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In terms of volume, the foreign exchange market is the largest among all other existing segments of the financial market. Currency trading is dozens of times greater than the volume of all world trade in goods and services. Therefore, most of currency transactions is not related to servicing international trade, but represents financial transfers and speculative transactions.
The foreign exchange market is divided into a number of segments in terms of the urgency of the execution of transactions. Here you can distinguish the cash and urgent segments of the market. Let's define the cash market as the cash currency exchange market, where the banknotes issued by the central banks of various countries are traded. Operations with cash currency make up a very small share of the currency market turnover. The population deals with this segment of the foreign exchange market in their daily life. The largest segment of the cash foreign exchange market is the "spot" market, the size of transactions on it is more than 90% of the total volume of transactions on the market. The term of currency delivery for operations on the spot market does not exceed two banking days. In the spot market, banks and brokers from all over the world collectively form exchange rates, which are the base for the foreign exchange market as a whole. In parallel with the spot market, there is an urgent foreign exchange market. The need for the futures market is due to the fact that the 1-2-day delivery time of the currency on the spot market turns out to be too short for many foreign trade transactions. In this market, various transactions are carried out that combine longer terms for the supply of currency - from 3 days to several years. The exchange rate of the futures currency market, as a rule, does not coincide with the spot exchange rate, which is explained by differences in the levels of interest rates in the money and stock segments of the financial market.
The actions of many participants in the foreign exchange market are often the result of their operations in other segments of the financial market. Thus, the formation of a huge and capacious international loan capital market, including the Eurocapital market, involves the performance of foreign exchange transactions, without which transactions with financial assets are impossible. The rapid development of integration processes, the universalization of all segments of the financial market, the emergence of new financial instruments, including derivatives (derivatives), in the context of liberalization and deregulation of international monetary relations, has greatly increased the need to protect against newly emerging risks and created new problems at the macro level for national bodies of currency regulation and control in terms of developing both unified definitions and rules for conducting transactions in all segments currency markets. At the micro level, the need to develop universal concepts and rules for dealing transactions for the purchase and sale of foreign currencies is determined directly by foreign economic transactions of counterparties from various countries. Transactions with goods and services outside national borders, as well as investments in other countries, are paid in foreign currency. Businesses that receive or pay for goods and services in foreign currencies are exposed to exchange rate risks. Enterprises in Europe, by entering into an agreement with an American partner for payment in US dollars, do not assume the risk of a negative change in the dollar exchange rate and the final payment date. In the case of payment in euros, the exchange rate risk is transferred to the US company. A European importer who ships goods from the US and is required to pay in dollars converts the euros into dollars through their servicing bank. In writing or by phone, he instructs the bank to deduct euros from his account and convert the equivalent of the payment into dollars. In the foreign exchange market, the bank buys the necessary amount of dollars for euros, delivers them to the client and debits his account in euros.
If an exporter from Europe who delivers goods to the United States and receives payment in dollars wants to exchange them for euros, then after receiving the payment in foreign currency, he instructs the bank to sell dollars for him and credit their equivalent in euros to his account. The bank sells dollars on the exchange or over-the-counter segments of the foreign exchange market, buys euros and credits them to the exporter's account. The purchase of securities quoted in a foreign currency also involves transactions with this currency.
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The concept and functions of the foreign exchange market
The foreign exchange market is a relationship of foreign exchange transactions (currency exchange), has a specific character (plays an important role in external economic activity countries). The foreign exchange market at the same time provides the process of integrating the economy (national into the world).
Currency market functions:
1) promotes integration national economy into the world through the exchange of national money for foreign, and consequently, the further course of the social division of labor and specialization in the production of certain products of certain countries, which ultimately stimulates competition and market way housekeeping
2) is an alternative form of investment of money capital in countries with a weak national currency, since the acquisition of "hard" currencies allows investors to reduce the loss of their real savings in the domestic market at high inflation rates
3) allows you to receive high incomes on risky transactions of a speculative nature in the markets for futures contracts, as well as to insure against currency risks.
The foreign exchange market is an integral part market mechanism, which unites economic relations arising in the field of exchanging national money for foreign ones, and serving the movement of the integration of the national economy in the world economy.
The main task of the foreign exchange market is to organize an uninterrupted system of exchange of national monetary units, which are legal tender exclusively on the territory of a given state, for foreign ones.
Segments of the foreign exchange market
The Russian foreign exchange market is divided into the following segments:
1) spot market (represents a market in which currency purchase and sale transactions are carried out at the currently agreed exchange rate, but the currency is delivered only two days after the conclusion of the transaction);
2) the futures contracts market (is a market where a futures exchange transaction is concluded at a fixed rate and a fixed amount in foreign currency);
3) the cash currency market.
The spot market, in turn, is divided into the market of freely convertible currencies and the market of limited convertible currencies, and the market of futures contracts is divided into segments corresponding to certain financial instruments, i.e. futures, forwards, options, etc.
In its composition, the foreign exchange market covers a fairly wide range of participants who make transactions for the purchase and sale of currency values. Conventionally, participants in the foreign exchange market can be divided into three key groups.
Users of the foreign exchange market are enterprises, citizens, foreign companies, participants in foreign economic activity and others, i.e. those participants who create the final supply and demand foreign exchange. Organizers of the foreign exchange market and intermediaries carrying out the movement of currency values - currency exchanges, brokerage firms, commercial banks.
The regulator of the foreign exchange market is the state represented by the Central Bank of the country.
International currency markets. A specialized segment of the financial market is the international currency markets, which serve the trading of currency values. The turnover of the world currency market exceeds 680 trillion. USD US per year, or 1.9 trillion. USD in a day.
