Trading Month-End FX Turn Effects with FX Swaps

Summary

The document describes how to represent a turn-of-month or turn-of-quarter effect in foreign exchange markets. It frames the trade as an FX swap whose near leg falls on the final date of the month or quarter and whose far leg falls on the first date of the next period. The initial exchange transfers the notionals, and the later exchange reverses them with an adjustment through swap points.

The swap points reflect interest rates as well as supply and demand, so the turn premium is tied to both financing and market conditions. The answer characterizes this as a fairly standard over-the-counter quote. It does not provide a way to track historical turn data, a pricing formula, sample quotes, or execution guidance, so it establishes the instrument and basic mechanics without assessing whether a particular turn is attractive to trade.

Key ideas

• A month-end or quarter-end turn can be structured as an FX swap across the period boundary.
• The near leg occurs on the period's last date and the far leg on the next period's first date.
• Swap points adjust the reversed notional exchange and reflect rates and supply-demand conditions.
• The answer describes the quote as a standard-style OTC market quote but gives no tracking method or trade evaluation.

Tags

# FX Forward last day first day premium


# FX Forward last day first day premium












How exactly do you trade the turn of the year/quarter effect (also known as last day-first day effect). How do you track this data, is it directly quoted in the market or is it interpolated?

## Answer by Magic is in the chain (score 1)

https://quant.stackexchange.com/a/46277

It would be in the form of an FX swap, with the first leg on the last day day of the month/quarter , and the second leg on the first day of the next month. In swap you exchange the notionals on the first leg date, and then reverse exchange the notionals with swap points adjustments on the second date. The swap points reflect the interest rate plus the impact of supply/demand.

It is an OTC market and this would be standard-ish quote.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.