Create a Swaps Contract

This activity describes creating a swaps contract via the Hedging Explorer. Most steps are also applicable when creating swaps contracts in other screens, such as a Despatch Order or Commodity Exposure report.

This activity presumes that a market commodity with the Swaps contract type exists. See Commodities, Markets and Market Commodities.

Security Note: You need the Allow the user to maintain hedge actions security right in the Accounting user group security rights group for this activity.

Activity Steps

1. Open the Hedging Explorer.
2. Select the Hedge Actions tab.
3. Right-click in the Hedge Actions field group and select New » Related Actions from the menu.

   The menu displays applicable market commodities, each with its associated market.

4. Select the market commodity for which to create the hedge position.

   The New Hedge Action screen displays.

5. Update the Hedge Date if required. If creating a hedge position for a despatch order QP override, the default date is the spot pricing date. Otherwise, the default date is the first day of the current month.
6. Update the Transaction Type if required. Whether the hedge position is being bought or sold in the marketplace. Select from Buy and Sell. Default: As specified for the market commodity.
7. Update the Maturity Date if required. The Maturity Date Scope in the market commodity configuration determines whether a day can be entered for the date, or just a month and year. If only a month and year is entered, the maturity date is the last business day of the month. For swaps contracts, the maturity dates for the Buy and Sell legs might be different. When the month of the Sell position precedes the month of the Buy position, the hedge position is called a Lend. When the long month precedes the short month, the hedge position is a Borrow. Only one maturity date can be specified at this step; however, you can update the maturity dates in the Hedge Actions table later if required.
8. Enter the Strike Price if required. The strike price is the settlement Exercise Price for a leg of the swaps contract with the Price Type set to Fixed. If both legs will have a price type of Average, the strike price is not required. You can update the price type for each leg in the Hedge Actions table later if required. If hedging a quotation pricing (QP) override in a despatch order, the default price is the price value of the QP. Fixed price charges are not included.
9. Select an Owner Organisation. Select from the organisations and companies defined on the Organisations panel of the Solution Explorer. Default for hedge positions with a despatch order or quota allocation: the buyer of the sales contract or the seller of the purchase contract.
10. Select a District. Select from the districts defined on the Organisations panel of the Solution Explorer. Default for hedge positions with a despatch order or quota allocation: the district of the sales or purchase contract.
11. Select an Action Classification if required. Select from the Hedge Action Classification list items defined in the List Editor. Default: As specified for the market commodity.
12. Select a Broker if required. Select from the organisations and companies defined on the Organisations panel of the Solution Explorer and that have the Organisation Role of Brokers. Default: As specified for the market commodity.
13. Enter the Number Of Contracts as a whole number.

    MineMarket calculates the Quantity as the Number Of Contracts multiplied by the Market Contract Quantity of the market commodity.

    In the Hedge Actions table, Number Of Contracts and Quantity display as positive numbers for swaps contracts with the Transaction Type set to Buy; and negative for Sell.

14. Click Create.

    The New Hedge Action screen closes.

    A message displays the status of the hedge position creation.

15. Click OK.
16. Update the pricing.

    For a swaps contract, a double row displays in the Hedge Actions table. Each row is for one leg of the swaps contract. Typically, the Price Type for one leg is Average and for the other leg is Fixed; however, both prices may be made Average.

    1. Update the Price Type if required.
    2. For a leg with the Price Type of Average, update the following fields.
       • Price Series—Select from the price series defined in the Pricing Editor that have a matching Material Type, Product or Analyte Definition defined for the commodity. For foreign exchange (FX) hedge positions, an exchange rate series is used instead of a price series. Default: as specified for the market commodity.
       • Quotation Period—Select from:
         • Fixed—Enter start and end dates for the quotation period.
         • Predefined—Select from predefined functions based on a time period and dependent upon the maturity date or another date. See Expression Editor Functions - Quotation Period Category.
         • Calculated—Use the Expression Editor to create or select a tested expression.
    3. For a leg with the Price Type of Fixed, update the following fields if required.
       • Strike Price
       • Strike Price Currency—Select from the currencies defined in the Currency/Exchange Editor.
       • Strike Price UOM—For a material commodity, select from the Mass units defined in the Unit Conversion Editor. For a currency commodity, select from the currencies defined in the Currency/Exchange Editor.
17. Complete the remaining fields as required.
    • Name
    • Broker Reference—External reference name or number of the hedge position, as stored in the broker's system.
    • Broker Fee—Amount charged by the broker, in the nominated currency. The fee is considered to be a flat fee for the whole hedge position. The broker fee is included in valuations and the settlement for the hedge position. For options contracts, the broker fee is paid even if the options contract is withdrawn.
    • Broker Fee Currency—Select from the currencies defined in the Currency/Exchange Editor.
    • Accounting Group—Select from the accounting groups defined on the Chart Of Accounts screen.
18. Click Save.