Casa Trading Activities SPOT FWD June 2020

The Trading Room
The Activities
Jacques Markowicz 1
Foreign Exchange Centers
The major Foreign Exchange centers
Jacques Markowicz Source : Intuition 2
Foreign Exchange Centers

Others 15% UK 34%
Australia 3%
France 3%
HgKg 4%
Swiss 6.00%
Germany 6.00%
Singapore 6%
Japan 6% USA 17%
Jacques Markowicz 3
1
Foreign Exchange - Size
The foreign exchange market is enormous. In terms of size and liquidity, the
FX market far exceeds even the largest domestic markets such as the US
stock market or the US futures market.
The size of the market is determined every three years. Central banks and
monetary authorities around the world measure the activity in the foreign
exchange market during the month of April. They submit their findings to
the Bank for International Settlements (BIS), which then produces the
Triennial Central Bank Survey of Foreign Exchange and Derivatives Market
Activity.
The most recent analysis conducted in April 2006 found that the average
daily turnover in the FX market was almost $ 2,265 trillion (2004 = $ 1.330)
The greatest percentage (+/- 85%) of all deals on the

foreign exchange market is of a speculative nature.

The foreign exchange market has a new benchmark to measure average daily
turnover, after the Bank for International Settlements (BIS) released the results of
its Triennial Survey of Foreign Exchange Turnover.
According to the report, global FX turnover hit $5.345 trillion per day in April 2013.
This is the first time average daily volume (ADV) has broken the $5 trillion
threshold, the total represents a 32.5% increase from the previous survey
taken in April 2010.
Spot turnover rose 37.5% to just over $2 trillion per day, while outright forward
activity was 43% higher at $680 billion per day. Signaling the continued recovery
from the credit crunch, the effects of which were still evident in 2010, FX swaps
business rose by 26.7% from April 2010 to $2.23 trillion per day. FX swaps
remains the biggest FX market by category

Jacques Markowicz Source : ACI Briefing 5

Highlights from the 2016 Triennial Survey of turnover in OTC foreign exchange markets:
Trading in foreign exchange markets averaged $5.1 trillion per day in April 2016. This is down
from $5.4 trillion in April 2013.
For first time since 2001, spot turnover declined. Spot transactions fell to $1.7 trillion per day in
April 2016 from $2.0 trillion in 2013. In contrast, the turnover of FX swaps rose further, reaching
$2.4 trillion per day in April 2016. This rise was driven in large part by increased trading of FX
swaps involving yen.
The US dollar remained the dominant vehicle currency, being on one side of 88% of all trades in
April 2016. The euro, yen and Australian dollar all lost market share. In contrast, many emerging
market currencies increased their share. The renminbi doubled its share, to 4%, to become the
world’s eighth most actively traded currency and the most actively traded emerging market
currency, overtaking the Mexican peso. The rise in the share of renminbi was primarily due to the
increase in trading against the US dollar. In April 2016, as much as 95% of renminbi trading
volume was against the US dollar.

Jacques Markowicz Source : BIS Triennial Central Bank Survey 6
2
Currency Risk
Spot F/X
Forward Swaps
Currency Options
Interest Rate Currency Swaps
Jacques Markowicz 7
All F/X Instruments

6
U 5
S
D
4
T
R 3
I 5,3
L
2 4
L
3,3
I
O 1 1,9
N 1,5
1,2
S
0
1998 2001 2004 2007 2010 2016
Jacques Markowicz Source : ACI 8
All F/X By Instruments GJ2
SWAP
SPOT
OUTRIGHT
OPTIONS
2001 2004 2007 2010 2016 2001 2004 2007 2010 2016 2016 2016
Jacques Markowicz Source : ACI 9
3
Diapositive 9
GJ2 Gisèle Jung; 22-01-14

Origination Structured Products
Jacques Markowicz
Jacques Markowicz
Jacques Markowicz
Syndication Int. Rates Derivatives
F/X Deals
Investor Services Int. Rates Derivatives
FX Swap 46%
Corporate Services Corporate Services
OPT 5%
2%
IRCS
Spot & Forward F/X Investor Services
Investor Services Treasury

Spot 33%
Outright FWD 33%
Investor Services Repo’s

Business Management Business Management
I.T. Business Management
Financial Markets – Trading Room

