forex market 2003

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Forex Market or ForeignForex Market or Foreign

Exchange Market Exchange Market



The market in which currencies areThe market in which currencies aretraded. The forex market is the largest traded. The forex market is the largest

most liquid market in the world with anmost liquid market in the world with anaverage traded value that exceed $1.9average traded value that exceed $1.9trillion per day and it includes all of thetrillion per day and it includes all of thecurrencies in the world.currencies in the world.



Main terms of forex market.Main terms of forex market.

There is no central market place for currencyThere is no central market place for currencyexchange.exchange.

Trade is conducted over the counter exchange.Trade is conducted over the counter exchange.

The forex market is open 24 hours a day,5 dayThe forex market is open 24 hours a day,5 dayin weekin week

Currency are traded worldwide.Currency are traded worldwide.

Major financial centers of forex market areMajor financial centers of forex market areLondon, New York, Tokyo, Zurich, Frankful,London, New York, Tokyo, Zurich, Frankful,Hong Kong, Singapore, Paris, Sydney.Hong Kong, Singapore, Paris, Sydney.



ContCont

The forex market is an Over The CounterThe forex market is an Over The CounterExchange MarketExchange Market

By any communication networks it worksBy any communication networks it works



Major Participants in Forex Market Major Participants in Forex Market

IndividualsIndividuals

BanksBanks

FirmsFirms Government Government

International AgencyInternational Agency



Flow of Forex Market TransactionFlow of Forex Market Transaction



Customer buying US $ forIndian Rs

Buyers local bank

Foreign ExchangeBroker

Major bank representinginter bank market

Sellers local bank

Customer selling US $To get Indian Rs



Purpose of TransactingPurpose of Transacting

HedgersHedgers1 Risk taker1 Risk taker

2 He resort to hedging only when the benefits2 He resort to hedging only when the benefitsexpected from covering the position are greaterexpected from covering the position are greaterthen the cost then the cost

SpeculatorsSpeculators

1 Concentration1 Concentration on profiton profit2 speculator is very ideal person in selling2 speculator is very ideal person in selling

of financial products in forex marketof financial products in forex market



Cont..Cont..

3 Risk taker3 Risk taker

4 Ex ;> purchase currency in low price4 Ex ;> purchase currency in low price

and sell it in future for higher priceand sell it in future for higher price Arbitrageurs Arbitrageurs

1 Very careful person in market 1 Very careful person in market

2 Identify temporary imperfection and2 Identify temporary imperfection andconvert such opportunity into risk lessconvert such opportunity into risk lessprofit profit



ContCont

3 No investment 3 No investment

4 Simultaneously buys and sells of currency4 Simultaneously buys and sells of currency

5 Ex ;>> buy one $ in Singapore market @5 Ex ;>> buy one $ in Singapore market @low cost and sell in London market @highlow cost and sell in London market @highcost cost



Settlement Settlement

SWIFTSWIFT

Society for Worldwide InterSociety for Worldwide Inter--bank Financialbank Financial

TelecommunicationTelecommunicationCHIPCHIP

Clearing House Interbank Payment SystemClearing House Interbank Payment System

CHAPSCHAPSClearing House Automated Payment SystemClearing House Automated Payment System



SWIFTSWIFT

It is coIt is co-- operative society owned by about operative society owned by about 250 banks in Europe & North America250 banks in Europe & North America

It is communication network forIt is communication network forinternational financial market, linked withinternational financial market, linked with25000 financial institution in through out 25000 financial institution in through out the world.the world.

Its provide reliability of message to allIts provide reliability of message to alllocal banking authority.local banking authority.



CHIPCHIP

It is an electronic payment system ownedIt is an electronic payment system ownedby 12 private commercial banksby 12 private commercial banksconstituting the New York clearing houseconstituting the New York clearing houseassociation.association.

CHIPS began its operation in 1971 andCHIPS began its operation in 1971 andpresently it is worlds largest payment presently it is worlds largest payment

system. Foreign exchange and Eurosystem. Foreign exchange and Euro--dollardollartransactions are settled through CHIPStransactions are settled through CHIPS



Cont..Cont..

ExEx

Bank of India transferBank of India transfer US $ 1 millionUS $ 1 million

to Canara bankto Canara bankSteps ;>Steps ;>

1 BOI maintaining a dollar a/c in1 BOI maintaining a dollar a/c in AMEX bank. AMEX bank.

2 CB maintaining a dollar a/c in2 CB maintaining a dollar a/c inCITI bankCITI bank



Settlement processSettlement process

Canara

BANK

BOIBOI SS

WW

IIFF

TT

Amex AmexBankBank

CITICITIBankBank

CC

HH

II

PP

ss

FF

EE

DD

WW

II

RR

EE

Amex Amex

BankBank

CITICITI

BankBank

forex market 2003

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