SBP launches FX matching platform for transparent interbank deals

KARACHI: The State Bank of Pakistan (SBP) is launching a centralised foreign exchange trading platform for interbank dealings to improve the depth and transparency of the currency market.

The platform, called FX Matching, will allow authorised dealers to trade US dollars against rupees on an anonymous and real-time basis, the SBP said in a circular.

“Building an innovative and inclusive digital financial ecosystem is a key priority area of SBP Vision 2028. In this context, SBP is introducing a Centralized Foreign Exchange (FX) Trading Platform called ‘FX Matching’ for the interbank FX market,” the central bank's circular said.

“The adoption of the FX Matching platform is a key step for enhancing the depth and transparency of the interbank FX market.”

The SBP issued instructions along with the key components of the FX matching to the banks or authorised dealers (ADs) to formally commence trading on the foreign exchange matching platform.

"FX matching will be available to all ADs for interbank USD-PKR trading (in ready value labeled as spot on the platform)." Trading on FX matching will be for a minimum lot size of $500,000 and multiples thereof.

The trading on the platform will be on an anonymous basis which means participants will be able to place their quotes or hit quotes placed by another participant without disclosing their names. The participants will be able to know their counterparties after a trade is matched, the circular said.

“Each participant can set credit limits for their counterparties in the FX Matching. The participants are advised to have credit limits with major market participants to get the best quotes available on the FX Matching.”

The banks will have to use forex matching or trade dealing to execute outright interbank foreign exchange transactions that impact the foreign exchange exposure limit as of January 29, 2024. “In case on any given day, Federal Reserve Bank of New York is closed and interbank FX market is open in Pakistan, the trading on the FX Matching will be in Tom value,” it added.

The International Monetary Fund, in its report issued last week, the authorities must refrain from formal or informal restrictions on exchange rate.

The IMF said that the central bank’s interventions in the FX market should remain guided by the objective of building FX buffers, with sales not to be used to prevent trend depreciation of the rupee driven by fundamentals.

It also said that the authorities agreed to redouble efforts to eliminate the existing exchange restriction and multiple currency practices in early 2024.