Source : BIS 2016
A.L.M.
11
12
10
4
Equity Derivative Trading
Equity Derivative Trading

Equity Derivative Sales
Equity Cash Trading
Equity Sales
Modeling
Jacques Markowicz 13
FX and money market dealing rooms comprise various sections,

or desks, each performing a particular function. The FX and money markets
desks are typically placed together so that the dealers can benefit
from the synergies between the two markets.
Foreign Exchange Dealing
The foreign exchange desk specializes in foreign exchange

spot dealing and foreign exchange forward dealing.
Foreign exchange spot dealing involves the exchange of currencies

against each other at a specific rate with settlement two working days later.
Foreign exchange forward dealing involves the exchange of

currencies against each other at a specific rate with settlement
on some future date, for example, one month later, three months later.

Money Market Dealing
Money market dealing involves the borrowing or lending of

funds under agreed conditions. Money market instruments
include: call deposits, fixed deposits, certificates of deposit,
T-bills, commercial paper, repos.
Corporate Dealing
This section of the dealing room facilitates requests from

corporate customers for specific deals in the money market
or the foreign exchange market. This section does not usually make prices.
Dealers act as 'salespeople' in the dealing room.
The structure of the dealing room can vary considerably between banks.
5
The number of people in the dealing room can vary widely, but the basic structure
is fairly consistent. The chief dealer supervises all dealing room activities.
Each section is headed by a senior dealer, who supervises the work of the other dealers,
including juniors and trainees.
Chief Trader :
•Responsible for all activities in the dealing room.

•Receives a report on the day's activities from the various sections
(The chief dealer is able to monitor dealer positions and the P/L in real-time.
•Reports to the senior management
•As a second in command to assume responsibility in his absence.
Source : Intuition
Senior Trader:
•Responsible for all the transactions that take place in their section.
•Executes customer orders.
•Runs positions in F/X & money market products (within the course of a trading day
or over a longer period of time).
Junior Trader:
•Provides support to the other dealers by keeping positions up to date.

•Keeps in touch with the back office.
•Runs positions with very limited amounts of risk.
Jacques Markowicz
Source : Intuition 17
Financial Markets – Trading Room (Limits)
Currency:
Different currencies have different volatilities and therefore the bank may have
to impose differing limits according to the type of currency being traded.
Credit:
Money market transactions involve direct lending and borrowing and causes a credit risk.
These risks have to be evaluated and a limit is set according to the creditworthiness of
the counterparty (Credit Risk Settlement).
Instrument:
Currencies have different volatilities, so do different money market instruments.

Along with this are differences in liquidity.
Jacques Markowicz
Source : Intuition 18
6
Financial Markets – Trading Room (Limits)
Maturity:
Most F/X and money market products cover a maturity of less than a year.
Dealers may still have different limits imposed for different maturity products.
Deal size:
The size of a deal can directly link to the amount of exposure the dealer is taking
on their book.
If a dealer is transacting a customer order, buying from the market and then
directly selling to the customer, the deal size is not very relevant.
If the dealer is buying to hold on position there may well be a limit to the maximum
size they would be allowed to take at any one time.
Position:
Position limits will pay respect to all the other limits in terms of what a dealer is
allowed to hold and for how long.
Position limits can have two dimensions:
Daylight limits: positions the dealer can hold during the trading day when they are
there to monitor the risk.
End of day limits: positions they can hold on their books at the end of a trading period.
Two of the key areas involved in transactions are anonymity and confidentiality.
Anonymity:
very important for the operation of an efficient, reputable money market. It only
applies when dealing through brokers.
Confidentiality:
vital to preserve this anonymity. Any breach of confidence that could damage the
mutual trust between participants is strongly condemned.
Although a code of ethics is not legally binding, dealers are very strongly urged
to abide by it. Those who do not do so run the risk of getting a bad name in the
market and may thus lose influence and business.
F/X & MM Traders
Foreign Exchange Money Market
Spot dealers Money Market dealers
Forward Swap dealers FRA dealers
F/X Options dealers IRS dealers
Equity Options dealers IR Options dealers
Jacques Markowicz
21
7
Financial Markets
Forex & Money Market Products

