SBP to launch platform for FX interbank market

KARACHI: The State Bank of Pakistan (SBP) decided to revamp the foreign exchange trading system and announced to introduce a Centralized Foreign Exchange (FX) Trading Platform called “FX Matching” for the interbank FX market to bring more transparency to the interbank market.

Effective January 29, 2024, it will be mandatory for ADs to use ‘FX Matching’ or FXT dealing for executing outright interbank FX transactions.

Analysts said this centralized trading platform will reduce the volatility in the interbank market and support a free and fair FX trading system.

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The main objective of this move is to provide the interbank market participants a centralized trading platform that offers FX trading on an anonymous basis and real time price visibility.

According to SBP, building an innovative and inclusive digital financial ecosystem is a key priority area of SBP Vision 2028 and the adoption of the FX Matching platform is a key step for enhancing the depth and transparency of the interbank FX market.

All deals executed by ADs on FX Matching and FXT Dealing will be reported electronically to the SBP in real time through the system. To ensure real time reporting, all tickets must be confirmed in the FX Matching and FXT Dealing by both the counterparties immediately after the trade.

In order to formally launch the interbank FX trading on the FX Matching platform, the SBP has issued instructions for the Authorized Dealers (ADs).

As per SBP’s instructions, FX Matching will be available to all ADs (participants) for interbank USD-PKR trading in ready value labelled as spot on the platform.

The trading on the platform will be on an anonymous basis which means participants will be able to place their quotes or hit quotes placed by other participants without disclosing their name. The participants will be able to know their counterparties after a trade is matched.

The best bid and offer quoted on the FX Matching will be visible to all the participants; however, the best executable quote for a particular participant will be subject to availability of counterparty limit.

Each participant can set credit limits for their counterparties in the FX Matching. The participants are advised to have credit limits with major market participants in order to get best quotes available on the FX Matching.

Trading on FX Matching will be for minimum lot size of USD 500,000 and multiples thereof.

The bid or offer prices placed on the FX Matching will be firm and remain valid until cancelled by the participant quoting the prices. The participants are advised to cancel all open orders (if not executed) before logging-off from the platform and close of the market for interbank FX trading. Effective January 29, 2024, it will be mandatory for ADs to use FX Matching or FXT Dealing for executing outright interbank FX transactions that impact Foreign Exchange Exposure Limit.

FX Swap transactions concluded with the same counterparty will continue to be conducted as per current practice including FXT Dealing, telephone or other means. ADs can trade on FX Matching as per the timings announced for interbank FX trading by SBP from time to time.

In case on any given day, Federal Reserve Bank of New York is closed and the interbank FX market is open in Pakistan, the trading on the FX Matching will be in Tom value.

The SBP has warned that ADs/participants must be cautious in placing bids/offers and executing transactions on the platform and monitor their orders to avoid executing erroneous trades.

Copyright Business Recorder, 2024