Was taking a look at an NZD spot deal that was traded on a Friday for value the following Tuesday (t+2). Somehow this trade became classified as a forward by our back office systems (dealer says they see it as a spot as do we) with trade date of the following Monday for same value. The trade was done after the NZD roll forward time so this all makes sense to me except for the forward part.

Anyway, I started digging a bit more and saw some references to there being some sort of "hidden markup" in the dealer's favor when this occurred. I tried thinking through it but couldn't figure out where the cost might be. Could anyone help me think through this?


Note NZD trade dates change at 7am Wellington which is 3pm Eastern at this time of year (not mid-day).

Assuming your trade was on Friday after 3pm EDT then: - Trade Date would be Monday. - Value Date of Tomorrow would be Tuesday (a short dated forward) - Value Date of Spot would be Wednesday.

You mention your value was Tuesday - I would therefore agree with your back office that it is a (short dated) forward: Tomorrow.

As regards a "hidden mark-up": I cannot think of a legitimate practice. All would be misunderstandings that should be discussed and hopefully reversed. If a counterparty thinks Tomorrow is Spot then an NZD/USD pricemaker effectively receives an extra day's interest (the difference between NZD and USD interest rates calculated from Tom/Next swap points). Similarly, someone could incur cost of Tom/Next if they have a resting order on an ECN, where in many cases time of Taker action sets Trade Date, around 7am Wellington and they find they traded for the wrong day. Hopefully the counterparty will cooperate.


  • $\begingroup$ Thanks for your response. This makes sense now given that we wanted to trade it for a specific value date not necessarily spot. $\endgroup$ – somethinghere Aug 19 '14 at 18:54

a hidden markup in a dealer's favour? Who was the client? What tier of pricing are they on?

What's the counter currency? If it's CAD or TRY then spot is T+1 not T+2.

But I think "nonefaster" has the answer.

What does the NZD roll forward time mean? Do you mean, say, that the forward desk changes its pricing source from London to New York? The forward trade date and value date are calculated in which timezone? And what relation does this bear to the spot desk?

Tell me the exact trade date (when the client order was executed) and what value date was asked for? If the client specified a value date rather than a tenor then what "nonefaster" is saying kind of makes sense. But not 100% because your client either asked for a specific value date of Tuesday, or a SPOT tenor (T+2) and the counter currency is neither CAD nor TRY...

If your client asked for a specific value date of Tuesday, or a SPOT tenor then how did your back office made the deal value date the following Monday... T+1 and a TOM tenor? And what is your back office doing adjusting prices?

There were no holidays involved in NZD, or in the counter currency. If the client asked for SPOT and the forward date rolled (which it couldn't for a SPOT tenor because no forward adjustment takes place) then the value date would be Wednesday :)

But it looks like the deal was thought to be a TOM by the front and back offices, and price was adjusted by the pre-spot forward pips and that's the difference you've seen.

If there was some kind of "hidden markup" it refers to a spot spread adjustment in the NZD (or the counter currency) that was applied to the forward deal, or a forward spread adjustment applied to the forward component. But that ought to depend on the client credit tier (as in first question above).

  • $\begingroup$ USD was the counter currency. What I mean by roll forward time is exactly what nonefaster suggested. Anything traded after 3pm EST is considered traded next day. $\endgroup$ – somethinghere Aug 19 '14 at 18:33
  • $\begingroup$ This was adjusted by the forward pts as you suggest as it was needed for a specific value date. Thanks for your help. $\endgroup$ – somethinghere Aug 19 '14 at 18:49

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