Aggressive in all main currencies.
Presence in exotic currencies
F/X Derivatives
F/X options: plain vanilla & exotics
Long-term forwards
Interest Rates Derivatives
Overnight Interest rate Swaps, FRA, IRS
Cap/Floor/Swaption
Structured products
Jacques Markowicz
22
Spot Foreign Exchange
Jacques Markowicz
23
EUR/USD (1980 – Feb 2020)
24
Jacques Markowicz
8
Foreign Exchange
A F/X Spot transaction is :
- an agreement between two parties

to exchange a specific amount of one currency
for a specific amount of another currency
- on a specific date *
- on an agreed rate
* normally two working days after dealing
Financial Markets
International & Central Banks
The Market
Spot & Options Dlrs. Fwd & Deposit Dlrs. Govern. Bonds Dlrs.
Companies Sales Institutionals
Branches
26
Jacques Markowicz
F/X – Split of Currencies
AUD CHF CAD

GBP
JPY USD 42.5%
Other CCys
EUR 19.5%
Jacques Markowicz Source: ACI The Financial Markets Association 27
9
F/X The major currency blocs
DKK
Latin American currencies
CAD Sterling
SEK
Middle Eastern
currencies US Dollar Euro CHF
HKD
SGD Yen
NOK
Asian currencies
Eastern European currencies
AUD & NZD
Jacques Markowicz Source: F/X & Money Markets Bob Steiner 28
Foreign Exchange – Currencies
Currencies are identified by

a three-letter code (ISO).
The market share per

currencypair is as follows:
Foreign Exchange – Spot Value Dates
The table shows the spot value dates for each trading day:
Trade Date Monday Tuesday Wednesday Thursday Friday
Value Date Wednesday Thursday Friday Monday Tuesday

,
10
Foreign Exchange & Treasury
Overnight : a deposit or foreign exchange swap from today until tomorrow
Tom-next : a deposit or foreign exchange swap from tomorrow until the next day (spot)
Spot-next : a deposit or foreign exchange swap from spot until the next day
Spot-a-week : a deposit or foreign exchange swap from spot until a week later
Jacques Markowicz Source: F/X & Money Markets Bob Steiner 31
Overnight Tom/next Spot
day 0 day 1 day 2
O/N
T/N

USD
R CHF
E EUR
C
E
I
V NOK
SEK EUR
E
Spot 1 Mth 2 Mth 3 Mth 4 Mth 5 Mth 6 Mth
JPY GBP USD

P
A
Y
USD AUD
11
Financial Markets – Spot F/X Trader
34
Jacques Markowicz
Financial Markets –Traders
35
Jacques Markowicz
Foreign Exchange
Many banks present themselves to the market as market-makers.
This means that the banks are prepared to quote a spot price for buying and
selling currencies to anyone who asks (as long as they are creditworthy)
both customers and other financial institutions,
€/$ 1,4625
€/$ 1,4627
12
Become a Trader
Risk Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a
high level of risk since leverage can work both to your advantage and disadvantage. As a result, CFDs may not be suitable for all
investors because you may lose all your invested capital. You should not risk more than you are prepared to lose. Before deciding
to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of
experience. Past performance of CFDs is not a reliable indicator of future results. Most CFDs have no set maturity date. Hence, a
CFD position matures on the date you choose to close an existing open position. Seek independent advice, if necessary. Please
read FxPro’s full ‘Risk Disclosure Statement’.
Financial Markets – News Feb 2020
J. Markowicz Source: Thomson Reuters 38
39
Jacques Markowicz Source : Thomson-Reuters
13
40
Reuters Screen February 2020
Jacques Markowicz Source : Thomson Reuters 41
Reuters 3000 F/X Spot Trading
42
Jacques Markowicz
14
Foreign Exchange – Spot Confirmation
43
Jacques Markowicz
Foreign Exchange
1 Euro
Brussels City Co. “A”
Bank
1.4627 USD
1 Euro 1 Euro
Paris City Brussels City
Co. “A”
Bank Bank
1.4625 USD 1.4627 USD
The quoting bank will impose its price on the calling bank.
44
Jacques Markowicz
Foreign Exchange - Spot Price
€ 1 = $ 1.4625- 27
Base Ccy
Quoted Ccy
“Big” figure “Small” figure
15
Foreign Exchange - Spot Price
€ 1 = $ 1.4625 - 27
Bid Price € Spread Offer Price €
Foreign Exchange – Spot Transaction
Sells € Buys €
Customer
Buys $ Sells $
€/$ 1.4625 - 1.4627

