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FX Spot, Forwards and Swaps Explained For The ACI Dealing Certificate Exam



If you are preparing for the ACI Dealing Certificate, FX is not optional knowledge.

It is core.


And within FX, three instruments dominate exam questions:


  • Spot

  • Forwards

  • Swaps


Candidates usually understand them conceptually.Where they lose marks is in pricing, value dates, forward points, and swap mechanics.


Let’s strip this back to what you actually need to know to pass.

1️⃣ FX Spot – The Foundation


Definition:A spot transaction is an agreement to exchange one currency for another at an agreed rate, with settlement typically T+2 business days.


Example:

EURUSD = 1.1020 / 1.1023

This means:


  • The dealer buys EUR at 1.1020

  • The dealer sells EUR at 1.1023

  • USD is the terms currency

  • EUR is the base currency


If a client buys EUR 5 million, they pay:

5,000,000 × 1.1023 = USD 5,511,500


What the ACI Exam Tests


  • Bid/offer logic

  • Base vs terms currency

  • Value date conventions

  • Holiday adjustments

  • Cross-rate calculations


Most mistakes happen because candidates rush the perspective question:

Who is buying what?

Slow down. Always identify base currency first.

2️⃣ FX Forwards – Interest Rate Differentials in Action

A forward is simply a spot transaction plus a forward adjustment.

The forward rate reflects the interest rate differential between the two currencies.


The formula logic:


Forward Rate = Spot ± Forward Points



If EUR interest rates are lower than USD rates, EURUSD will typically trade at a forward discount (points subtracted).


Example


Spot EURUSD = 1.10003-month forward points = -0.0025

Forward rate = 1.1000 – 0.0025= 1.0975


This does not mean EUR is “expected to fall.”It reflects covered interest parity.


What the ACI Exam Tests


  • Adding vs subtracting forward points correctly

  • Converting points (e.g., 25 points = 0.0025)

  • Understanding premium vs discount

  • Interest rate parity logic

  • Swap point interpretation


Common trap:


Candidates add points when they should subtract.

Always look at the sign of the forward points.

3️⃣ FX Swaps – The Most Misunderstood Instrument

An FX swap is two FX transactions done simultaneously:

  • One leg at spot (or near date)

  • One leg at forward (far date)


It is not a directional trade. It is a funding / liquidity instrument.


Example:


A bank does:

  • Buy EUR spot

  • Sell EUR 3-month forward


This creates a temporary EUR position that reverses at maturity.


Swaps are quoted in points, not outright rates.


Why Dealers Use Swaps

  • Manage liquidity

  • Roll positions

  • Adjust value dates

  • Fund foreign currency assets


What the ACI Exam Tests


  • Swap structure (buy/sell logic on each leg)

  • Which leg is near and which is far

  • How forward points relate to interest rates

  • Value date adjustments


Common trap:


Confusing which leg creates exposure and which leg neutralises it.

Remember:

A swap is a financing tool, not a speculation tool.

4️⃣ How the Exam Frames FX Questions

The ACI does not ask textbook definitions.


It frames practical dealing scenarios:


  • A corporate needs to hedge a receivable

  • A bank needs to roll a position

  • A trader must calculate forward outright

  • A dealer must quote two-way pricing


You must think like a dealer, not a student.


That means:


  • Identify base currency

  • Identify who is price maker

  • Apply bid/offer correctly

  • Apply forward points correctly

  • Stay calm with value dates

5️⃣ The Simple Framework That Prevents FX Errors

Whenever you see an FX question, follow this checklist:


  1. Identify the currency pair.

  2. Identify the base currency.

  3. Identify who is buying.

  4. Decide whether it is spot, forward, or swap.

  5. Apply bid/offer logic.

  6. Apply forward points correctly (if relevant).


If you follow that structure every time, your error rate drops dramatically.

Final Exam Advice

FX questions are highly mechanical.

That is good news.


Mechanical questions reward discipline.


If you:

  • Master two-way pricing

  • Understand forward point logic

  • Understand swap structure

  • Practise value date adjustments


You turn FX from a risk area into a scoring area.


And in a five-section exam where you must pass each section individually, that matters.


If you’re preparing for the ACI Dealing Certificate (New Version) and want structured mock exams, worked calculations, and realistic dealing scenarios, explore the full Swapskills programme here:



Precision beats speed.

Clarity beats panic.

Mechanics win marks.

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