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When receiving a value date of D from the counterparty for a trade in NZD/USD, is D assumed to be

  1. date D in Auckland
  2. date D in New York
  3. date D in UTC
  4. date D in some arbitrary time zone

?

There are lots of online references to market close being 7AM Auckland time for NZD/USD trades, but I cannot find any places that describe the convention for which timezone the trade and value dates (which are just raw dates, with no time or time zone qualification) are specified in. In addition, the FIX type for this field in an Execution Report simply says it is a "local market date"; it's not clear whether this means "the local market for the primary currency" or "the local market of the counterparty".

This matters because, when calculating exposure, you need to be able to determine the UTC 'close of market' time by which the trade must be reconciled. Since Auckland is ~16 hours ahead of New York, it's important to know whether the counterparty's value date is 'date in Auckland' versus 'date somewhere else'.

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This kind of question is exactly why spot FX takes T + 2 to settle.

Exactly why you are looking for a convention is, I would say, because the whole thing depends on the conventions your trading partners use. You need to refer to the provider from whom you are getting the data.

For me, the trade date is most likely the time of the provider pricing engine that serves the local market. If the pricing engine is pricing NZD/USD out of New York then trade date would be specified in NYK time. That way, we can run the history of pricing the trade at a later date.

Similar for value date calculations, when adjusting spot prices by the forward pips it must be, again, the local time of the interest rate pricing engine. So a 1 week forward priced out of NYK has an NYK value date calculation.

Could get interesting when the interest rate desk is pricing out of Singapore but the spot desk is still pricing out of NYK.

But the value date is not necessarily the settlement date. It ought to be, because that's how you know the amount with which to settle. But the cut off time for settlement depends on the bank. I guess your bank has to confirm the time zone by which they expect to be credited by you. Or you have to pay the penalty for late settlement.

I guess it all comes down to the clearing desks may work on a different time zone to the pricing desks.

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  • $\begingroup$ Ah, I suspected it was a maker-specific convention. Presumably it's symbol-specific as well? I.e. they could be pricing NZD/USD out of Sydney but EUR/USD out of New York? $\endgroup$
    – Chris Kline
    Commented May 14, 2014 at 20:10
  • $\begingroup$ Yes and no. Price discovery mainly depends where the open market is. In other words, when the market is open in NYK, but closed in London and Singapore, then NZD/USD orders will come from USA. It's unlikely Sydney is trading overnight. Therefore price discovery, even of NZD/USD is going to come from USA, although the country of origin is elsewhere. FX prices depend on who is trading in the market at the time. $\endgroup$
    – rupweb
    Commented May 15, 2014 at 9:15

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