Buys € Brussels City Sells €
Sells $ Bank Buys $
Foreign Exchange
Brussels
City
Bank
€/$ 1.4625- 27
Paris
City
Bank
€/$ 1.4626- 28
New York
City
Bank
€/$ 1.4624- 26
16
Foreign Exchange – Spot & Cross Rates
49
Foreign Exchange Brokers
F
X
B
R
O
K
E
R
17
F
X
B
R
O
K
E
R
F
X
B
R
O
K
E
R
F
X
B
R
O
K
E
R
18
Foreign Exchange for Customers
Foreign Exchange – Bloomberg FX
Foreign Exchange – FXall
Fxall is a leading provider of electronic foreign exchange trading

solutions to corporations and asset managers.
Fxall’s customer base consists of over 1,000 institutions and

includes actives traders, asset managers, corporate treasurers, banks,
broker-dealers and prime brokers.
19
FX All - Spot EUR/USD (Feb 2019)
ING Trade (October 2019)
59
ING Trade (Oct 2019)
Jacques Markowicz Source : ING 60
20
ING Trade (Oct 2019)
Jacques Markowicz Source : ING 61
Foreign Exchange
Trading
COVID - 19
63
Jacques Markowicz
21
EUR/USD Feb 17 – Apr 30, 2020
Source : Investing 64
Jacques Markowicz
Foreign Exchange BNP Paris
F/X Broker
Citi London
ING Trader
Tokyo London
EBS
Foreign Exchange BNP: buy at 23
Citi: buy at 24
Barclays: sell at 28
Broker
Tokyo: buy at 25
BOA: sell at 27
Broker Fr
ING 25-27 Broker Ger

Broker UK
22
Spot Foreign Exchange
Electronic
Broking
System
(EBS)
67
Jacques Markowicz
Foreign Exchange – Reuters 3000
Reuters 2001-2002-3000 Screen Position

Conversations Position P/L R/R
From: GENP
EUR: - 10.000
Hi:EUR/USD in 5 pse ?
Hi 25- 27 + GBP/USD: 2.0450 - 2.0460
Mine 5 at 27 val 6/03+ BARL USD/JPY: 110.75 - 110.90 USD: + 14.825 -3 1.4828
MGTN
Tks $ to Chase Bibi We expect the Fed to reduce
EUR/USD : 1.4623 - 1.2829 its interest rates by 1/2 pc
EUR/CHF : 1.5750 - 1.5760 The Euro is recovering
from its previous losses
USD/JPY : 110.75 - 110.90
Cable 55-58 !
€/$ 25-27 !
Jacques Markowicz
Key Board 69
23
EUR/USD June 29, 2016
Jacques Markowicz
70
EUR/USD November 9, 2016
Jacques Markowicz
71
EUR/USD Dec. 15 2016 - Fed raises Interest Rate
Jacques Markowicz
72
24
EUR/USD Oct 26, 2017 – ECB Mario Draghi
Jacques Markowicz
73
EUR/USD Dec 22, 2017
Jacques Markowicz
74
EUR/USD Feb 17 – Apr 30, 2020
Jacques Markowicz
25
Foreign Exchange (Electronic Broking System)
Sep 3 - 10.25
6 MAR
EUR/USD TRADER DEALS
8.20 BUY 2 1.4620 ABNS EUR/USD

1.46
9.25 SELL 1 1.4625 MGTL EUR/USD
3 25 - 27 5 9.30 BUY 1 1.4623 DEUF EUR/USD
9.45 SELL 1 1.4636 FORB EUR/USD
10.05 SELL 1 110.85 KBCB USD/JPY
USD/JPY 6 MAR
110.
5 80 - 90 6
Foreign Exchange – Overnight orders
T/P = Take Profit - S/L = Stop Loss
Paris City
Bank
New York City

Bank
F/X Forward
26
Different day/year conventions
ACT/360
Most money markets use ACT/360

Exact number of calendar days in the period /360
ACT/365
Exact number of calendar days in the period /365
UK Sterling
Hong Kong dollar
Singapore dollar
Malaysian ringgit
Taiwan dollar
Thai baht
South African rand

USD
R CHF
E EUR
C
E
I
V NOK
SEK EUR
E
Spot 1 Mth 2 Mth 3 Mth 4 Mth 5 Mth 6 Mth
JPY GBP USD

