Introduction

Top 10 currency traders [62]% of overall volume, May 2014

Rank Name Market share
1 Citi 16.04%
2 Deutsche Bank 15.67%
3 Barclays Investment Bank 10.91%
4 UBS AG 10.88%
5 HSBC 7.12%
6 JPMorgan 5.55%

7 Bank of America Merrill Lynch 4.38%

8 Royal Bank of Scotland 3.25%

9 BNP Paribas 3.10%
10 Goldman Sachs 2.53%
Introduction
Most traded currencies by value Currency distribution of global foreign exchange market turnover[70][4]

ISO 4217 code % daily share

Rank Currency
(Symbol) (April 2013)

1 United States dollar USD ($) 87.0%

2 Euro EUR (€) 33.4%

3 Japanese yen JPY (¥) 23.0%
4 Pound sterling GBP (£) 11.8%
5 Australian dollar AUD ($) 8.6%
6 Swiss franc CHF (Fr) 5.2%
7 Canadian dollar CAD ($) 4.6%
8 Mexican peso MXN ($) 2.5%
9 Chinese yuan CNY (¥) 2.2%
10 New Zealand dollar NZD ($) 2.0%
11 Swedish krona SEK (kr) 1.8%
12 Russian ruble RUB (₽) 1.6%
13 Hong Kong dollar HKD ($) 1.4%
14 Singapore dollar SGD ($) 1.4%
15 Turkish lira TRY () 1.3%
Other 12.2%
Total[71] 200%
Spot Market

• The spot market or cash market is a public financial market in which financial
instruments are traded for immediate delivery.

• In spot market, settlement happens in t+2 working days.

• Spot transactions in 2010 accounted for about 37% of the market

• A spot market can be:
1. An organized market.
2. An exchange
3. Over-the-counter (OTC)

Now, the challenge is before you

as what is “THE SPOT FOREIGN
EXCHANGE MARKET”
THE SPOT FOREIGN EXCHANGE MARKET
THE SPOT FOREIGN EXCHANGE MARKET

• A foreign exchange spot transaction, also known as FX spot.

• It is an agreement between 2 parties to buy 1 currency against selling another

currency at an agreed price for settlement on the spot date.

• The standard settlement timeframe for foreign exchange spot transactions

is T + 2 days; (i.e., two business days from the trade date)

• A exception is the USD/CAD currency pair, which settles at T + 1.

• Spot exchange rates are determined by DD and SS for currencies being

exchanged.
Execution methods
• Direct – Executed between two parties directly

• Electronic broking systems – Executed via automated order matching system for
foreign exchange dealers.

• Electronic trading systems – Executed via a single bank proprietary platform or a

multibank dealing system.

• Voice broker – Executed via telephone with a foreign exchange voice broker
Forward Market

• An over-the-counter marketplace that sets the price

of a financial instrument or asset for future delivery.
• The forward market is highly customized
• Chief regulator of forwards markets in India is
Forward Markets Commission (FMC)
Background

• Till feb. 1992 forward contracts were permitted only against

related exposures and these contracts can’t be cancelled
• In March 1992, provide operational freedom to corporate
entities, unrestricted booking and cancellation of forward
contracts for all genuine exposures, whether trade related or
not, were permitted.
• Due to the Asian crisis, freedom to re-book cancelled
contracts was suspended.