FX Transactions

Updated by Ken Maranian

Overview

In energy commodities trading, FX (foreign exchange) transactions are essential for managing exposure to currency fluctuations — especially when physical commodities are priced in USD or other foreign currencies, but your reporting currency is different. Molecule supports three types of FX transactions: FX Forwards, FX Swaps, and Non-Delivering Forwards.These instruments allow you to hedge currency exposure, trade FX directly, and manage foreign exchange risk.

Prerequisites

  • FX transactions feature enabled on your account
  • Appropriate trading permissions
  • Understanding of FX market conventions
  • Access to FX rate data (spot and forward rates)

Supported FX Transaction Types

Type

Description

FX Forwards

  • Purpose: Lock in a future exchange rate
  • Settlement: Exchange both currencies at maturity
  • Use Case: Hedge known future currency exposure

FX Swaps

  • Purpose: Temporarily exchange currencies
  • Settlement: Exchange currencies at spot, reverse at maturity
  • Use Case: Manage short-term liquidity or hedge timing differences

Non-Delivering Forwards

  • Purpose: FX rate hedge without currency exchange
  • Settlement: Cash settlement in one currency only
  • Use Case: Hedge FX exposure without operational currency exchange

Entering FX Transactions

Access FX Trading

  1. Navigate to Trading > FX Transactions
  2. Click New FX Trade
  3. Select Transaction type from the dropdown

FX Trade Entry Form

Currency Pair Section

  • Base Currency: First currency in pair (what you're buying/selling)
  • Quote Currency: Second currency in pair (what you're paying with)
  • Flip Button: Quickly reverse the currency pair (EUR/USD ↔ USD/EUR)
  • Base/Quote Format: EUR/USD means EUR is base, USD is quote
  • Buy: Long the base currency, short the quote currency
  • Sell: Short the base currency, long the quote currency

Transaction Details

  • Transaction Type: Forward, Swap, or Non-Delivering Forward
  • Direction: Buy (long base currency) or Sell (short base currency)
  • Notional: Trade size in base currency units
  • Trade Date: When the transaction was executed

Rates Section

  • Forward Rate: Exchange rate for settlement (required for all types)
  • Spot Rate: Current exchange rate (required for swaps only)
  • Fixed Rates: Enter specific exchange rate, for example: 1.0850
  • Formula Rates: Use rate formulas, for example, ECB 2025-08-25..2025-08-29
    Rates determined from market data sources. Useful when final rate is set closer to maturity

Settlement Information

  • Maturity Date: When currencies are exchanged
  • Counterparty: Trading counterparty
  • Tags: For trade categorization and reporting

Managing FX Positions

FX Trades List

  • View: All FX transactions in dedicated trades list
  • Filtering: By currency pair, counterparty, maturity date
  • Sorting: By trade date, maturity, notional amount
  • Status: Track trade lifecycle and settlement status

Position Monitoring

  • Currency Exposures: View net positions by currency
  • Maturity Profile: See when positions mature
  • P&L Tracking: Mark-to-market valuation updates
  • Risk Metrics: Exposure amounts and concentration

FX Valuation and P&L

Valuation Method & Rate Sources

FX transactions use forward rates (not commodity marks) for valuation: P&L = (Current Forward Rate - Trade Forward Rate) × Notional × FX Rate

Sources: Current Forward Rate: From your uploaded forward curves | Trade Forward Rate: Rate entered when trade was booked | FX Rate: Conversion rate to account base currency

Best Practices & Troubleshooting

Best Practices

When entering trades, it is essential to follow a consistent validation process to ensure accuracy and alignment with hedging strategies.

  • Begin by verifying forward rates against reliable market data sources to confirm pricing integrity.
  • Next, check that the buy or sell direction of each trade reflects the intended market position.
  • Carefully validate maturity dates to ensure they align with the hedging timeline of underlying exposures.
  • Additionally, document the purpose of each trade by applying appropriate tags to identify the associated hedging relationships, which supports auditability and reporting.

From a risk management perspective, maintain regular oversight of currency exposures to

  • Ensure positions remain within defined risk parameters.
  • Align the maturities of FX hedges with the tenors of the underlying exposures to avoid mismatches.
  • To mitigate credit risk, diversify counterparties by distributing trades across multiple banking institutions.
  • Finally, consistently track profit and loss by monitoring mark-to-market changes, helping to evaluate hedge effectiveness and financial impact over time.
Troubleshooting

Problem

Solution

Can't see FX transaction entry

Verify FX transactions are enabled and you have trading permissions

Rates not updating properly

Check that forward curves are uploaded for your currency pairs

P&L calculations seem incorrect

Verify forward curve data and check base currency conversion

How did we do?