P
A
Y
USD AUD
Foreign Exchange - Forward
A Forward Foreign Exchange Contract is :
• an agreement between two parties to exchange

one currency for another at some future date.
• the rate at which the exchange is to be made, the

delivery date and the amounts involved are fixed
at the time of the agreement.
27
Foreign Exchange – Yield Curves (Dec. 04)
5,5
I 5,25
n 5
t 4,75
GBP £
e 4,5
r 4,25
e 4
s 3,75
t 3,5
3,25 US D $
R 3
a 2,75
t 2,5 EUR €
e 2,25
s 2
0 3 6 9 12
Months

Currencies: EUR & USD (360/360)
Spot Price: EUR/USD: 1.4630
Interest Rate EUR: 3.00 % (1 year)
Interest Rate USD: 3.25 % (1 year)
Forward Price “Outright” EUR/USD
Quoted currency
1.0325
1.4630 * = 1.466551
1.0300
Base Currency
 rq*d 
Premium of the EUR versus the USD: 
1 
b   O
S* 
 rb* d 

1
1.4665- 1.4630 = 0.003551 US cents 
 b 


3 Mths Premium of the EUR versus the USD:
1.00625
1.4630 * = 1.4639
1.005625
1.4639 - 1.4630 = 0.0009 US cents
6 Mths Premium of the EUR versus the USD:

1.01375
1.4630 * = 1.4647
1.0125
1.4647 - 1.4630 = 0.0017 US cents
28
Foreign Exchange – Forward EUR/USD
Bank buys € - Bank sells €
Spot EUR/USD 1.4628 - 1.4632
3 months (premium) 0.0007 / 0.0011
6 months (premium) 0.0015 / 0.0019
12 months (premium) 0.0032 / 0.0038
The forward outright exchange rate is, in one sense, strictly

the mathematical result of combining the spot rate with interest rates.
   
1   R 2 X N  
  B  
Forward Points  Spot Rate x   2 
 1
 1   R X N  
  1 B  
  1 

Where:
R1 = Base Currency Interest Rate

R2 = Quoted Currency Interest Rate
N = Number of Days in the Swap Period
B1 = Base Currency Days Basis
B2 = Quoted Currency Days Basis

*
Currencies: GBP* & USD (360/360) 5.25 x 360
365
Spot Price: GBP/USD: 2.0450
Interest Rate GBP: 5.25 % (1 year)
Interest Rate USD: 3.25 % (1 year)
Forward Price “Outright” GBP/USD
Quoted currency
1.0325
2.0450 * = 2.0061
1.0525
Base Currency
 rq*d 
Discount of the GBP versus the USD: 
1 
b   O
S* 
 rb* d 

1
2.0061- 2.0450 = - 0.03890 US cents 
 b 

29
Foreign Exchange – Forward GBP/USD
Bank buys £ - Bank sells £
Spot GBP/USD 2.0450 - 2.0460
3 months (discount) -0.010 / -0.009
6 months (discount) -0.020 / -0.018
12 months (discount) -0.040 / -0.038
Foreign Exchange - Premiums & Discounts
-5 -4 -3 -2 -1 0 1 2 3 4 5
Base currency higher Base currency lower
than quoted currence than quoted currence
= Discount = Premium
Par
Foreign Exchange - Premiums & Discounts

If the base currency interest rate is lower than the quoted currency interest rate,
then the base currency will be at a forward premium to compensate holders
of the base currency for the lower interest rate. Of course, this also means that
the quoted currency is at a forward discount.
When the base currency is at a forward premium, the swap points will be quoted
low figure - high figure. When the swap points are quoted in this order,
they should be added to the spot price to derive the full forward price.
If the base currency interest rate is higher than the quoted currency interest rate,
then the base currency will be at a forward discount. This means that the quoted
currency is at a forward premium.
When the base currency is at a forward discount, the swap points will be quoted
high figure - low figure. When the swap points are quoted in this order, they
should be deducted from the spot price to derive the full forward
30
Long-Dated Forward
Forward outright :
Forward swap :
FWD
Swap
Points
&
Outright
Feb 2020
92
Jacques Markowicz Source : Thomson Reuters
Swap & Outright EUR/USD 1 month (Feb 2019)
93
Jacques Markowicz
31
Foreign Exchange – Broken dates
1 months (premium) 0.0011 (30 days)
2 months (premium) 0.0023 (60 days)
Customer wishes a price for 46 days
0.0023 - 0.0011 = 0.0012 points
((0.0012 points/30) X16) + 0.0011 = 0.001740
Foreign Exchange – Forward with option date
Price quoted by the bank:
Spot EUR/USD 1.4628 - 1.4632 (Oct 15, 2009)

