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Banking. Foreign exchange market in the Russian Federation: participants, structure (lecture notes)

Lecture notes, cheat sheets

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Foreign exchange market in the Russian Federation: participants, structure

Currency markets are operations centers where transactions are made for the purchase and sale of currencies based on supply and demand.

The participants of the foreign exchange market are: firstly, commercial banks. These are not only large banks, but also medium and small banks, and all of them tend to concentrate operations on large exchanges; secondly, non-banking financial institutions: hedge funds (mainly speculative funds) and pension funds (these institutions do not act directly on the market, but use the intermediary of banks. Their role is increasing, since their transactions reach large sizes and they are not subject to the rules for reasons of precaution as banking institutions); thirdly, enterprises and individuals. Large companies operate almost like banks and carry out transactions that are not always related to meeting their commercial needs. In addition, small and medium-sized companies "feed" the banks with their own funds; fourthly, brokers working on large exchanges. Their role is constantly changing with technological changes. They should always be able to provide banks with services that bankers cannot find either in direct transactions with other institutions or using new technology (electronic quotation); and, finally, fifthly, central banks playing the role of a regulator. However, in a free trade system, central bank interventions are relatively rare and are used to eliminate erratic exchange rate fluctuations.

The motivation for entering the foreign exchange market can be the satisfaction of commercial purposes (spot market, futures market, options market, financial futures market), pure speculation, and intervention. All these operations determine the trends of the foreign exchange market.

The "working" order of the foreign exchange markets can be subdivided by organization, functions and operations:

1. Internal organization of banks: drawing up a list of counterparty banks; determination of the degree of risk for each individual counterparty; introduction of limits for currency positions during and at the end of the day; position tracking; organization of a back office responsible for registering transactions, sending confirmation messages and messages about the transfer of funds, tracking correspondent accounts, accounting.

2. International markets. The basic principles of their functioning: to be true to the given word; a clear statement of the purpose of the rate request: the price for the transaction, the price for information; determination of exchanged amounts without prior clarification; Validity period of the exchange rate offered for the transaction: usually several tens of seconds, except for a special indication of the quoter; immediate written confirmation of transactions by telex, fax or through the SWIFT system; dispute resolution; introduction of codes of professional ethics.

3. The course of the exchange day in international markets: opening: analysis of the received and expected information, consideration of the evolution of exchange rates after the close of the previous day, contacts with existing exchanges in order to understand the situation of the day; first-year education; firm or unstable quotation; arbitrations; customer relations; maintaining a currency position.

Author: Shevchuk D.A.

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