KARACHI: In a significant move towards enhancing the transparency of the foreign exchange market, the State Bank of Pakistan (SBP) has decided to introduce a centralised trading platform called ‘FX Matching’, creating a more inclusive digital financial ecosystem.

“Effective Jan 29, 2024, it will be mandatory for ADs (banks) to use FX Matching or FXT Dealing for executing outright interbank FX transactions that impact FEEL (Foreign Exchange Exposure Limit),” said a circular issued by the SBP on Tuesday.

The SBP said the objective is to provide the interbank market participants a centralised trading platform that offers FX trading on anonymous basis and real time price visibility. “The adoption of FX Matching platform is a key step for enhancing the depth and transparency of the interbank FX market,” it added.

The central bank said FX Matching will be available to all authorised dealers (hereinafter referred as participants) for interbank USD-PKR trading (in ready value labelled as spot on the platform).

The trading on the platform will be on an anonymous basis which means the participants will be able to place their quotes or hit quotes placed by other participant without disclosing their name. The participants will be able to know their counterparties after a trade is matched.

The best bid and offer quoted on the FX Matching will be visible to all the participants; however, best executable quote for a particular participant will be subject to availability of counterparty limit.

“Each participant can set credit limits for their counterparties in the FX Matching. Trading on FX Matching will be for minimum lot size of $500,000 and multiples thereof,” said the SBP.

The bid or offer prices placed on the FX Matching will be firm and remain valid until cancelled by the participant quoting the prices.

FX swap transactions concluded with the same counterparty will continue to be conducted as per current practice, including FXT Dealing, telephone or other means.

ADs can trade on FX Matching as per the timings announced for interbank FX trading by the SBP from time to time.

In case on any given day, Federal Reserve Bank of New York is closed and interbank FX market is open in Pakistan, the trading on the FX Matching will be in Tom value.

All deals executed by ADs on FX Matching and FXT Dealing will be reported electronically to the SBP in real time through the system. To ensure real time reporting, all tickets must be confirmed in the FX Matching and FXT Dealing by both the counterparties immediately after the trade.

“The existing end of day reporting mechanism using Foreign Exchange Computerised Reporting System (FXCRS) will continue as per existing instructions,” said the SBP.

Published in Dawn, January 24th, 2024