M_S_FOREX MARKET

OVERVIEW : 

OVERVIEW Introduction to forex market Market size & Liquidity Market participants Determinants of FX Rates Financial Instruments IFC Types of IFCs World IFCs Products and Services Barriers for Mumbai

Presented by : 

Presented by MONISH TANNA SWAPNIL JADHAV

INTRODUCTION : 

INTRODUCTION

Forex: Introduction : 

Forex: Introduction Foreign exchange (forex or FX for short) is one of the most exciting, fast-paced markets around. The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).

Slide 6: 

The Foreign Exchange is the world’s largest financial market, with over $3 trillion traded daily. By way of comparison, the Forex market is 100 times larger than the New York Stock Exchange, and triple the size of the US Equity and Treasury markets combined.

History of Foreign Exchange : 

History of Foreign Exchange Gold Standard b. Agreements on Fixed Exchange Rates c. Floating Exchange Rate System

Classic Gold Standard : 

8 Classic Gold Standard For example, if the dollar is pegged to gold at U.S.$30 = 1 ounce of gold, and the British pound is pegged to gold at £6 = 1 ounce of gold, it must be the case that the exchange rate is determined by the relative gold contents: $30 = £6 $5 = £1

Fixed Exchange Rates System : 

9 Fixed Exchange Rates System Bretton Woods System

WHY WE NEED FOREIGN EXCHANGE ? : 

WHY WE NEED FOREIGN EXCHANGE ? The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.

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Unlike other financial markets, the Forex market has no physical location or central exchange. It operates through an electronic network of banks, corporations, and individuals trading one currency for another

The foreign exchange market is unique because of : 

The foreign exchange market is unique because of its trading volumes, the extreme liquidity of the market, its geographical dispersion, its long trading hours: 24 hours a day except on weekends the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes) the use of leverage

MARKET SIZE & LIQUIDITY : 

MARKET SIZE & LIQUIDITY The New York Institute of Finance estimates the daily average to be more than $2 trillion. By the year 2010, more than $10.0 trillion will be traded daily. According to the Bank for International Settlements, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion.

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Table 2: Foreign Exchange Reserve (US$, billions) - Top 10 countries in 2007 1990 2007 China : Mainland 28.6 1,528.3 Japan 69.5 948.4 Russia n.a. 464.0 India 5.8 266.5 Korea 14.5 261.8 Euro Area n.a. 203.5 Brazil 7.4 179.4 Singapore 27.6 162.5 China,P.R.:Hong Kong 24.6 152.6 Algeria 0.7 110.2 Malaysia 9.3 100.6 Source: IMF International Financial Statistics. For India, 1990: Ministry of Finance, Government of India

Monetary Authorities with the largest foreign reserves in 2009. : 

Monetary Authorities with the largest foreign reserves in 2009.

MARKETS PARTICIPANTS : 

MARKETS PARTICIPANTS Banks Commercial Companies Central Banks Hedge Funds as Speculators Investment Management Firms Retail Foreign Exchange Brokers Non-bank Foreign Exchange Companies

Determinants of FX Rates : 

Determinants of FX Rates Economic Factors - Economic Policy - Economic Conditions Political Conditions Market Psychology

Financial Instruments : 

Financial Instruments Spot Forward Future Swap Option Exchange Traded Funds Speculation

IFC : 

IFC A financial centre is a global city that is a company and business hub, as well as being home to many world famous banks and/or stock exchanges. An international financial centre is a non-specific term of reference usually meant to designate a city as a major participant in international financial markets for the trading of cross-border assets.

Requirement : 

Requirement at least one significant stock market presence of international banks other financial markets

Type of IFC’s : 

Type of IFC’s Global (GFCs ) These are centres that genuinely serve clients from all over the world in the provision of the widest possible array of IFS Regional (RFCs) They serve their regional rather than their national economies, examples of such RFCs would be Dubai or Hong Kong

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Non-global and non-regional, ordinary international IFCs These are centres like Paris, Frankfurt, Tokyo and Sydney that provide a wide range of IFS but cater mainly to the needs of their national economies rather than their regions or the world – one might be tempted to call them national IFCs Offshore (OFCs) These are centres that are primarily tax havens for wealth management and global tax management rather than providing the fully array of IFS.

Ranking : 

Ranking London 1 New York 2 Singapore 3 Hong Kong 4 Zurich 5 Geneva 6 Tokyo 15 Mumbai 49 The Global Financial Centres Index is published by the City of London Corporation and is updated annually.

Bases of ranking : 

Bases of ranking Skilled people Business environment Market Access Infrastructure General Competitiveness

Products and Services : 

Products and Services Fund Raising Asset Management and Global Portfolio Diversification Personal Wealth Management Global Transfer Pricing Global Tax Management and Crossborder Tax Liability Optimisation Global/Regional Corporate Treasury Management Operations Global/Regional Risk Management Operations and Insurance/Re-insurance Global/Regional Exchange Trading of Financial Securities, Commodities and Derivatives Contracts in Financial Instruments/Indices and in Commodities

Cont.. : 

Cont.. Financial Engineering and Architecture for Large Complex Projects Global/Regional Mergers and Acquisitions Activity Financing for Global/Regional Public Private Partnerships

Barriers for Mumbai : 

Barriers for Mumbai ‘Missing’ Debt, Currency, and Derivatives Markets An inadequate universe of institutional investors Competition Policy Financial Innovation