6 months (premium) 0.0015 / 0.0019 (Apr 15, 2010)
Customer wishes to buy EUR/sell USD forward with an option date from
Apr 10 until Apr 25:
Spot Rate: 1.4632

Forward Rate: 1.4632 + .0022 = 1.4654
Foreign Exchange – Forward swap
1 – One year EUR loan at 3.00% from

US Head Office to Belgian subsidiary.
U.S. H.O. Belgian Sub.
€ 1 year 3.00%
2 – Belgian subsidiary need to borrow US

dollars for one year for its treasury.
Belgian Sub.
$ 1 year ? %
32
Foreign Exchange – Forward Swap
Sells 10.000.000 EUR

Brussels City
20/09/06 Customer 1.4630 Bank
Buys 14.630.000 USD
EUR/USD in one year ?

1.3500 ? - 1.4500 ?- 1.5500 ?
Foreign Exchange – Forward Swap
Sells 10.000.000 EUR

20/09/06 Customer 1.4630
Brussels City
Bank
Buys 14.630.000 USD
Buys 10.000.000 EUR *

Brussels City
20/09/07 Customer 1.466551 Bank
Sells 14.665.510 USD

  r2 * N  
1   100 * B 2  
Swap points  Spot rate *   1
* does not include interest coverage  1   r1 * N  
Jacques Markowicz
  100 * B1   98

Spot
+ € - + $ -
10,000,000 14,630,000
14,630,000
10,000,000
3% 3.25%
Forward 1 year
+ € - + $ -
10,300,000 15,105,475
10,000,000 ?
300,000 ?
10,000,000 14,665,510
300,000 439,965
Jacques Markowicz 15,105,475 /10,300,000 = 1.466551 99
33
Non-Deliverable Forward (NDF)
A non-deliverable forward (NDF) is the same as a forward outright transaction

where an amount, forward rate and forward date are agreed.
The difference is what happens on the forward value date - there is no physical
transfer of the amount; instead, a cash settlement is made based on the difference
between the forward rate agreed at the time of the deal and the actual spot rate
in the market two days before the forward date falls.
Therefore, an NDF can be defined as a cash settled forward outright.
Settlement is typically in US dollars.
The NDF market uses the central bank spot fixing to calculate the spot amount.
NDF is used to trade non-convertible currencies,
Cy “A” buys $ against currency XYZ for 6 months
Spot rate 1 $ = 100 XYZ Forward rate 1 $ = 100 XYZ
At maturity spot rate 1 $ = 110 XYZ
Cy “A” sells currency XYZ buys $ at 100

Cy “A” buys currency XYZ sells $ at 110
Settlement in US dollars = profit $ 10
The Bank of China announced the biggest

devaluation (August 2015) in two decades
and adopted a more market-based
methodology to determine the yuan's daily
fixing rate. Exchange rate flexibility means
that they can conduct an independent
monetary policy going forward. For the last
decade, the central bank's job was to soak
up excessive liquidity, and in the future, its
job will mainly become providing liquidity.
34
Non-Deliverable Forward (Oct 2018)
NDF USD/CNY (Mar 2019 – Jan 2020)
Chinese Yuan Renminbi (CNY)

Chinese Yuan Renminbi (USD/CNY)
Jacques Markowicz
105
35
China A 50 February 3, 2020 – 7%)
ChineseChinese Yuan Renminbi

Yuan Renminbi (CNY)
(USD/CNY)
Jacques Markowicz
NDF USD/CNY (February 3, 2020)
Chinese Yuan Renminbi (CNY)

