Introduction
Foreign exchange optional deal refers to the foreign exchange forward deal that enables customers to settle with prescribed foreign exchange rate on any working day within a certain contracted period in the future. Customers can choose the settlement date by themselves.
Features
1. Customers entrust Bank of China to settle with the contracted foreign exchange rate within a certain designated period, and implement the conversion between different foreign currencies by buying a kind of currency and selling another.
2. When the settlement date is uncertain, Bank of China can fix the foreign exchange rate of a certain period in the future at a level on the settlement date to fully lock up the exchange rate risk, and to reduce the probability of breach of agreement caused by customers' failure of normally performing the trade contract.
Target Customers
1. The product applies to customers who have the need to conduct foreign currency deals within a certain period in the future but having not determined the specific settlement date, and can be used to settle corporate import and export trade as well as the payment of credit deposit, etc.
2. Customers are required to have opened foreign currency accounts in Bank of China.
Process
1. Sign an agreement: before entering into foreign exchange optional transactions, customers are required to sign the General Agreement on Value-preservation of Foreign Exchange Trading and the Application Form for Foreign Exchange Transactions with Bank of China.
2. Deposit implementation: the international settlement department shall implement credit and collect corresponding deposit.
3. Inquiry of price: the customer shall make inquiry of price to Bank of China by confirming the details of forward exchange trading in the form of written entrustment.
4. Completion of Transaction: once the transaction is completed, Bank of China shall verify the transaction to the customer.
5. Settlement: the actual settlement shall take place on the settlement date. The customer can, concerning his/her needs, require Bank of China to unwind the transaction or to extend the trading session before the maturity date of the transaction.
Cases
In the case of foreign exchange forward deal, if foreign counterparties of the company delayed payment, the company can lock the risks with foreign exchange optional forward deal. After purchasing the product, the company can settle the JPY at the price of 114.75 at any day within the period from December 2007 to March 2008.
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