How to represent cross rate components

, ,
1

Imported from previous forum

2

I have a requirement where it is necessary to include cross components with a cross trade. For example a forward/forward swap that is a cross has
six cross components (two spot and 4 forward) in addition to the spot and two forward components for the traded cross.

So far I’ve stuggled to see how to represent this without customisation.

Has anyone any ideas?

Thanks in advance

Rob

3

[ original email was from Jay Hurley - Jay.Hurley@morganstanley.com ]
> I have a requirement where it is necessary to include cross components

with a cross trade. For example a forward/forward swap that is a cross
has six cross components (two spot and 4 forward) in addition to the
spot and two forward components for the traded cross.

So far I’ve stuggled to see how to represent this without customisation.

Has anyone any ideas?

Thanks in advance

Rob

So you are trying to do something like buy and sell EUR/CHF which would have two legs, near and far EUR/CHF, but on those legs would have the EUR/USD and USD/CHF prices and quantities as well as EUR/CHF?

Currently there is no way to represent both EUR/CHF and the EUR/USD and USD/CHF components in a single message, you would have to make a choice to go with either the traded cross or synthetic leg information.

This is something that we could look to add if there is demand for it although it could get complex in the case of something like AUD/SEK where, if we are limited to two components then they would be AUD/USD and USD/SEK, however, SEK is normally traded as EUR/SEK on interbank platforms so the components could be AUD/USD, EUR/USD and USD/SEK which would need an n-component repeating group.

Regards,
Jay

4

Thanks for the response.

Yes you are correct. Actaully I should perhaps have said we are interested in modelling this in TradeCaptureReports where the inclusion of more esoteric data is useful because we intend to use for bank to bank or intra bank systems.

I think this needs to be an enumeration regardless of whether the cross is via a third pair or not because spot components are not included for the far leg, so a TOM/NXT results in a different number of cross components to a FORWARD/FORWARD. Also avoids the clutter of all those specialised component names.

Incidentally I assume your more complex example should have been AUD/USD, EUR/USD and EUR/SEK rather than USD/SEK?

For the record we are considering going with an enumeration of . So modelled in FIXML we get an Enumeration of

Where the CFI gives us a notion of SPOT or forward.

Regards

Rob