In pursuit of its commitment to market development, the Bankers Association of the Philippines (BAP) recently launched the dollar-peso cross-currency swap (USDPHP CCS) market.
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The Dollar-Peso cross-currency swaps involve a Philippines peso fixed rate and a US dollar floating swap, with standard tenors of 1, 2, 3, 4, 7, and 10 years. It utilizes the Secured Overnight Financing Rate (SOFR) as a floating rate benchmark for the US dollar leg.
This initiative, which was spearheaded by the BAP Open Market Committee, aims to enable its members to utilize hedging instruments critical to financial institutions and in response to the needs and requirements of their customers to better manage foreign exchange and interest rate risks.
With strong support from the Money Market Association of the Philippines and ACI Philippines, the BAP Open Market Committee ensures that the USDPHP CCS market is guided by the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
It will also ensure the adoption of the ISDA Master Agreement and Foreign Exchange Global Code.
Market makers in the dollar-peso cross-currency swap market include BDO, BPI, Metrobank, PNB, Security Bank, Citibank, DB, HSBC, ING Bank, JP Morgan, and Standard Chartered Bank.
Meanwhile, China Bank, RCBC, Robinsons Bank, Union Bank, ANZ, Mizuho, and MUFG have also signed up as regular participants. The voice broker participants in this market include Amstel, GFI, Tradition, as well as Tullet Prebon.
A cross-currency swap is a transaction between two authorized parties that involves an exchange of principal amounts and interest payments in one currency for principal and interest payments in another currency at an agreed-upon exchange rate and at an agreed schedule.
The USDPHP CCS involves a Philippines peso fixed rate and a US dollar floating swap and will use the US dollar SOFR as the floating rate benchmark for the US dollar leg.
The USDPHP CSS market is supported by Bloomberg, a globally recognized trading platform provider for various financial products.
The USDPHP CCS is traded in Bloomberg’s FIQ<GO>.