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Islamic Cross Currency Swap (ICCS)

An agreement between two parties to exchange one stream (series) of profit payments in one currency for a stream (set) of profit payments in another currency over a fixed period of time

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Features:

The profit payments are made through the execution of a series of underlying Shariah contracts.


Applicable Shariah Structure:

  • Commodity Murabahah Structure
    The Islamic Cross Currency Swap under the commodity Murabahah structure seeks to achieve Shariah-compliance by using Commodity Murabahah Transactions. The Commodity Murabahah transaction is a sale arrangement whereby a counterparty purchases Shariah permissible commodities from a supplier (at a cost price) and then sells such Shariah permissible commodities to another party at a marked-up price to include the counterparty’s profit margin.
  • Bai` al-Sarf (Currency Exchange) and Wa`d (Undertaking/Promise) Structure
    The Islamic Cross Currency Swap under the Wa`d structure seeks to achieve Shariah-compliance by applying a stream of Bai al-Sarf Transactions. One party will make a Wa`d to enter into Bai al-Sarf, which is a Contract of Exchange. The party will exchange one currency for another currency with its counterparty. The two currencies can be of different amounts but must be exchanged between the two parties on the same day.


Tenure: Above one year.

Amount: The minimum amount for an ICCS transaction is RM5 million (or equivalent) and the maximum is subject to the client's limit.

Currency: Multi-currency

Documentation:

  • Islamic Derivatives Master Agreement (IDMA)/ Tahawwut Master Agreement
  • Term sheets