Execution and Contract Lifecycle · Forwards Trading Guide

A useful dealer comparison starts with identical obligations. A tighter looking rate may be worse once dates, credit terms and settlement costs are included.

Specify one comparable request

Give each provider the same currency direction, amount, value date, settlement method and any special conditions. State whether you need a firm executable quote or an indicative estimate. Comparing a standard three month quote with a specific invoice date can confuse a maturity difference with a pricing advantage. Confirm the time and duration for which a price remains available.

Translate the quote into cash

An importer buying EUR 250,000 receives outright EUR/USD offers of 1.1020 and 1.1030 for the same date and terms. The dollar costs are $275,500 and $275,750, a $250 difference before fees. The lower offer is cheaper for this purchase. A euro seller would compare the relevant bid side instead. Always specify the customer direction before ranking rates.

Compare the whole relationship

Review settlement charges, collateral terms, credit availability, early termination pricing and operational reliability. A lower rate combined with a large funding requirement may not be the best fit for the business. Record whether a quote includes all relevant charges. Comparing simultaneous prices reduces the chance of mistaking a market move between requests for a dealer spread.

Preserve the execution record

Keep the approved purpose, quote time, rate, amount, date, provider, approver and confirmation reference. Reconcile the booked trade with the instruction and resolve differences promptly. An indicative website rate is useful context but does not prove that an executable trade was available at that level for the customer’s size and credit terms.

Try it yourself

A euro buyer compares offers of 1.0870 and 1.0882 for EUR 100,000. The first provider also charges $40. What is the remaining cash advantage?

Show the worked answer

The gross rate advantage is $120. After the $40 fee, the first offer is $80 cheaper, assuming all other terms and charges are identical.

Further reading

Educational material. Numerical examples are hypothetical and exclude costs unless stated. Forward contracts create binding obligations and may require collateral or credit approval. Actual terms, access and risks depend on the agreement and jurisdiction.

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