TCX exclusively offers cross-currency hedging products, which are essentially agreements between two parties to exchange two currencies at a specific time in the future.
TCX generally offers two type of products:
- Forward contracts are agreements to purchase or sell a set amount of a foreign currency at a specified price and at a predetermined time in the future. Typically, with this product a client sells a single, local currency, fixed amount and in return receives a fixed amount in US dollars from TCX at an exact date in the future.
- Cross-currency swaps are products under which two parties agree to exchange multiple fixed amounts (normally a loan principal and interests amounts) denominated in two different currencies. Again, usually the clients agrees on selling local currency amounts to TCX, which in exchange pays US dollars. A cross currency swap can be described as a series of forwards bundled together.
The interest paid on a local currency leg of a cross-currency swap can be fixed or floating. ‘Floating’ in this regard means that the interest rate moves with a benchmark interest rate.
TCX normally offers non-deliverable products where all cash flows, despite being denominated in local currency, are settled in USD. By doing so, a ‘synthetic’ local-currency loan is created.
Deliverable contracts, where all cash flows are in local currency, are available upon request and only for specific currencies.