Economic entity foreign exchange market is manifested in its functions. The foreign exchange market performs functions common to all markets:
commercial- provision of economic activity participants with foreign or national currency;
valuable- setting such a level of the exchange rate at which the foreign exchange market and economic system as a whole will be in balance;
informational- providing the participants of the foreign exchange market with information about the functioning of the foreign exchange market;
regulatory- Ensuring order and organization in the foreign exchange market.
The leading motive for operations in the modern foreign exchange market is speculative. A speculator, for example, buys a certain amount of euros in the morning and sells it for dollars in the evening. In the event of a favorable change in the exchange rate, the currency speculator receives one or another profit from the transaction (margin).
The development of the world economy is accompanied by a rapid increase in "hot money", that is, short-term, highly liquid speculative capital. The size of this capital today is hundreds of billions of dollars. This capital is constantly moving, concentrated or, conversely, split up to extract speculative profits on the difference in exchange rates. By performing this function, the foreign exchange market at the same time contributes to the tide international capital into highly profitable areas of the world economy, ensuring its dynamic development.
The modern foreign exchange market is an extremely complex and dynamic system that is influenced by many economic, political, psychological factors and immediately responds to their changes. Compared to the material sphere, the foreign exchange market is more stochastic, the level of its uncertainty and unpredictability of development is much higher. Conducting foreign exchange transactions is objectively always associated with risk. The probability of incurring losses due to adverse changes in the exchange rate is denoted by the term "currency risk".
The foreign exchange market is not only a generator of currency risks, but also a system for their prevention. He plays the role of the insurer, and the insurance operation is called hedging. Hedging(from the English. hedge - fence, protection) is achieved with the help of an extensive system of special currency transactions and techniques, the use of which, however, requires special training. Speculative and insurance functions are closely related and represent two sides of the foreign exchange market.
According to the place of currency trading, there are exchange and over-the-counter segment of the foreign exchange market. The exchange currency market operates on special officially organized stock exchanges. Unlike it, in the over-the-counter market, currency trading is carried out by commercial banks on the basis of computer global systems.
Depending on the period of fulfillment of currency requirements and obligations, there are current and term segments of the foreign exchange market. In the current foreign exchange market, transactions are made within a short time - no more than two banking days (spot transactions). The derivatives market combines transactions, the execution of which is carried out for a longer time - usually 1, 2, 3, 6, 9 and even 12 months.
The formation of the national currency market in Russia began in 1991 with the creation exchange market, which includes eight currency exchanges. Commercial banks and the Central Bank act as sellers and buyers of foreign currency on the stock exchanges. Russian Federation(Bank of Russia). In Russia, a floating exchange rate regime was introduced, which depends on the ratio of supply and demand on the country's currency exchanges, primarily on the Moscow Interbank Currency Exchange (MICEX). A direct quotation of the ruble to foreign currency is applied, i.e. a unit of foreign currency is expressed in a certain number of rubles.
The official exchange rate of the US dollar against the ruble is set by the Bank of Russia, taking into account the results of trading on the MICEX. In order to maintain a stable exchange rate, the Bank of Russia daily fixes the exchange rate and, in order to maintain official exchange rate The ruble has introduced a "dirty floating" regime of the exchange rate, i.e., it periodically interferes in the formation of supply and demand for currency on the MICEX, primarily the US dollar, with the help of special foreign exchange interventions. The rate of other currencies is determined on the basis of the cross rate. At the same time, the exchange rates of these currencies against the US dollar are used as an intermediate (third) currency.
Since September 2003 introduced new order fixing: the official exchange rate of the ruble against the dollar is determined on the basis of the results of trading on the MICEX with a settlement term "tomorrow". Previously, within the framework of a single trading session (ETC), there were only two instruments - these are the calculations "dollar - ruble" and "euro - ruble" with the term "today". Moreover, the time frames of these trades were very limited - from 10.00 to 11.00 in the dollar trades and from 10.00 to 11.30 in the "euro - ruble" trades. Now a third instrument has appeared - "dollar - ruble" with a settlement term "tomorrow", which will be traded from 10.00 to 16.45 Moscow time. This significantly expands the opportunities for regional participants in the foreign exchange market. After all, at the usual daytime session of the MICEX, trading in dollars for "tomorrow" was conducted for a long time, but the opportunity to participate in them was mainly for Moscow dealers, and the Unified Trading Session takes place simultaneously according to the same rules on all eight stock exchanges of the country from Vladivostok to St. Petersburg.
The change in the system for determining the ruble exchange rate also means that the Central Bank has shifted its activity from the settlement market "today" to "tomorrow". Market participants believe that this has had a qualitative effect on the exchange rate of the national currency, it is now determined solely on the basis of supply and demand and will become more market-oriented, and this, in turn, will lead to a new round of ruble strengthening. For currency dealers this new system determining the official rate will make it possible to judge with greater certainty the goals and expectations of the Central Bank, based not on rumors and speculation, but on its behavior during "tomorrow's" trading. As the elapsed time has shown, the "dollar - ruble" trades with the "today" settlement period, which took place without the participation of the Central Bank, really led to a decrease in the current dollar exchange rate.
Currently, the US dollar remains the key currency for fixing, and it is this currency that the ruble is quoted in, i.e., the price of the ruble is fixed against the dollar. But at the same time, the Bank of Russia also uses a new regime for regulating the exchange rate based on the dollar-euro currency basket, which contributes to strengthening the stability of the ruble exchange rate.
The mechanism of exchange trading in foreign currency is constantly being improved. Thus, in Russia since June 1997, the system of electronic lot trading (SELT) has been operating, which removed the previously existing temporary restrictions on foreign currency trading, dramatically increased its efficiency and flexibility on the Russian exchange market.
