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Thursday, February 17, 2011

Fores is (part 4)

Process transactions
In exchange forex (foreign exchange), this one may buy or sell currencies traded. The objective is to gain profit or advantage of position you are doing transactions. In Stock Lot known term foreign currency and Pip. 1 Lot value is $ 1000 and 1 pip value is $ 10. While the value of the dollar in foreign exchange is different from that we know the dollar value in the banks. Dollar value on the stock exchange is very varied, 6000/8000 and 10,000 rupiah.

Two-way transaction
Transactions in foreign currencies can be done by two-way in taking advantage. One can buy the first (open buy), then closed with a sell (sell) or otherwise, make the sale first, and then closed with a purchase.

Foreign exchange market players Unlike the stock exchanges where the members have equal access to stock prices, foreign exchange market consists of several levels of access.
At the highest level of access is the interbank money market (interbank), which consists of companies big. Interbank money market investment bank, the difference between the price bid / selling price (ask) and price request / purchase price (bid) is very thin so even usually does not exist, and these rates apply only to their own circles who are not known to the foreign players outside their group.
At the access level below, the range difference between the selling price and buying price to be great depending on the volume of transactions.
If a trader can guarantee the implementation of foreign exchange transactions in large numbers so they can request that the difference in value of sales and purchase reduced-called better spread (thin difference between the selling and buying).
Level access to foreign exchange markets is largely determined by the size of currency transactions are conducted.
Top ranking banks control "of the interbank money market (interbank)" up to 53% of the total transaction value. And after the banks are ranked above the next ranking is a small investment banks and multinational companies large (which requires hedge the risk of the transaction and pays its employees in different countries), large hedge funds, as well as retail merchants who be a determinant of foreign exchange market.
According to Galati and Melvin, pension funds, insurance companies, mutual funds and institutional investors is a player who has a big role in the financial markets in general and particularly the foreign exchange market since the decade of 2000s.
Bank Interbank money market (interbank) meet the needs of the majority of the velocity of money in the corporate world and the needs of daily transactions speculators who can reach the value of trillions of dollars. Some transactions were executed for and on behalf of its clients, but most are for the benefit of owners of the bank or to the interests of the bank itself.
Until now, foreign exchange brokers are the perpetrators of the velocity of currency in large quantities, facilitating interbank trading and bring together sellers and buyers to "wages" (fee) is small. But now many businesses are turning to the foreign exchange to a more efficient electronic systems such as EBS (now owned by ICAP), Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Bloomberg and Tradebook (R)
World business One of the roles of foreign exchange market is the needs of the company's activities in paying the price of goods or services denominated in foreign currencies. Foreign currency needs of an enterprise is often only a small value compared with the needs of banks and speculators and foreign exchange trading is done often only a very small impact for the value of the currency exchange market. Nevertheless foreign trade flows of these companies over the long term is an important factor for the direction of a currency exchange rate. Transactions of some multinational companies can bring unexpected consequences when they closed position (the position of selling or buying) a very large one where the transaction is not widely known by market players.
The central bank The central bank of a country holds a very important role in the foreign exchange market. The central bank is always trying to control money supply, inflation and interest rates or even often they have a target both official and unofficial exchange rate against a currency country. Often the central bank uses foreign exchange reserves to stabilize the market.
With market expectations or the issue of intervention by central banks alone have been enough to stabilize the local currency, but aggressive intervention performed several times in each year in a country that the currency exchange rate volatility.
Various sources of funds in the foreign exchange market when put together can be easily "trick" the central bank (withdraw or sell currencies in huge amounts so that the central bank no longer able to intervene) in which this scenario which appears at 1992-1993 European exchange rate mechanism (European Exchange Rate Mechanism - ERM) experienced a fall and several times a fall in currency values in Southeast Asia.
Investment management company Investment management companies (which usually is a lot of account managers on behalf of clients such as pension funds and foundations donated funds) that transact in foreign exchange markets to foreign currency needs in order to make stock purchases abroad. Foreign exchange transactions for them is not a primary investment objective so that the transaction does not by speculative purposes or for the purpose of obtaining maximum profit.
Foreign exchange brokers Foreign exchange broker is a company established specifically to conduct brokerage services for its customers in the field of financial markets by obtaining a reward for his services. According to CNN, a broker of foreign exchange has trading volume between 25 to 50 trillion U.S. dollars per day or about 2% of the total value of foreign exchange market transactions as reported by the site and Futures Trading Commission (Commodity Futures Trading Commission - CFTC) that novice investors easily can be targeted in a fraudulent foreign exchange trading.