Swap points

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FX swaps.

The difference between the exchange rates applied to the near leg and the far leg of a foreign exchange (FX) swap.

The definition and pricing of FX swaps are discussed in more detail on the page foreign exchange swaps.


Example 1: Low side points

The spot exchange rate is:

GBP 1 = 1.3000 - 1.3010 USD.

The forward points - also known as the swap points - are 5-8.

The outright forward exchange rate quote is:

GBP 1 = 1.3005 - 1.3018 USD.


The pricing of a related FX swap contract would be favourable for the price-taker (compared with an outright spot exchange and an outright forward contract) for example as follows.


For a customer selling USD in the near leg and BUYING back a related amount of USD in the far leg.

The swap points would be +5 (because these are the points applying to calculate an outright forward BUYING rate for a client buying USD forward).


The swap points of +5 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:

NEAR LEG: Sale of USD at rate of USD 1.3000 per 1 GBP.

FAR LEG: Buying USD at a rate of USD 1.3005 per 1 GBP.


The selling rate of USD 1.3000 in the Near leg is better for the price taker, compared with the outright spot selling rate of USD 1.3010 per 1 GBP.

(The customer pays away fewer USD in the near leg, per 1 GBP received.)


Example 2: High side points

For a customer buying USD in the near leg and SELLING back a related amount of USD in the far leg.

The swap points would be +8 (because these are the points applying to calculate an outright forward SELLING rate for a client selling USD forward).


The swap points of +8 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:

NEAR LEG: Buying USD at rate of USD 1.3010 per 1 GBP.

FAR LEG: Selling USD at a rate of USD 1.3018 per 1 GBP.


The buying rate of USD 1.3010 in the Near leg is better for the price taker, compared with the outright spot buying rate of USD 1.3000 per 1 GBP.

(The price taker RECEIVES more USD in the near leg, per GBP 1 paid away.)


See also


Student article

Forward thinking - swap points and forward points