Imported from previous forum
EXAMPLE 1: Assume an FX EUR\USD Swap order with the following characteristics:
Symbol(55) = EUR/USD
Currency(15) = EUR
OrdQty(38) = 50000
OrdQty2(192) = 50000
Side (54) = SELL
This would be the vanilla arrangement for a matched swap. The following information is being specified:
Base Currency = EUR
Term Currency = USD
Dealt Currency = EUR
Near Portion: BUY 50000 EUR & SELL ‘X’ USD
Far Portion: SELL 50000 EUR & BUY ‘X’ USD
EXAMPLE 2:
My question: what happens if I elect to specify my order quantities in the Term currency?
Symbol(55) = EUR/USD
Currency(15) = USD
OrdQty(38) = 50000
OrdQty2(192) = 50000
Side (54) = SELL
I read this order as follows:
Base Currency = EUR
Term Currency = USD
Dealt Currency = USD
Near Portion: BUY 50000 USD & SELL ‘X’ EUR
Far Portion: SELL 50000 USD & BUY ‘X’ EUR
ie, my assumption is that Currency (15) specifies the Dealt currency, which may be either the Base or the Term Currency. Electing to specify the order quantities in the Term currency rather than the Base effectively moves the deal to the other side of the market, as the Side is defined in the spec as representing the Side of the future portion of the Swap. One ends up holding EUR.
The reason I ask is there is a another way to interpret the second example:
Base Currency = EUR
Term Currency = USD
Dealt Currency = EUR
Far Portion: BUY ‘X’ EUR & SELL 50000 USD
Far Portion: SELL ‘X’ EUR & BUY 50000 USD
In this interpretation I have assumed that the deal is still fundamentally a BUY & SELL EUR deal and the Currency (15) being USD simply indicates the denomination of the ‘50000’ quantities. One ends up holding USD.
Presently I read the FIX 4.4 specification as specifying the first interpretation, but this is something where I would really appreciate a definitive statement.