FX Forward, Swap and Option

I. Product Description

FX Forward is the buying/selling transaction of foreign currencies with exchange rate that is determined during time of transaction, with payment and delviery on a certain date that is 2 (two) days after transaction date.

This transaction allows Customers protection against future exposure risk of FX with respect to exchange rate fluctuations.

FX Swap is the simultaneous buying and selling transactions of a certain currency in the same principal amount on the same time with respect to the buying and selling of other currencies for 2 (two) different dates, using an agreed swap price.

FX Swap, cash flow wise, is the same when customers borrow funds in 1 (one) currency and at the same time lend funds in other currencies where the difference in interest rates is reflected in the difference of exchange rates.

FX Option is the agreement of giving of options to buyer to purchase or sell a certain currency using certain exchange rate on a predetermined period. Buyer has the right (not obligation) to execute the option. The buyer must pay the premium for the giving of option to the publisher/seller of option

There are several Option types, which are:

1. Based on type:
• Call Option: Option to buy
• Put Option: Option to sell
2. Based on execution time:
• AMERICAN OPTION: Anytime
• EUROPEAN OPTION: On Fixing Day/Expiry

 

II. Risk Product and Other Information

1. Market Risk
   Risks arising from movements in the value of currencies where the Customer can suffer losses if from the moment the position is opened until the transaction settlement date, the currency value always moves against the customer's expectations


2. Every purchase of foreign currency with respect to IDR for FX Forward transaction with value amounting to USD 100,000 or more, the customer must submit the underlying transaction documents


3. Each currency sold with respect to IDR requires underlying transaction for:
   - Equal to USD 5,000,000 or more (for FX Forward transaction) each transaction - Equal to USD 1,000,000 or more (for FX Option transaction) each transaction

III. Product Simulation

A. FX Forward Product Simulation

Customers can do purchase transaction of USD with respect to IDR.

• On August 20, 2018, PT ZYZ receives invoice in USD from international supplier with nominal of USD 1,000,000 and date of maturity of October 20, 2018
.
• PT ZYZ intends to immediately do hedging over the respective USD obligation to mitigate risk of loss due to the movement of exchange rate on market.
.
• Spot exchange rate for Bank position to sell USD for IDR on August 20, 2018 is 14,500. Swap point for tenor 2 months is +210 points.
.
• Therefore, Forward exchange rate for customers to buy USD 1,000,000 on October 20, 2018 amounts to 14,710 (spot 14,500 + swap point 210).
.

Scenario A – Customers experience gain:
If on October 20, 2018, market exchange rate is 15,000, then customers will earn profit since they transacted below market price.

Customers’ IDR account will be blocked on the transaction date and will be debited by IDR 14,710,000,000 from what was supposed to be IDR 15,000,000,000 (if utilizing market price), on October 20, 2018

Scenario B – Customers experience loss:
If on October 20, 2018, market exchange rate is 14,000, then customers will experience a loss since they transacted above the market price.

Customers’ IDR account will be blocked on the transaction date and will be debited by IDR 14,710,000,000 from what was supposed to be IDR 14,000,000,000 (if utilizing market price), on October 20, 2018

B. FX Swap Transaction Simulation

PT XYZ needs to make a payment in IDR to a supplier in Indonesia, while currently PT XYZ has an excess USD, which in 1 month will be used to pay foreign suppliers. For PT XYZ to be able to pay its bills to the Indonesian and foreign suppliers, PT XYZ needs to do swap transaction with 1-month tenor on the following month. 1-month tenor on the following month.

Spot Rate USD/IDR
(transaction date)	13,880
Swap point (1 month)	100
Expiry Date	1 month
Nominal USD	1,000,00

On the transaction date, customers will sell USD for IDR amounting to USD 1,000,000 with spot rate at 13,880 (1st leg)

Meanwhile on the maturity date, customers will purchase USD for IDR amounting to USD 1,000,000 with spot rate at 13,980 (13,880 + 100) (2nd leg)

C. FX Option Product Simulation

PT XYZ needs to buy USD on the next 3 months amounting to USD 10 mio. Thus, PT XYZ contacted OCBC NISP to do hedging. However, due to the fluctuation of USD, PT XYZ decides to buy Option. Below is the quotation earned:

 

Spot Rate USD/IDR		14,000
Strike price	14,080
Expiry Date	92 days
Premium USD	2.5% flat
Option Type	European

On the Spot date (D+2 from transaction date), customers will make a premium payment of USD 250,000 (2.5% x USD 10 mio) to OCBC NISP Bank.

Therefore, on Expiry Date:

• If Spot Rate USD/IDR is below 14,080, PT XYZ will not exercise the option bought at 14,080 and will do Spot transaction on market price
• If Spot Rate USD/IDR is below 14,080, PT XYZ will exercise the option bought.

Terminology:

• Spot Rate: exchange rate on FX Spot
• Strike Price: agreed exchange rate
• Expiry Date: last date the option is valid
• Settlement Date: delivery date
• Option Premium: premium paid
• Tenor: option period

 

IV. Facility / Channel

Transaction can only be conducted through phone recording with Treasury Advisory with FX Specialist on each area. Customers can contact Relationship Manager (RM) for further information regarding this product.

V. Complaint Procedure

Customers can submit complaints related to products through:

1. Call OCBC NISP di 1500 – 999 (domestic call) atau 021-26506300 (overseas call)
2. Contact Relationship Manager (RM)
3. Email to callcenter@ocbcnisp.com
4. Click www.ocbcnisp.com

Terms and Condition

1. Must sign "PERJANJIAN PEMBERIAN FASILITAS TRANSAKSI VALUTA ASING" document on stamp (once every facility extension)
2. Write down initials on each pages of "PERJANJIAN PEMBERIAN FASILITAS
3. Owns a relation account for IDR and Foreign currencies (Current account* or Multicurrency)
4. Has FX Line facility

1. You hereby acknowledge that you have read, received explanation and understood the product and/or service as specified in this Summary of Product and/or Service Information (“Summary”) and have informed, understood and accepted any consequences of product and/or service including all inherent benefits, risks and costs.
2. This Summary is intended only as an information and does not aim to be a basis for investment decisions. Past performance is not an indication of future performance. Any proposal documents for investment related products, must be studied further. Any projections, opinions or other statistical facts displayed in this information are only an indication and are not guaranteed in any form. You must determine your own decisions in accordance with the needs and investment strategies by considering legal, tax and accounting issues. Based on good intentions and moral responsibility, Bank OCBC NISP and each of its employees are not responsible for any direct or indirect losses, or as a consequence arising from the use of and dependence on this information in an investment decision.
3. Bank OCBC NISP reserves the right to reject your product and/or service application if it does not fulfil the requirements and the application of laws and regulations.
4. You have to carefully read this Summary and contact Bank OCBC NISP if there are further queries in respect of the product and/or service contained in this Summary.
5. This Summary has been adjusted to be in accordance with the provisions of regulations including the regulations of Financial Service Authority.

This Summary is made in English and Bahasa Indonesia, and in the event of inconsistency between the version, Bahasa Indonesia shall prevail.

PT Bank OCBC NISP Tbk terdaftar dan diawasi oleh OJK dan merupakan peserta penjamin LPS