Emerging Markets Rates and Currencies Handbook

transaction. Offshore Restrictions: Clients looking to hedge an FX position offshore can only hedge through NDF or FXO. Spot is only traded onshore and the currency is only deliverable onshore. From a requirement standpoint, clients trading onshore have to provide the “Declaración de Cambio” (document that contains information required by the BanRep for all FX transactions) to Citibank Colombia before the value date of the trade. Some market participants, like Citi, decided to voluntarily comply with the Self-regulatory Authority, Autorregulador del Mercado de Valores (AMV), rules, which follow the FX Global Code´s principles and establish the mandatory licensing of market traders and dealers. In addition, there are local regulations that demand the registration of the executed deals, in order to promote price transparency. License Requirements As mentioned above, Citi voluntarily complies with the AMV rules, including the Certification Duty, that requires the licensing of market traders and dealers. Requirements to open a foreign currency account A currency account offshore cannot be credited with local currency. The Colombian market has restrictions on cash accounts held by foreign investors. Cash accounts for FPIs in Colombia must be linked to securities accounts and may only be held in Colombian Pesos (COP). These accounts are created for the purpose of settling securities and FX transactions in the market. An offshore account cannot be credited with local l currency. The Colombian market has restrictions on cash accounts held by foreign investors. Cash accounts for FPIs in Colombia must be linked to securities accounts and may only be held in Colombian Pesos (COP). These accounts are created for the purpose of settling securities and FX transactions in the market. Deal Management Rollover: Rollback and rolling forward are permitted for NDFs. Unwinding: Unwinding is permitted. Transactions are net settled. Early Maturity: It is possible to terminate a trade early. Transactions are net settled. Documentation Requirements Spot transactions can only be traded onshore by financial institutions authorized by the Central Bank. FX Spot trades can be settled between T+0 and T+3, however the local standard are same-day settlement s (T+0). A foreign exchange form (“Declaración de Cambio”) must be filed with the Central Bank for every FX transaction. Citi clients can submit the form electronically through the “Post-Trade” platform. Benchmark spot orders: clients may request price indications using TRM as the transaction rate. For TRM spot orders, Citi requires the request to be received at least one day prior to the TRM formation date. Depending on the transaction size, orders might need to be placed more days in advance. Because the benchmark rate is published by the central bank by the end of the day, benchmark spot orders are settled in T+1 as opposed to the market standard of T+0. Deliverable forwards are only traded onshore by local entities and are settled on the expiry date. NDFs are available both onshore and offshore and are settled on the next business day after the expiration date. Onshore NDFs are COP settled while offshore NDFs are settled in convertible currencies and both are usually fixed based on the TRM. Onshore swaps are settled in COP and can be linked to CPI (IPC), inflation (UVR), floating (IBR) or fixed interest rates. Offshore swaps are usually settled in USD and are traded OTC under ISDA definitions. Local derivatives would be subject to terms of the Contrato Marco (local ISDA). Trade Flows So long as FX trades are reported through the Declaración de Cambio, there are no specific restrictions on trade flows. Capital Flow and FDI All foreign exchange transactions done by a Foreign Portfolio Investor (FPI) must be for the exclusive purpose of investing in securities and must be registered with the Central Bank, by the FPIs local administrator. Currency speculation by foreign investors is not allowed. All foreign exchange transactions performed by a FPI regarding capital investment, net profits, sale proceeds and dividends must be registered with the Central Bank separately on a trade-by-trade basis. Citi Colombia Carrera 9A # 99 - 02 Bogota, Colombia FX Sales Contact: +57 1485 4000