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Forwards on Baskets

Providing investors with tailored exposure to global equity markets and the security of multilateral trading and central clearing on Nasdaq Nordic.

Flexible, secure and cost efficient

Due to increased regulation, managing global exposures using traditional OTC products has become increasingly challenging in recent years. As a major global exchange operator with strong market knowledge, Nasdaq has introduced Forwards on Baskets, which makes it possible to create and maintain a tailored, global equity exposure with one single transaction, centrally cleared and exchange traded in a single currency.

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Why Forwards on Baskets

Global equity exposure made simple

Nasdaq has developed Forwards on Baskets to address increasing demand for a simpler and more efficient way to handle a global equity exposure. Changes in the regulatory landscape - such as Basel 3 and EMIR - put more pressure on bilateral over-the-counter (OTC) agreements in terms of capital and margin requirements. Other hurdles for trading OTC derivatives include bilateral risk and dependency in liquidity provision, decreased price efficiency and costs to enter and maintain ISDA agreements.

how does forwards on baskets work

Single transaction in selected currency

Forwards on Baskets enables you to create a forward contract on a customized basket of index futures. Members can curate their baskets from a selection of highly liquid and well-known index futures. Forwards on Baskets makes it possible to gain equity exposures in the US, Europe, Asia including emerging markets – all in one single transaction and without any bilateral risk dependency in a trading and clearing currency of your choice: SEK, USD or EUR.

Forwards on Baskets are reported to Nasdaq Nordic under the Exchange Rules and are cleared through the Nasdaq Clearing.


Product Overview

Basket Expiration Price 

When calculating the basket expiration price, the official final settlement price of each basket component is used. If there is no final settlement price by the time the forward contract expires (as for 0#JTI: and 0#HSI:), then the daily settlement price is used. The basket expiration price is calculated in SEK, USD or EUR, as applicable for each basket.

Basket Request Procedure 

Members can request listing of a forward contract on a new basket by submitting the Basket Request Form to Nasdaq. The new forward contract will be listed and tradable within two business days. Please contact Nasdaq Product Management team to receive the relevant form.

Margining 

Margins are calculated using the OMS II margining model. Initial margin is equal to the sum of the Risk parameter for the basket and the spread adjustment factor (currently at 0.5%). The Risk parameter is calculated using historical prices of the underlyings, estimated number of lead days to close down positions in a default situation, and a pro-cyclicality buffer. The Risk parameters are reviewed monthly.

Eligible Collateral 

Allowed collateral includes for example cash, government bonds and Swedish shares. See below under Applicable rules for more information.

Position Limits 

Position limits apply. Each basket request is evaluated based on the weight of the included components and the requesting member will be notified if the expected trade value exceeds the position limit.

Transaction Fees 

Transaction fees are charged as percent of notional amount of the transaction (buy/sell) and closing at expiration.

Collateral Management Fees 

Standard collateral management fees apply.

Access to Market Segment 

Trading and Clearing Members can gain access to the specific market segment by submitting the Entry form for segment SEK/USD/EUR World Index.


Learn More

We are happy to support you and answer any questions. Contact us here and a member of our team will respond to you.
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