must have trade date same as the booking date of internal swap deal.
MM placement transaction will have the deal currency as the Buy currency of the Spot FX Deal.
MM Borrow Transaction will have the deal currency as the Sell currency of the Spot FX deal.
If the interest rate on the placement or borrowing contract is negative, the system calculates the negative interest amount on the respective MM deal.
The FX Interest Forward will be based on the interest amounts of the two MM deals. If buy/sell interest field is zero or a negative value, the third FX forward interest contract will not be booked. For example, if the FX Spot is a Buy deal, then the Placement Interest Rate will be provided. Using this, the interest amount of the MM Placement (which is also the Sell Amount of the FX Interest Forward) will be computed. The interest amount of the MM borrow (and the buy amount of the FX interest forward) is the maturity amount (maturity amount of the MM placement * forward exchange rate) – original borrow amount (sell amount of the FX spot). The interest rate for the MM borrow deal can be calculated by using the interest amount and the day count fraction of the deal currency.
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