What is an FX Forward Contract?

A forward foreign exchange (FX) contract is a binding agreement to exchange one currency for another at a pre‑agreed exchange rate, with settlement occurring on a specified future date beyond the spot date.
The exchange rate is fixed at the time the contract is agreed, providing certainty over future currency costs or receipts.

FX forward contracts are traded over‑the‑counter (OTC) and can be tailored to a client’s specific requirements, including notional amount, currency pair, and settlement date.

FX forward contracts are traded over‑the‑counter (OTC) and can be tailored to a client’s specific requirements, including notional amount, currency pair, and settlement date.

hat Does “Deliverable” Mean in a Forward Contract?

A deliverable FX forward requires the physical exchange of both currencies on the agreed future settlement date.
At maturity:

• One currency is delivered by the buyer

• The other currency is delivered by the seller

• Full principal amounts are exchanged between the parties

This differs from non‑deliverable forwards (NDFs), which are cash‑settled and do not involve the exchange of the underlying currencies.

How a Deliverable FX Forward Works

1. Today (Trade Date):
   The forward exchange rate, settlement date, and notional amount are agreed.

2. During the Contract Term:
   The contract remains fixed, regardless of how market exchange rates move.

3. On the Settlement Date:
   The two currencies are physically exchanged at the agreed forward rate, even if the prevailing spot rate is different.

This structure allows clients to lock in certainty for future FX needs.

Key Features of Deliverable FX Forward Contracts

• Fixed exchange rate agreed in advance

• Physical delivery of both currencies at maturity

• Custom settlement dates, from days to years beyond spot

• OTC flexibility, tailored to specific cash‑flow requirements

• Binding obligation for both parties to settle at maturity