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Forward Parity Foreign Exchange

I. Description
Forward parity foreign exchange means the customer and ICBC sign a forward foreign exchange contract, in which delivery date, currency and exchange rate, and transaction direction and amount for multiple transactions are specified. In addition, currencies, transaction directions and delivery exchange rates for such transactions are identical. That is, on each delivery day, the customer conducts foreign exchange delivery with ICBC as per the unified exchange rate.

II. Target Customers
It is applicable to corporate customers that need to avert exchange rate fluctuation risk for the purpose of hedging, have frequent and regular foreign exchange trading demand in the future, and intend to conduct forward transactions to manage exchange rate risk.

III. Functional Features
The company can lock future multiple exchange settlement or purchase prices in a one-off way through forward parity foreign exchange, thereby averting exchange rate risk. The transaction structure is clear, eliminating complicated operation needed for multiple forward foreign exchanges with different exercise prices.
Both delivery date and amount of forward parity foreign exchange can be customized.

IV. Features and Advantages
1. Competitive product quotation: The forward foreign exchange market is relatively developed, market liquidity is relatively high and various products are available. In addition, ICBC can directly inquire in the market and conduct hedging. With professional and experienced traders as well as product design and quantitative analysis teams, flexible pricing mechanism and strong competitiveness among peers, ICBC can provide superior prices.
2. Customized design: The product is flexible to meet customers’ different needs based on product period, delivery frequency, delivery amount and other elements, and lock foreign exchange cost for them.
3. Continuous dynamic management: ICBC can regularly provide customers with evaluation reports on forward parity foreign exchange transaction, and provide subsequent dynamic management services according to the market quotations and their demands.

V. Price
ICBC will provide quotation to customers after consideration of market factors, and make real-time updates based on market changes.

VI. Service Channels and Hours
Corporate customers meeting access conditions may apply to sub-branches or tier-2 branches with the derivative business operation right during trading hours for corporate business.

VII. Application Process
1. Customer assessment: ICBC conducts due diligence on customers to evaluate the customers comprehensively based on the business nature, financial derivative trading experience and internal management controls, in order to recommend suitable products for customers.
2. Signing of the master agreement: To apply for the forward parity foreign exchange business, the customer must sign related business agreements with ICBC.
3. Implementation of guarantee measures: the customer needs to pay security deposit or hand over collateral or may apply for occupying special credit limit of derivative transaction.
4. Risk disclosure and signing of confirmation: ICBC provides risk disclosure for customers, covering cash flow analysis, market value and influencing factors, and potential market value losses. The customer needs to confirm risk warning contents in writing and sign the confirmation.

VIII. Risk Prompt
Risks that the customer may face: the exchange rate on the delivery day is inferior to spot exchange rate; market capitalization is assessed to make profits or suffer losses; the worse market capitalization assessment result requires additional security deposit; and reversed squaring my incur additional fees. Customers shall completely understand every article in texts and make independent decision based on their own judgment. Customers shall take into account force majeure and possible accidents, losses arising from which have nothing to do with ICBC.

IX. Business Case
Business background: some corporate customer has USD income and is expected to make multiple spending in JPY and with different periods and amounts in coming three years.
Customer need: hope to avert JPY appreciation, lock financial cost, and wish the transaction structure to be simple and delivery exchange rates to be unified.
Solution: the customer intends to conduct forward parity foreign exchange transaction with ICBC at the agreed delivery exchange rate of 91.10. That is, it should purchase from ICBC an agreed amount of JPY at the exchange rate of USD1:JPY91.10 (spot exchange rate of USD1:JPY93.18) on each delivery day in three years to come.

X. Notes
The business has the lower limit of USD2 million or equivalent and the shortest term of 3 months (delivered once every month).

Note: The information provided on this page is for reference only. Concrete business shall be subject to the announcements and provisions of the local outlet.

Global Market