BAP launches cross-currency swap market

CEBU, Philippines — In a bid to promote market development, the Bankers Association of the Philippines (BAP) has opened up the dollar-peso cross-currency (USDPHP CCS) market.

Spearheaded by the BAP Open Market Committee, the initiative enables its members to utilize hedging instruments critical to them and also in response to the needs and requirements of their customers to better manage foreign exchange and interest rate risks.

In an official statement, BAP explained that the BAP Open Market Committee, with the strong support of the Money Market Association of the Philippines and ACI Philippines, ensures that the USDPHP CCS market is guided by the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) as well as 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, Philippine National Bank (PNB), Security Bank, Citibank, DB, HSBC, ING Bank, JP Morgan, and Standard Chartered Bank.

Banks who have signed up as regular participants include China Bank, RCBC, Robinsons

Bank, Union Bank, ANZ, Mizuho, and MUFG.

Voice-broker participants in this market include Amstel, GFI, Tradition, and 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 market involves a Philippine peso fixed rate and a US dollar floating swap with standard tenors of 1 year, 2 years, 3 years, 4 years, 5 years, 7 years, and 10 years. This will use the US dollar Secured Overnight Financing Rate, or SOFR, as the floating rate benchmark for the US dollar leg.

The USDPHP CCS market is supported by Bloomberg, a globally recognized trading platform provider for various financial products. — (FREEMAN)