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Forex Mkt

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Forex Mkt

  2. 2. <ul><li>THE FOREIGN EXCHANGE MARKET </li></ul><ul><li>This is over the counter market ( OTC ) i.e. there is no physical </li></ul><ul><li>market place to make the deals. </li></ul><ul><li>Instead it is a net work of banks , brokers and dealers spread </li></ul><ul><li>across the various financial centers of the world . </li></ul><ul><li>These players trade in different currency through telephones , faxes </li></ul><ul><li>, computers and other electronic networks like the SWIFT system </li></ul><ul><li>( Society for Worldwide Inter bank Financial Telecommunication) . </li></ul><ul><li>These traders generally operate through a trading room . </li></ul><ul><li>The deals are finalized orally with written communication </li></ul><ul><li>following later . </li></ul>
  3. 3. <ul><li>THE PLAYERS </li></ul><ul><li>The main players in the foreign exchange market are : </li></ul><ul><li>large commercial banks, </li></ul><ul><li>forex brokers , </li></ul><ul><li>large corporations and </li></ul><ul><li>the central banks . </li></ul><ul><li>The central banks enter the market to smoothen out fluctuations in the exchange rates . </li></ul>
  4. 4. <ul><li>FOREIGN EXCHANGE </li></ul><ul><li>As defined in Section 2 of FEMA , 1999 foreign exchange includes : </li></ul><ul><li>all deposits ,credits , balance payable in any foreign currency , </li></ul><ul><li>any drafts , travelers` cheques , letter of credit and bills of exchange , </li></ul><ul><li>any instrument giving anyone the option of making it payable either partly or fully in a foreign currency . </li></ul><ul><li>Here the term currency includes coins , bank notes , postal notes , </li></ul><ul><li>postal orders and money orders . </li></ul>
  5. 5. <ul><li>Market Makers : </li></ul><ul><li>The large commercial banks which stand ready to buy and sell various currencies at specific prices at all points of time . </li></ul><ul><li>Retail Market : </li></ul><ul><li>The market in which the commercial banks deal with the customers both individuals and corporate . </li></ul><ul><li>Inter bank Market / Wholesale Market: </li></ul><ul><li>The mkt. in which banks deal with each other </li></ul><ul><li>A 24 Hour Market : </li></ul><ul><li>The world wide forex mkt. is a 24 – hour mkt. i.e. trading is going on at least one of the forex market through out the day. </li></ul>
  6. 6. <ul><li>EXCHANGE RATE QUOTATIONS </li></ul><ul><li>An exchange rate quotation is the price of a currency stated </li></ul><ul><li>in terms of another i.e. the price of one currency quoted </li></ul><ul><li>in terms of 1unit of the other currency . </li></ul><ul><li>For e.g. Rs. / $ : 46.40 / 46.65 </li></ul>
  7. 7. <ul><li>TYPES OF TRANSACTIONS </li></ul><ul><li>Foreign exchange transactions can be classified on the basis of the </li></ul><ul><li>time between entering into a transaction and its settlement . </li></ul><ul><li>Outright / Cash / Ready Transaction : </li></ul><ul><li>When the exchange of currency takes place on the date of the deal . </li></ul><ul><li>TOM ( tomorrow ) Transaction : </li></ul><ul><li>When the exchange of currency takes place on the next working day . </li></ul><ul><li>SPOT Transaction : </li></ul><ul><li>When the transaction will be settled after 2 business days from the date of the contract . </li></ul>