The second segment of the national currency market is the interbank currency market. It is organized by commercial banks that trade foreign currency among themselves and provide it to their clients. The interbank foreign exchange market is more liberal than the exchange market and is less dependent on the actions of the Bank of Russia. It responds faster and more quickly to changes in the supply and demand for foreign currency by foreign exchange market participants. The flexibility of the interbank foreign exchange market determines the general global trend towards the dominance of this segment in terms of the number of foreign exchange transactions. Yes, in last years the share of direct transactions between banks in the total foreign exchange turnover of the Russian Federation increased from 85% to 94%.
World debt market. The modern debt market is about 34 trillion. USD in year. Most debt instruments are denominated in foreign currency and are called Eurobonds. The global stock market has an annual turnover of 26 trillion. dollars, but most of the transactions are speculative.
Most of the debt obligations are issued with the help of bonded loans, and this process is called securitization. Securitization- this is the involvement of an increasing amount of capital, regardless of the form of their existence, on the securities market through their short-term or long-term presentation in the form of certain securities. This is especially true for capital, which different reasons is currently in an inactive form, for example, in the form real estate: housing, basic production assets, long-term reserves of raw materials, etc. The issuance of various bonds and other debt securities on the basis of such property makes it possible to accelerate the turnover of this capital, to receive additional income expand the market and its opportunities.
Although loans issued by an appropriate loan agreement or with the help of securities are used to meet the same needs, there are many differences between them from an organizational and financial point of view. The latter are in different cost, the terms of the loan, its size and the speed of obtaining borrowed funds (Fig. 22.1). Based on this classification, it is easy to imagine the general structure of the securities market ( stock market).
Rice. 22.1. Differences between segments of the global market,
in which credit operations are carried out and securities
AT loan agreement the following options are displayed.
Price. Bonds are issued with fixed and floating interest rate, while loans are issued at a floating interest rate, the size of which is regularly reviewed. Thus, the cost of issuing bonds is much higher than the cost of loans.
To assess the state of trade in interbank deposits, an indicator is used, which is called LIBOR rate- the average rate of interest at which banks in London provide loans in Eurocurrencies to banks by placing a deposit with them. This is a frequently fluctuating rate in relation to short-term borrowings, dominating the London interbank market. It is the most important reference point for banks and other credit organizations in setting current prices for financial transactions.
Timing. Loans are medium-term loans, although average terms tend to increase. Bonds are long-term securities.
Loan sizes(especially syndicated) are usually higher than the amounts for which the issue of bonds is carried out.
The speed of receiving funds. The provision of loans in the credit market is carried out much faster than when issuing bonds.
An organized large-scale purchase and sale of securities is carried out, as a rule, on stock exchange. Starting from the XVI century. exchange trading securities in a short time allowed participants to amass gigantic fortunes and often just as quickly lose them. In the last decades of the XIX century. mass creation joint-stock companies in various industries flooded the stock exchange with shares and bonds of various companies, which sharply increased daily turnover and stimulated the exchange redistribution of property.
The stock exchange allows:
With development banking system separate big banks, fulfilling the instructions of their clients, issue shares of these clients, actually implementing the functions of the stock exchange and, as it were, competing with it. The concentration of banks and the creation of international banking consortiums lead to the fact that an increasing part of the securities circulate through the system of credit organizations, bypassing the stock exchange. Large banks are becoming more and more prominent players in stock speculation. These banks form sufficiently qualified analytical services that not only monitor emerging trends in the exchange rate fluctuations of securities, but also develop a strategy and tactics for their impact on the market. Banks often create special associations (explicit and hidden) - corners- to carry out activities aimed at organizing a mass purchase of securities, creating a rush demand, artificial inflation of the exchange rate and subsequent resale with the highest profit.
When, over the past decade, the scale of such bank operations began to lead to massive bankruptcies of the affected companies, the governments of a number of countries state control over the issue of securities and operations on stock exchanges Oh. The created legal and regulatory filter has significantly reduced the possibilities and danger of excessive mayhem in the securities market.
The structure of the international securities market is presented in Table. 22.2.
Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.
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federal state budgetary educational institution higher professional education
Chelyabinsk State University
Institute of Industrial Economics, Business and Administration
Department of economics of industries and market
abstract
subject: "International currency relations"
on the topic: "Foreign exchange market»
Chelyabinsk
Introduction
The successful development of foreign exchange relations is possible if there is a special market where you can freely sell and buy currency. Without such an opportunity, economic counterparties simply would not be able to realize their currency relations - they would not have foreign currency to fulfill their external obligations, they could not turn the received foreign exchange earnings into national money to fulfill their internal obligations. Such a market is usually called a currency market.
However, in the foreign exchange market, people buy and sell foreign currency not only for making payments, but also for other purposes: for speculative operations, currency risk hedging operations, etc. Moreover, these operations are acquiring an ever wider scope, which takes the foreign exchange market beyond the boundaries of a simple appendage to international settlement and payment relations and gives it the status of a relatively independent economic structure. According to its economic content, the foreign exchange market is a sector money market, on which demand and supply for such a specific product as currency are balanced. According to its purpose and organizational form, the foreign exchange market is a set of special institutions and mechanisms that, in interaction, provide the opportunity to freely sell and buy national and foreign currencies based on supply and demand. The foreign exchange market has all the attributes of an ordinary market: objects and subjects, supply and demand, price, special infrastructure and communications, etc.
