SBP introduces 'FX Matching' for transforming Interbank FX trading

January 23, 2023 (MLN): The State Bank of Pakistan (SBP) has introduced a Centralized Foreign Exchange (FX) Trading Platform called ‘FX Matching’ for the interbank FX market with effect from January 29, 2024, the central bank informed through a circular issued to the Head/Principal Offices of all Authorized Dealers (ADs) in Foreign Exchange. 

The objective is to provide interbank market participants with a centralized trading platform that offers FX trading on an anonymous basis and real-time price visibility.

"The adoption of the FX Matching platform is a key step for enhancing the depth and transparency of the interbank FX market," the circular reads.

To formally launch the interbank FX trading on the FX Matching platform, the following instructions are being issued for the ADs:

Main Features of the FX Matching:

FX Matching will be available to all ADs for interbank USD-PKR trading in ready value labelled as spot on the platform, allowing participants to trade for a minimum lot size of $500,000 and multiples thereof.

The trading on the platform will be on an anonymous basis which means participants will be able to place their quotes or hit quotes placed by other participants without disclosing their names.

In addition, the participants will be able to know their counterparties after a trade is matched.

The best bid and offer quoted on the FX Matching will be visible to all the participants; however, the best executable quote for a particular participant will be subject to the availability of counterparty limit.

Each participant can set credit limits for their counterparties in the FX Matching. The participants are advised to have credit limits with major market participants to get the best quotes available on the FX Matching.

The bid or offer prices placed on the FX Matching will be firm and remain valid until cancelled by the participant quoting the prices.

Participants are advised to cancel all open orders (if not executed) before logging off from the platform and closing of market for interbank FX trading.

Interbank FX Trading on the FX Matching and FXT Dealing:

It will be mandatory for ADs to use FX Matching or FXT Dealing effective January 29, 2024, for executing Outright interbank FX transactions that impact FEEL (Foreign Exchange Exposure Limit).

FX Swap transactions concluded with the same counterparty will continue to be conducted as per current practice including FXT Dealing, telephone or other means.

ADs can trade on FX Matching as per the timings announced for interbank FX trading by SBP from time to time.

In case on any given day, the Federal Reserve Bank of New York is closed and the interbank FX market is open in Pakistan, the trading on the FX Matching will be in Tom value.

Participants must be cautious in placing bids/offers and executing transactions on the platform and monitor their orders to avoid executing erroneous trades.

Reporting of Deals on FX Matching and FXT Dealing:

All deals executed by ADs on FX Matching and FXT Dealing will be reported electronically to SBP in real-time through the system.

To ensure real-time reporting, all tickets must be confirmed in the FX Matching and FXT Dealing by both counterparties immediately after the trade, the notice advised.

The existing end-of-day reporting mechanism using the Foreign Exchange Computerized Reporting System (FXCRS) will continue as per existing instructions.

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