Chinese Yuan Renminbi (USD/CNY)
Jacques Markowicz
NDF USD/CNY (Feb 2020)
36
NDF USD/INR (Mar 2019 – Jan 2020)
Indian
Indianrupee
rupee(INR)
(USD/INR)
Mexican Peso (MXN)
Jacques Markowicz
Source : Investingg 109
NDF USD/INR (Feb 2020)
NDF USD/PHP (Mar 2019 – Jan 2020)
Philippines (USD/PHP)
Mexican Peso (MXN)
Jacques Markowicz
37
NDF USD/PHP (Feb 2020)
NDF USD/VND (Jan 16 - Feb 18, 2020)
Jacques Markowicz Source : Investing 113
NDF USD/VND (Feb 2020)
38
NDF USD/MYR (Jan 2020 – Feb 2020)
NDF USD/MXN (Mar 2019 – Jan 2020)

Mexican Peso (MXN)
Jacques Markowicz
Source : Bloomberg 116
USD MXN July 22, 2014
Source : Thomson Reuters 117

Jacques Markowicz
39
Foreign Exchange - Formula
 p * b * 100  O
r$   r€  *
 d*O  S
 0.003551 * 360 * 100  1.4665

3.25   3.00  *
 360 * 1.4665  1.4630
Foreign Exchange - Formula
 p * b * 100  S
r€   r$  *
 d* S  O
 0.003551 * 360 * 100  1.4630

3.00   3.25 - *
 360 * 1.4630  1.4661
119
Foreign Exchange – Fixed Periods

The most utilized fixed periods in the Forward F/X market are:
1 month
2 months
3 months
6 months
12 months
40
Foreign Exchange – End-End convention
There is an end-of-month convention in the forward FX market
which stipulates that, when spot value is
the last business day of the month,
the value dates for the fixed periods also fall on
the last business day of the forward months.
Foreign Exchange – Exercises

2- We are Friday June 30, 2016 and Tuesday July 4, 2016 is a bank holiday
in the United States.
What is the value date for a EUR/USD spot exchange transaction
concluded on Friday June 30, 2016?
Friday June 30, 2016
Monday July 3, 2016
Tuesday July 4, 2016
Wednesday July 5, 2016
Foreign Exchange - Exercises
3- You buy 8 million CHF against USD at the spot rate of 1 USD = 1.1500 CHF
How many USD would you have to pay out ? (Input your answer to 2 decimal place)
3-1 You buy USD 9.000.000 against EUR at the spot rate of 1 EUR = 1.4975 USD
What is the EUR equivalent? (Input your answer to 2 decimal place)
4- You buy 5 million GBP against USD at the spot rate of 1 GBP = 2.0450 USD
How many USD have you sold ? (Input your answer to 2 decimal place)
4-1 You sell 10.000.000 USD at the spot rate of 1 GBP = USD 2.0450.
How many GBP have you bought? (Input your answer to 2 decimal place)
4-2 You buy USD 5.000.000 against EUR at the spot rate of 1 EUR = 0.9028 USD
What is the EUR equivalent? (Input your answer to 2 decimal place)
41
5- Your are the CFO of Cy “A”. You call your bank to sell Dollars and buy Euro.
The spot rate EUR/USD quoted by your bank is 1.4870 – 1.4880.
The bank will take a margin of 0.0100 (1 US cent per EUR).
At what spot rate will you sell the dollars to the bank ?
1.4770
1.4970
1.4780
1.4980
6- Your are the Treasurer of a multinational British company .

You have to sell US dollars and buy British Pounds and you call 4 Banks.
Bank “A” quotes you GBP/USD 1,5470 – 1,5473
Bank “B” quotes you GBP/USD 1,5471 – 1,5474
Bank “C” quotes you GBP/USD 1,5469 – 1,5472
Bank “D” quotes you GBP/USD 1,5472 – 1,5475
At what best spot rate will you sell the US dollars to the bank and buy GBP ?

7- You are the treasurer of a Swiss company which exports cheese
to the United Kingdom.
You receive GBP 1,250,000 and decide to sell them in the spot market.
The spot market prices are the following :
USD/CHF 1.5831 - 1.5841

GBP/USD 1.9045 - 1.9055
At what spot rate will you sell the GBP and buy CHF?
How many CHF will you receive?
42
Foreign Exchange NDF– Exercises
7- 1
At maturity will the US Treasurer have a loss or a profit ?
USD :
Spot EUR/USD 1.4845 – 1.4855
1 Month : 0.0005 / 0.0010