1. Concept, currency market instruments
The economy of any state cannot exist without a developed financial market. Integral part financial market is the foreign exchange market. The foreign exchange market is a sphere of economic relations that manifests itself in the implementation of an operation for the sale and purchase of foreign currency and securities in foreign currency, as well as operations for the investment of foreign exchange capital. Any market economic entity- acts only as a seller or buyer. The foreign exchange market is a kind of tool for coordinating the interests of the seller and buyer of currency values. Any action of the seller or buyer in the market is associated with commercial risk. Commercial risk is the danger of possible losses from the implementation of a particular financial and commercial activity. The foreign exchange market also contains the concept of currency risk - the receipt by an economic entity of additional expenses or income, depending on changes in exchange rates. For any currency, the foreign exchange market consists of all international financial centers located in London, New York, Paris, Zurich, Frankfurt, Singapore, Hong Kong, Tokyo, where this currency is sold and bought for another currency. These international financial centers are interconnected by all means of communication and are in constant contact with each other, thus forming a single international currency market and providing round-the-clock foreign exchange trading.
Modern currency markets have the following features:
1. They belong to the group of efficient markets, which are characterized by a large volume of transactions (up to 2 trillion dollars a day), a huge number of participants, fairly free access to the market, and availability of price information;
2. Internationalization is increasing;
3. Operations are carried out continuously throughout the day, since the main centers of currency trading are separated by time zones;
4. The purchase of currency is carried out mainly for speculative and arbitrage transactions;
5. There is instability in exchange rates, which has led to the fact that the exchange rate has become a kind of exchange commodity.
According to the entities operating with currency, the currency markets are divided into:
1. In the interbank foreign exchange market, there are three main segments according to the urgency of foreign exchange transactions: spot market - a market with immediate delivery of foreign currency. It accounts for up to 65% of the total currency turnover; forward market - forward market, where up to 10% of foreign exchange transactions are carried out; swap market - a market that combines transactions for the purchase and sale of currency on a spot and forward basis. It implements up to 25% of all foreign exchange transactions.
2. In the exchange segment of the currency market, transactions with currency can be made through the currency exchange, or by trading derivatives (derivative stock instruments) in currency departments commodity and stock exchanges.
3. On the client segment of the foreign exchange market individuals and corporate clients conduct foreign exchange transactions with the help of commercial banks.
Depending on the volume, nature of foreign exchange transactions and the number of currencies used, foreign exchange markets are divided into:
1. global currency markets - concentrated in the world's financial centers - in London, New York, Tokyo, Frankfurt am Main, Singapore, Paris. The leading world center of currency trading is London, it accounts for 1/3 of all currency transactions in the world.
2. regional foreign exchange markets - they carry out transactions with a certain range of convertible currencies (for example, the Kuwaiti dinar, etc.) 3. the domestic foreign exchange market is the market of one state.
It is understood as the whole set of operations carried out by banks located in the territory of a given country, for foreign exchange services for their customers (which may include companies, individuals and banks that do not specialize in international foreign exchange operations), as well as their own foreign exchange operations.
In countries with limited currency legislation the official foreign exchange market is usually complemented by a "black" (illegal) and "grey" (where banks make transactions with non-convertible currencies) market. In relation to foreign exchange restrictions, free and non-free foreign exchange markets are distinguished, and according to the types of application of exchange rates - with one regime and with two exchange rate regimes. In general, most foreign exchange transactions in industrial developed countries ah (about 80% of all foreign exchange transactions) is carried out in the interbank segment of the foreign exchange market and, mainly, in the current (spot) market. It is in the course of interbank transactions that the exchange rate is directly formed.
2. Functions of the foreign exchange market
The foreign exchange market performs the following functions:
1. transfers purchasing power from one country to another through currency exchange;
2. provides a clearing mechanism for international payments without making significant changes to the net positions of commercial banks in the implementation of large transactions with the purchase / sale of currencies;
3. Provides a source of short-term credit to importers and borrowers by enabling banks to purchase term drafts drawn in foreign currency and held until maturity, with an obligation to pay a check drawn for a specific term;
4. provides methods for hedging open currency positions;
5. provides ample opportunities for speculative transactions;
6. provides opportunities for arbitrage transactions.
The transfer of funds or purchasing power from one currency to another is an essential function of foreign exchange markets. The rest of currency trading is used in transactions made by traders and speculators who buy and sell currencies in anticipation of quick profits from predicted changes in the relative value of the currency.
3. Structural characteristics of the foreign exchange market
3.1 Structuralcharacteristics of the foreign exchange market
By types and forms of functioning.
By area of distribution, i.e. in terms of breadth of coverage, it is possible to distinguish international (international financial centers) and domestic currency markets. So the international (world) currency markets are concentrated in the main financial centers of Western Europe, the USA, the Middle East, and East Asia. Most major centers located in London, New York, Frankfurt am Main, Paris, Zurich, Tokyo, Singapore, etc. According to some estimates, the London market accounts for one third to one half of the annual turnover. It is gradually catching up with the New York market. In turn, both international and domestic markets consist of a number of regional markets, which are formed by financial centers in certain regions of the world or a given country. The international currency market covers the currency markets of all countries of the world. The international currency market should also be understood as a chain of global regional currency markets closely interconnected by a system of cable and satellite communications.
There is an overflow of funds between them, depending on current information and forecasts of leading market participants regarding the possible position of individual currencies. In relation to currency restrictions, one can single out free and non-free currency markets (this applies to regional and national currency markets), depending on the absence or presence of currency restrictions on it. Regulation of foreign exchange transactions in foreign countries usually carried out at two levels. it state regulation, carried out within the framework of the monetary policy of the state, and restrictions imposed directly by banks to insure their activities against possible losses. The monetary policy of any state is, first of all, an element economic strategy government in power.
