The National Bank of Ukraine welcomes the launch of a new service – FX swap with the central counterparty – by the Settlement Center. The product was developed in cooperation with the NBU and with active support from market participants.
Effective 22 November, the banks can execute on-exchange FX swap transactions with the domestic currency (the hryvnia) and foreign currency (the U.S. dollar and the euro) as underlying assets. The Settlement Center acts as a central counterparty. It also clears and settles such transactions.
FX swaps with the central counterparty will enable the banks to control and hedge currency risks, the NBU estimates. What is more, the introduction of the new instrument enables the banks to adjust the structure of their FX assets and liabilities and provide reliable lending against the security of liquid assets.
“The Settlement Center’s management has been seeing positive dynamics in the capital markets since the relaunch of the repo-with-risk-control service by the Settlement Center, and has been responding to market participants’ requests to introduce new products and services that involve the central counterparty. These initiatives are envisaged by the Settlement Center’s Development Strategy, which is being successfully implemented,” said Andrii Suprun, Head of the Office for Corporate Rights and NBU Depository Services, and Chairperson of the Supervisory Board of the Settlement Center.
An FX swap with the central counterparty is a money market derivative contract whereby the Settlement Center functions as the central counterparty. The Settlement Center controls the collateral of clearing members (pledged in the form of cash and securities) and guarantees either the fulfillment of obligations under concluded contracts or the payment of fines to the non-defaulting party.
The NBU is the Settlement Center’s key shareholder (the central bank owns more than 84% of the Settlement Center’s shares).