8 -You are the treasurer of company « B »
2 Month : 0.0012 / 0.0017
and you receive the following market
3 Month: - 0.0025 / - 0.0020
prices from your bank: 6 Month: 0.0040 / 0.0050
At what « outright » price will you sell USD and buy EUR
for delivery in 3 month ?
At what « outright » price will you buy USD and sell EUR
9 -You are the treasurer of company « C » and you receive the following
market prices from your bank:
Spot EUR/USD : 1.3215 - 1.3225
3 Month EUR/USD : 0.0015 / 0.0025
At what « outright » price will you buy from your bank USD and sell EUR
43
9.1 - You are the treasurer of company “D” and you receive the
following market prices from you bank :
Spot EURUSD : 1.3215 - 1.3225
Six month EUR/USD : - 0.0050 / - 0.0040
At what “outright” price will you sell to your bank USD

and buy EUR for delivery in 6 month?
Explain your answer.
9-2 You are the trader of a British Bank and you have bought from a customer
5.000.000 GBP against EUR for value 3 months forward outright.
Which of the following is ways of hedging your risk :
1 - Sell EUR against GBP for value 3 months forward outright ?
2 - Buy EUR against GBP spot and also buy spot EUR againts GBP and sell EUR
against GBP in a 3 month swap ?
3 - Buy EUR against GBP for value 3 months forward outright ?
4 - a) Buy EUR spot against GBP.

b) Sell EUR spot against GBP and buy EUR against GBP in a 3 month swap ?
Spot EUR/USD 1.2850
10 - 11 Market prices are the following : 3 month USD : 3.25% (91 days)
3 month EUR : 2.20% (91 days)
6 month USD : 3.75% (182 days)
Calculate the 3 and 6 month premium or discount of the EUR versus the USD
44
Spot EUR/USD 1.3215
12- Market prices are the following :

9 month USD : 4.00% (272 days)
Calculate the 9 month premium or discount of the EUR versus the USD.
45

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Casa Trading Activities SPOT FWD June 2020

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The Trading Room

Foreign Exchange Centers

The major Foreign Exchange centers

Jacques Markowicz Source : Intuition 2

Foreign Exchange Centers

The greatest percentage (+/- 85%) of all deals on the

Jacques Markowicz Source : Intuition 4

Foreign Exchange - Size

The greatest percentage (+/- 85%) of all deals on the

Jacques Markowicz Source : ACI Briefing 5

Foreign Exchange - Size

The greatest percentage (+/- 85%) of all deals on the

Interest Rate Currency Swaps

All F/X Instruments

Jacques Markowicz Source : ACI 8

All F/X By Instruments GJ2

GJ2 Gisèle Jung; 22-01-14

Spot & Forward F/X Investor Services

Investor Services Treasury

Outright FWD 33%

Investor Services Repo’s

I.T. Business Management

Financial Markets – Trading Room

Equity Derivative Trading

Equity Derivative Trading

Financial Markets – Trading Room

FX and money market dealing rooms comprise various sections,

Foreign Exchange Dealing

The foreign exchange desk specializes in foreign exchange

Foreign exchange spot dealing involves the exchange of currencies

Foreign exchange forward dealing involves the exchange of

Financial Markets – Trading Room

Money market dealing involves the borrowing or lending of

This section of the dealing room facilitates requests from

Jacques Markowicz Source : Intuition 15

•Responsible for all activities in the dealing room.

Financial Markets – Trading Room

•Provides support to the other dealers by keeping positions up to date.

Financial Markets – Trading Room (Limits)

Currencies have different volatilities, so do different money market instruments.

Financial Markets – Trading Room

Jacques Markowicz Source : Intuition 20

F/X & MM Traders

Foreign Exchange Money Market

Spot dealers Money Market dealers

Forward Swap dealers FRA dealers

F/X Options dealers IRS dealers

Equity Options dealers IR Options dealers

Forex & Money Market Products

Spot Foreign Exchange

EUR/USD (1980 – Feb 2020)

A F/X Spot transaction is :

- an agreement between two parties

Companies Sales Institutionals

F/X – Split of Currencies

AUD CHF CAD

Jacques Markowicz Source: ACI The Financial Markets Association 27

AUD & NZD

Jacques Markowicz Source: F/X & Money Markets Bob Steiner 28

Foreign Exchange – Currencies

Currencies are identified by

The market share per

Jacques Markowicz Source : Intuition 29

Foreign Exchange – Spot Value Dates