In the most general terms, the monetary policy of developed countries is a purposeful use by the authorities of certain mechanisms to achieve goals. economic policy- stimulating the rates of economic growth, employment of the population and combating inflationary tendencies. In general, monetary policy is designed to regulate the external competitiveness of the state, to protect the economy from the negative impact of currency instability and any external factors. Currency restrictions are a system of government measures (administrative, legislative, economic, organizational) to establish the procedure for conducting transactions with the subject of operation (foreign currency, securities denominated in it, currency values) in individual countries, imposed by national legislation. Currency restrictions include measures for the targeted regulation of payments and transfers of national and foreign currency abroad, as well as establishing the procedure for settlements in foreign currency on the domestic market. A foreign exchange market with foreign exchange restrictions is called a non-free market, and in the absence of them, a free foreign exchange market. According to the types of exchange rates used, the foreign exchange market can be with one regime and with a dual regime.
A single regime market is a foreign exchange market with free exchange rates, i.e. with floating exchange rates, the quotation of which is established at exchange auctions. A dual regime currency market is a market where both a fixed and a floating exchange rate are applied at the same time. The introduction of a dual currency market is used by the state as a measure to regulate the movement of capital between the national and international loan capital markets.
This measure is designed to limit and control the influence of the international loan capital market on the economy of a given state. According to the degree of organization, the foreign exchange market is exchange and over-the-counter. The exchange currency market is an organized market, which is represented by a currency exchange. Currency exchange - an enterprise that organizes trading in currency and securities in foreign currency. The exchange is not a commercial enterprise. Its main function is not to receive high profits, but to mobilize temporarily free funds through the sale of foreign currency and securities in foreign currency and to establish the exchange rate, i.e. her market value. The exchange currency market has a number of advantages: it is the cheapest source of currency and foreign exchange funds; bids put up for exchange auctions have absolute liquidity(liquidity of currency and securities in foreign currency means their ability to quickly and without loss in price turn into rubles). The over-the-counter currency market is organized by dealers who may or may not be members of the currency exchange and conduct it by telephone, telefax, computer networks.
This is the so-called currency dealing (ForEx DEALING). After 1973, the prices of currencies were no longer determined by the gold reserves of countries (Brenton Wood Agreement) and today the over-the-counter currency trading market (total market turnover per day) is 1.2 trillion. US dollars, outpacing, for example, the US government debt market by about four times. It should be noted that the huge financial potential of this market determines the excess profits and excess losses that its participants bear.
The most famous is Soros's breakthrough, when on September 23-25, 1982, the profit received by his fund was estimated at 1 billion US dollars. The ForEx market can be divided into four "echelons" (segments). - large (margin = 10 mm. $) - medium (margin = 0.5 mln. $) - small (margin = 0.005 mln. $) - "starter" (margin = 1 $) Main game currencies: USD - US dollar; DEM = German mark GBP = British pound JPY = Japanese yen SWF = Swiss franc Of course, being opposite sides of the same coin, the exchange and over-the-counter markets (although they contradict each other to some extent) are at the same time mutually complementary This is due to the fact that, while performing the general function of trading in currency and circulation of securities in foreign currency, they use various methods and forms of selling currency and securities in foreign currency.
The advantages of the over-the-counter foreign exchange market are: rather low cost of expenses for currency exchange operations. Bank dealers often use face-to-face foreign exchange auctions on the stock exchange to reduce their own costs for foreign exchange conversion by concluding agreements on the sale and purchase of currency at the exchange rate before the start of trading on the stock exchange.
On the exchange, commissions are charged from bidders, the amount of which is directly dependent on the amount of currency and ruble resources sold. In addition, the law establishes a tax on exchange transactions. In the over-the-counter market for authorized bank after the counterparty for the transaction has been found, the currency conversion operation is carried out practically free of charge; - higher speed of settlements than when trading on the currency exchange. This is primarily due to the fact that the over-the-counter foreign exchange market allows you to conduct transactions throughout the entire business day, and not at a strictly defined time of the exchange session. Further, when classifying foreign exchange markets, it is necessary to single out the markets for eurocurrencies, eurobonds, eurodeposits, eurocredits, as well as "black" and "gray" markets.
Let's dwell on this briefly. The eurocurrency market is the international currency market of Western European countries, where transactions are carried out in the currencies of these countries. The functioning of the eurocurrency market is associated with the use of currencies in non-cash deposit and loan transactions outside the countries issuing these currencies. The Eurobond market expresses financial relations on debt obligations in case of long-term loans in Eurocurrencies, issued in the form of bonds of borrowers. The bond contains data on the amount of debt, the conditions and terms of its repayment, the procedure for obtaining interest in accordance with coupons (a coupon is a part of a bond certificate, which, when separated from it, gives the owner the right to receive interest). The Eurodeposit market expresses stable financial relations for the formation of deposits in foreign currency in commercial banks foreign states at the expense of funds circulating on the Eurocurrency market. The eurocredit market expresses stable credit relations and financial relations for the provision of international loans in eurocurrency by commercial banks of foreign countries.
Derivatives trading in recent years is the most important segment of the development of financial markets. rapid development Derivatives markets are facilitated by the existing volatility and rapid volatility in the prices of commodities and financial instruments. When characterizing derivatives markets, we can single out: - the market for forward contracts; - futures market; - options market. Forward transactions, or forward transactions for cash, in accordance with which the buyer and seller agree to the delivery of a commodity or currency at a certain date in the future, are an alternative to futures and options practiced on the exchange, as well as one of the first forms of futures contract that arose as reaction to a significant price change. Futures market.
