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What happens if your plans change?
An illustration of spot or forward contract breakage costs.
Should your commercial circumstances change and you need to terminate your spot or forward contract with Barclays and there may be a “breakage cost”, or gain, which depends on how the prevailing forward rate has changed.
At the time of your entry into an FX transaction, the size of these breakage costs, or gains, on early termination cannot be predicted, as forward rates can increase as well as decrease, by an upredictable amount. Below are two examples to help you understand how the breakage cost or gain is calculated:
Example 1:
Example 2:
1Forward contracts are designed to be held for the term of the contract. Breakage costs or gains may also be influenced by factors including bid-offer spreads, credit-worthiness, market liquidity and timing of execution. The breakage costs or gains presented on this slide are purely indicative and should not be taken as a future commitment by Barclays to cancel the transaction at these levels. Further scenarios can be provided on request.
GBP USD forward rate |
% change from 1.300 |
GBP 1,000,000 USD equivalent |
Gain or loss to you (in USD) |
---|---|---|---|
1.0400 |
-20% |
1,040,000 |
260,000 |
1.1700 |
-10% |
1,170,000 |
130,000 |
1.2350 |
-5% |
1,235,000 |
65,000 |
1.2870 |
-1% |
1,287,000 |
13,000 |
1.3000 |
0% |
1,300,000 |
- |
1.3130 |
1% |
1,313,000 |
-13,000 |
1.3650 |
5% |
1,365,000 |
-65,000 |
1.4300 |
10% |
1,430,000 |
-130,000 |
1.5600 |
20% |
1,560,000 |
-260,000 |
GBP USD forward rate |
% change from 1.300 |
GBP 100,000 USD equivalent |
Gain or loss to you (in USD) |
---|---|---|---|
1.0400 |
-20% |
104,000 |
26,000 |
1.1700 |
-10% |
117,000 |
13,000 |
1.2350 |
-5% |
123,500 |
6,500 |
1.2870 |
-1% |
128,700 |
1,300 |
1.3000 |
0% |
130,000 |
- |
1.3130 |
1% |
131,300 |
-1,300 |
1.3650 |
5% |
136,500 |
-6,500 |
1.4300 |
10% |
1,430,000 |
-13,000 |
1.5600 |
20% |
156,000 |
-26,000 |
To discuss your business requirements and how Barclays can support you, contact us today.