Glosario

An early draw involves exchanging a portion of the total amount specified in a flexible FX forward contract before the expiration of the contract.The period in which the contract holder can activate early draws, for example three months, is established in the contract terms. Flexible forward contracts are an effective method of hedging against currency risk, and allow the contract holder to make regular payments using the same exchange rate for a specific time period. They can therefore be useful for companies that make regular payments to an overseas supplier.

ECB exchange rates are a set of daily foreign exchange rates, published by the European Central Bank (ECB), that are used as reference by companies and other participants in FX markets. The reference rates are usually updated around 16:00 CET on every working day on the ECB website. ECB exchange rates are based on a regular daily concertation procedure between central banks across Europe, which normally takes place at 14:15 CET. All currencies are quoted against the euro, the base currency. ECB exchange rates are published for information purposes only. They are often used for the annual financial statements of corporations, tax returns, statistical reports and economic analyses.

The economic calendar is a schedule of the most relevant economic events followed by investors. These events often have a significant impact on the financial markets and currency volatility.Foreign exchange markets are most affected by monetary and fiscal policy announcements, as well as by financial reports. A currency calendar allows investors to know what is going to happen when.Some of the most important events for the currency market include the US non-farm payroll reports, inflation figures and changes in interest rates. Investors also scrutinise central bank meetings and statements for even slight indicators of impending monetary policy.

Economic exposure to foreign exchange risk is the extent to which the present value of a firm’s expected future cash flows is affected by exchange rate changes. Economic exposure comprises two cash flow exposures: transaction exposure and operating exposure. Transaction exposure reflects future FX-denominated cash flows that result from already existing, contractually binding, sales or purchase orders (SO/PO), whether or not the corresponding receivables/payables have been created. Operating exposure measures the extent to which currency fluctuations alter the firm’s future operating cash flows, that is, its future revenues and costs. Operating exposure may arise even in a firm with cash flows denominated solely in its home currency, if its costs and/or price competitiveness are affected by FX fluctuations.

Economic exposure management is the set of hedging programs, pricing strategies and other measures taken by companies to protect themselves from the effects of adverse currency fluctuations. Economic exposure comprises two cash flow exposures: transaction exposure and operating exposure. Transaction exposure can be managed by implementing the adequate hedging program or combination of hedging programs. The details of each program vary according to the pricing dynamics, the weight of FX in the business, the location of competitors, and the situation in terms of forward points. Operating exposure can be managed by adjusting the firm’s market selection, pricing policy and product mix. With the appropriate hedging programs, many firms have the opportunity to ‘embrace currencies’ —buying and selling in the currency of their suppliers and clients—, thus expanding market share while protecting profit margins.

Economic Value Added (EVA) is an economic performance metric that results from comparing a firm’s return on capital ROC with its cost of capital r. In its simplest version, the formula is: EVA = (ROC - r) x Total capital When a firm’s return on capital exceeds its cost, the performance is satisfactory from investors’s point of view. Currency management can affect EVA in a variety of ways. ROC can be enhanced by buying and selling in foreign currencies, while a solid risk management process could lead —everything else remaining equal— and to a lower r. Both impacts would create more Economic Value Added.

Hedging relationship effectiveness is a concept introduced by the hedge accounting standards, referring to the extent to which changes in the fair value of a hedged item are offset by opposite changes in the fair value of the financial derivative instrument intended to hedge it. An effective hedging relationship is one of the main requirements of the different standards for hedge accounting. Under hedge accounting, an effective hedging relationships need to meet three conditions: Economic relationship. There must be an inverse relationship between the change in the value of the hedged item and the change in the value of the hedging instrument. Credit risk. Changes in the credit risk of the hedging instrument or hedged item should not be large enough as to dominate the value changes associated with the economic relationship. Hedge ratio. The appropriate hedge ratio should be maintained throughout the life of the hedge.

Una empresa de servicios monetarios (MSB, Money Services Business) es una organización que transfiere dinero o convierte divisas. El término abarca a instituciones financieras bancarias y no bancarias, tales como las sociedades de inversión, las empresas de cambio de divisas y de seguros.

La definición de MSB puede variar en función de la jurisdicción. Según el Servicio de Aduanas e Impuestos de Su Majestad la Reina de Inglaterra (HRMC), una empresa se considera MSB si se encuentra en alguna de las siguientes categorías:

• Actúa como casa de cambio (incluso si se trata de un barco que no se encuentra en aguas territoriales del Reino Unido).
• Transfiere dinero, o cualquier representación del mismo, de cualquier modo (la recogida y entrega de dinero como un “mensajero” no se considera transferencia de dinero).
• Cobra cheques que son pagaderos a los clientes de una empresa.

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Enterprise currency management is a software category that comprises a wide range of solutions designed to automate different aspects of a firm’s currency management. Included in this automation process is the ‘FX Workflow’ framework, i.e. the procedures involved in the pre-trade, trade and post-trade phases of FX hedging. The vast majority of Enterprise currency management solutions are provided by the Fintech industry. The common denominator of all these solutions is that they leverage technology to make currency management simpler and more efficient.

Las entidades de contraparte central (CCP, por sus siglas en inglés), también conocidas como cámaras de compensación, son organismos, normalmente pertenecientes a grandes bancos, cuya función es facilitar el comercio de acciones y derivados en los mercados internacionales.

Las Entidades de Contraparte Central tienen dos funciones principales en su papel de intermediarias: la compensación y la liquidación.

En el proceso de compensación, la entidad media entre el comprador y el vendedor ofreciéndose como contrapartida a las contrapartes y definiendo los requisitos de cada parte para llevar a cabo la operación.

En la liquidación, comprueba que la transferencia de valores y capital para completar la transacción se ha realizado correctamente y a tiempo y en caso necesario garantiza la transacción, cubriendo el riesgo de insolvencia de las partes.

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As a result of the sharp reduction in bank lending to companies after the Global Financial Crisis, equity crowdfunding has been the solution for many budding start-ups, providing much needed capital in exchange for equity. Equitynet and FundedByMe are but two examples.