One of the most successful and at the same time the most controversial innovations in the global financial markets in recent decades has been the beginning of trading in financial futures, i.e. such futures contracts, which are based on financial instruments with a fixed interest rate and exchange rates. A futures contract is a legally valid agreement between two parties to deliver or receive a commodity of a certain quantity and quality at a pre-agreed price at a certain moment or a certain number of points in the future. Financial futures is an agreement to buy or sell a financial instrument at a pre-agreed price within a certain month in the future (on a certain day of the month).
The futures contract market serves two main purposes:
1. It allows investors to hedge against adverse price changes in the spot market in the future (hedger operations).
2. It allows speculators to open large positions with little collateral. Options market. Options are one of the types of futures transactions.
An option is a bilateral agreement on the transfer of rights (for the buyer) and an obligation (for the seller) to buy or sell a certain financial asset at a fixed rate on a pre-agreed date or within an agreed period of time. The currency options market was widely developed in the mid-1970s. XX century, after the introduction in most countries instead of fixed exchange rates floating (since March 1973). A currency option is a contract that gives the right (but not the obligation) to one of the participants in the transaction to buy or sell a certain amount of foreign currency at a fixed price (the strike price of the option) for a certain period of time, while the other participant undertakes, if necessary, to ensure the exercise of this right by being ready to sell or buy foreign currency at a certain negotiated price.
3.2 Market Participants
To give a more complete structural description of the foreign exchange market, it is necessary to list its participants and consider some of the features of their activities. Let's dwell on this issue in more detail. As a rule, there are three main groups of participants, each of which is not homogeneous in its composition. The foreign exchange market is predominantly an interbank market. Therefore, banks and other financial institutions, which constitute the first group of its participants, primarily act as its main actors. They can carry out operations both for their own purposes and in the interests of their clientele.
At the same time, participants can work in the market, entering into direct contact with each other, or act through intermediaries. In this category, first of all, commercial banks stand out, a special place in it is occupied by the central banks of countries. In addition, various financial institutions play a significant role, such as financial affiliates of large industrial and financial groups that have entered the world stage. The scale of their activities in the foreign exchange market is constantly increasing, especially rapidly they have grown in the last decade. For example, large companies operating in any area of production (electronics, aerospace engineering, chemical production, energy, automotive, energy production and processing, etc.) have their own banks or financial divisions operating in the foreign exchange market. To conduct foreign exchange transactions, large commercial banks have deposits in foreign financial institutions that are their correspondents.
At the same time, not all even large banks in Western Europe act as permanent participants in the foreign exchange market. For example, in France they are only a few banks: Credit Lyonne, Paribas, Societe Generale, Bank Nacional de Paris, Endosuez and some others. As already noted, the first group of participants in the foreign exchange market includes central banks. They occupy a special position in this group. First of all, by their status they are not commercial institutions and for this reason they differ significantly from commercial banks and other financial institutions. Central banks also have a dealing department in their structure. However, foreign exchange transactions occupy a subordinate place in the activities of central banks, since they serve for them mainly only as a means of carrying out their main functions and, as a rule, do not aim at the direct extraction of income. In addition, central banks have different types of counterparties and perform different functions. On the one hand, they are guided by the orders of their government (in those countries where central bank does not enjoy full independence) or participate in the implementation of an economic policy agreed with it (in states where the central bank is more independent).
They also coordinate their actions in the foreign exchange market with the policies of the central banks of other countries (in particular, when conducting foreign exchange interventions) and are guided by the provisions normative documents international financial institutions. On the other hand, the function of central banks is to monitor the state of the foreign exchange market and regulate it. First of all, this concerns the exchange rate of the national currency, the adjustment of which in the desired direction is carried out, in particular, through interventions in the foreign exchange market, as well as with the help of the central bank's foreign exchange reserves. In addition, it may affect the operations of commercial banks of the country and other financial institutions, as well as brokers who are obliged to unconditionally provide central bank relevant information. The second group of foreign exchange market participants are independent brokers and brokerage firms.
In addition to conducting their own foreign exchange transactions, they carry out information and intermediary functions, which are closely interconnected. Their informational function is that they tell other market participants the exchange rates at which the latter are ready to make transactions. The intermediary function is that brokers concentrate in their hands orders to sell and buy currencies and provide useful information bank dealers, which greatly facilitates the activities of the latter. Both individual brokers and brokerage firms have a wide network of correspondents and receive income (brokerage commission) on each transaction, both from the seller and the buyer of the currency.
The authority of a particular broker in the foreign exchange market, as a rule, depends on the scale of its activities, the number and solidity of its clientele, and the names of correspondents are the subject of trade secrets. This practice is of particular interest to some financial institutions that do not want to disclose their position in any currency until a certain point. In general, the activities of brokers contribute to the revival of business activity and increase the efficiency of the foreign exchange market. At the same time, it should be noted that the role of brokers in this market is gradually decreasing with a simultaneous increase in the share of transactions implemented through an automated dealer network. Currently, only about 1/3 of the total number of foreign exchange transactions is carried out by brokers. In the field of foreign exchange transactions, brokerage firms, like banks, have their own structure, consisting of departments, each of which deals with one or more currencies.
Accordingly, within the framework of the department, each broker specializes either in "spot" type transactions, or deals with transactions for a certain period, focusing on a specific group of correspondents. The largest and most famous of the brokerage firms in Western Europe are concentrated in London. These are firms of international scale, having representatives or branches not only at the London, but also at other currency exchanges. The third group of participants in the foreign exchange market includes all those who do not personally carry out transactions with currencies, i.e. those who do not speak here directly, but use the services of banks. First of all, they are legal entities(enterprises of industry, trade and other sectors of the economy, some financial non-banking institutions), as well as individuals. Among the financial non-banking institutions that do not directly carry out operations on the foreign exchange market, there are, in particular, pension funds, insurance companies and hedge funds (or hedge companies). Being able to accumulate significant financial resources, they can also act on international markets and are important participants in the foreign exchange market, acting through intermediaries.
