Forward trades

An effective way to manage the risk of currency instability is foreign currency forward trades. Forward trades allow you to lock in to a specific exchange rate. You can then use your forward to make payments at a future date.

Note: You must have a current (not expired) GMEI number in order to book forwards and forward drawdowns. If you do not have a GMEI number or it has expired, contact your Account Manager.

There are two different types of forward trades: Closed Forwards and Open Forwards.

• Closed Forwards—Let you to lock the exchange rate today, and receive a sum of money in foreign currency on a specified future date (also known as the maturity date or value date). For example, you know that at a specific date in the future, you will have to cover a bill in a foreign currency. You want to avoid the uncertainty of a fluctuating exchange rate, so you book a forward trade and lock in the exchange rate.
  This type of contract requires you to complete the transaction on the date it expires (the Maturity Date) at the agreed rate of exchange. For example, on November 3, 2017 you purchased a Closed forward for $100,000 US at 1.24 against Canadian Dollars for a value date on January 3, 2018. In this case you have a trade on January 3, 2018 at a fixed rate of 1.24.
  
  
• Open Forwards—Let you lock the exchange rate today for a future date value and settlement. Unlike Closed Forwards, Open Forwards allow you to draw down the funds at any time within the specified period. You do not need to wait until the maturity date. This way, you can escape the risk caused by market fluctuations. The trade can be settled either in full or in part as long as the full amount has been paid by the maturity date. For instance, if you have a number of bills to pay, you can draw down against the amount of the forward trade in order to satisfy your bill payments. All the drawdowns will be processed at the agreed upon rate.

Note: Before you can book Forward Trades, you must sign a Master Hedging Agreement. For more information, see Master Hedging Agreement.