Communication/Information
Clearly the efficient settlement of OTC products requires a high degree
of skill in managing the flow of information at, and immediately after,
trading and then during the term of the transaction.
Central to this is the Confirmation.
For an FRA, a confirmation will typically be sent via Society for
Worldwide Interbank Financial Telecommunications (SWIFT) and
would contain information such as:
Confirmation from Mega Bank To: Interbank Inc.
Buyer: Mega Bank
Transaction date 19 June 2004
Effective date 21 June 2004
Terms ISDA
Currency/Amount GBP 3 000 000
Fixing 19 September 2004
Settlement 21 September 2004
Maturity date 21 December 2004
Contract period 91 days
Contract rate 5.79% pa on a actual/360 basis
An IRS confirmation for a fixed/floating transaction would contain
information such as:
Confirmation from Mega Bank To: Interbank Inc.
Interest rate swaps
Transaction date 19 June 2004
Effective date 21 June 2004
Maturity date 21 December 2004
Terms ISDA
Currency/Amount USD 5 000 000
We pay 5.76%
Frequency Annual
Calculation basis Actual/365
We receive 6-Month LIBOR
Frequency Semi-annual
Calculation basis Actual/360
There are other pieces of information that can or will be added to this,
such as frequency being modified following convention.
108 Clearing and settlement of derivatives
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