3.3 Segments of the foreign exchange market
currency market broker futures
In the foreign exchange market, operations of various contents are carried out, which are united by the corresponding market segments. The main segments of the interbank foreign exchange market are the cash market (the market for transactions at the current rate, or telegraphic transfer operations, also referred to in Western literature as the "spot" market) and the derivatives market (or the market for transactions for a period). In the cash market ("slot" market), the purchase and sale of currencies takes place on the terms of settlement within two business days after the date of the transaction and at the rate at the time of its conclusion. The cash market, being a part of the foreign exchange market, also functions continuously. This means that its participants can buy or sell currency during the entire time of its operation. The exchange rate of any currency is set on the spot market in relation to the US dollar, while there may not be a direct correlation between other currencies at a certain moment. Despite the continuous nature of foreign exchange transactions and the constant determination of exchange rates, in some financial centers there is a so-called "fixing" procedure, the duration of which is different countries different. "Fixing is a process official definition exchange rates of various currencies, i.e. their quotation during periodic meetings of the main market participants, which are held in each financial center.
For example, in Paris, on the premises of the Stock Exchange, since 1977, the fixing procedure has been taking place daily on weekdays for approximately 30 minutes (beginning at 13.30 in winter, and at 14.00 in summer). At the same time, the representative of the French Association of Exchanges announces the rates of the main currencies (the selling and buying rates for each of the currencies) in relation to the French franc, which are then published in the official publication of France.
The difference between the seller's rate and the buyer's rate is called the "spread, or "margin" and represents the income of the bank using the mentioned quotes when conducting foreign exchange transactions. Such an official currency quote allows the clientele of commercial banks to better orient themselves regarding the situation in the foreign exchange market and more accurately formulate their orders to banks The exchange rate of any currency (usually in relation to the US dollar) is expressed as a figure that includes four decimal places, i.e. ten thousandths of 1. In this regard, in the professional terminology of dealers, the concept of "pip", i.e. "point ", denoting 1/10000 of the exchange rate.
For example, the exchange rate of the French franc against the US dollar can be expressed as 5.5950-5.5958, where the first corresponds to the purchase rate, and the second to the sale. In this case, the franc rate can also be represented as the following expression: 5.5950/08, where 08 is the number of "pips", which is the difference between the selling and buying rates, or "spread" ("margin"). The official quotation of currencies (fixing) in one form or another is carried out on most exchanges in the cities of Western Europe: in Amsterdam, Brussels, Madrid, Milan, Paris, Frankfurt am Main. However, the largest of them (London and Zurich) do not have such a quote.
Currently, the cash market ("spot" market) is still the largest segment of the foreign exchange market. Despite the fact that in recent years the volume of trading here has grown more slowly than in other segments (currency futures and options markets), the cash market accounts for slightly less than half (about 49%) of the total turnover of the foreign exchange market. Another important segment of the foreign exchange market is the futures market (forward transactions). Participants in this market assume the obligation to buy and sell the currency at the rate set at the time of the transaction, but with the condition of mutual delivery of currencies within the agreed time. Transactions are concluded either for a period of three to seven days, or for 1, 2, 3, 6, 9, 12 and 18 months, or for two or three years, for five years. The object of such transactions can usually be any freely convertible currency.
However, the longer the term of the transaction, the fewer currencies it can cover. The fact is that one of the two main purposes of futures transactions, in addition to extracting speculative profits, is primarily insurance against possible risk caused by changes in exchange rates. Therefore, with terms from three days to six months, it is possible to conclude transactions in almost all convertible currencies used in international settlements. In carrying out operations for a period of one and two years, such currencies as the Austrian schilling, the Belgian franc, the Spanish peseta, the Italian lira, the Portuguese escudo, as well as the monetary units of the Scandinavian countries, are almost never used. In contracts for a period of more than two years, only the leading currencies are used: the US dollar, the German mark, the Swiss franc, the Japanese yen and the British pound sterling. As a rule, when performing term transactions, banks require certain guarantees from customers in the form of appropriate deposits (except in cases where the counterparty is another bank or financial institution).
The need for such guarantees increases when the underlying currencies fluctuate significantly. Currencies with delivery at a certain time do not have an official quotation, their rates are formed under the influence of market forces, and therefore they differ from the rates of currencies with immediate delivery ("spot" transactions). Transactions for any period of more than two business days are called forward transactions.
Moreover, if the exchange rate for them is higher than the current "spot" rate, then they say that such a currency is quoted with a premium, but if it is lower than the rate for cash transactions, then we are talking about a discount. In the conditions of stabilization of the foreign exchange market, the volume of futures transactions is reduced in comparison with cash transactions. On the contrary, with significant fluctuations in exchange rates on the spot market, the volume of forward transactions increases. Thus, in recent years, due to the intensification of destabilizing phenomena in the foreign exchange market, the volume of urgent transactions increased faster than the volume of cash transactions. - There are two types of currency transactions in the forward market.
The first type includes ordinary forward transactions, which involve the purchase or sale of currency with maturities of more than two days. The second type is "swap" transactions, which are the simultaneous purchase and sale of currencies with different settlement periods. In this case, the same person always acts as a counterparty.
A "swap" transaction can also be defined as a combination of "spot" transactions and forward transactions ( classic look transactions: "swap" = transaction "spot" + "forward. It should be noted that in addition to traditional transactions such as "spot" and forward transactions in the 70s, relatively new types of transactions (the so-called standard contracts) appeared on the foreign exchange market: currency futures and options.These market segments have developed on their basis.Currency futures provide the holder with the right and obligation to deliver a certain amount of currency at a certain date in the future at an agreed exchange rate.Futures are very similar in appearance to forward transactions, but there are the following differences between them : - futures are more standardized, as they are characterized by a standard volume of currencies and settlement terms; - futures are held on organized markets (futures exchanges); - futures dealers do not trade directly with other dealers, since clearing companies act as intermediaries between them. Currency options give the holder the right, but do not impose no obligation to buy (premium deal, buy option) and sell (reverse premium deal, put option) currency by a certain date in the future at an agreed exchange rate.
The main differences between futures and options are as follows: - the owner of the option has the opportunity to buy or sell the currency, but is not required to do so; - in order to buy or sell an option, it is necessary to pay an additional premium to one of the parties. This means that an option, unlike a futures contract, has a fixed price; - trading in options is mainly carried out on the over-the-counter securities market.
The considered segments of the foreign exchange market in modern conditions are undergoing further evolution. As already noted, the cash market practically still retains the first place in terms of the volume of transactions among other segments in the total turnover of the foreign exchange market.
At the same time, the forward market, which includes conventional forward transactions and the swap market, developed much faster than the spot market in the early 1990s.
First of all, this refers to the swap market, which has become the second largest segment of the foreign exchange market (about 40% of turnover in 1992) after the market cash transactions. The volume of transactions with foreign exchange options also increased significantly, although its share in the total turnover of the foreign exchange market remains modest relative to other segments.
Conclusion
Thus, we can say that the foreign exchange market is a mechanism by which legal and economic relationships are established between consumers and sellers of currencies. This is its main functional characteristic.
In addition, the foreign exchange market performs the following functions:
1. Timely implementation of international payments.
2. Regulation of exchange rates.
3. Diversification of foreign exchange reserves.
4. Insurance of currency risks.
Making profit by participants in the foreign exchange market in the form of a difference in exchange rates. In terms of structure, the foreign exchange market can be characterized from different perspectives: content, segments and participants. The foreign exchange market in Russia cannot be called developed compared to the world, but it performs some functions of the domestic foreign exchange market and has structured system in many ways similar to other systems of foreign exchange markets.
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I. Depending on the volume and nature of foreign exchange transactions, the number of currencies used and the degree of liberalization
1. National (domestic) foreign exchange market is the market of one state. They exist in all developed countries. market economy. Currency exchange operations are carried out only in this country.
The national foreign exchange market is understood as the entire set of operations carried out by banks located in the territory of a given country, for foreign exchange services for their customers, which may include companies, individuals, banks that do not specialize in international foreign exchange operations, as well as their own foreign exchange operations. . In countries with restrictive foreign exchange laws, the official foreign exchange market is usually complemented by a "black" (illegal market) and a "grey" market (where banks transact with non-convertible currencies).
National currency markets ensure the movement of cash flows within the country and maintain communication with world currency centers. The degree of involvement of national markets in the operations of the world foreign exchange market depends on the degree of integration of the country's economy into the world economy, on the state of its monetary and credit system and taxation system, the level of foreign exchange control and foreign exchange regulation (the degree of freedom of action of non-residents in the national foreign exchange and stock markets), stability political system of the country and, finally, from its convenient geographical position.
2. Regional currency market - a market in which transactions are made with a certain range of world currencies.
There are the following regional currency markets:
· Asian currency market (with centers in Tokyo, Hong Kong, Singapore, Melbourne, Bahrain);
· European currency market (with centers in London, Frankfurt am Main, Zurich);
· American foreign exchange market (with centers in New York, Chicago, Los Angeles, Montreal).
The annual volume of transactions in these currency markets is over 250 trillion. Doll.
Transactions with certain convertible currencies are carried out on regional and national currency markets.
With the development of national and regional markets and their mutual relations, a single world currency market has developed.
3. World currency market - a market that includes individual markets, localized in different regions of the world, centers of international trade and monetary and financial transactions.
The world currency market is also called FOREX - short for English FOReign EXchange means "foreign currency exchange". The main participants in this market are banks and brokerage houses. They fulfill the orders of their clients for the purchase / sale of a particular currency.
The FOREX market is the largest market in the world in terms of transactions. During the day, transactions are made on it in the amount of one to three trillion dollars. By comparison, the world's largest New York Stock Exchange has a daily trading volume of less than $2 billion.
FOREX began to take shape in 1971, when the exchange rates became floating. FOREX appeared in Russia in the late 90s. FOREX is less speculative than the Russian stock market due to its volume and liquidity (daily turnover is 3 trillion dollars). And in terms of volatility, FOREX is second only to the government bond market of developed countries. Rates of leading currencies rarely change by more than 1% in one day, and the FOREX conjuncture is influenced to a greater extent by macroeconomic data and the news background.
The world currency market is concentrated in the world financial centers.
World financial centers- these are places of concentration of banks, specialized financial institutions, in which international currency, credit, financial operations, transactions with securities, gold. Among the MFCs, the currency markets in London, New York, Frankfurt am Main, Paris, Zurich, Tokyo, Singapore, and Hong Kong stand out.
The leading position is retained by the London currency market (more than 30% of daily foreign exchange transactions in the world). London has long been a leader in foreign exchange trading due to its extensive experience in this area, the liquidity of foreign exchange transactions, the abundance of foreign banks (524 out of 76 countries per square mile of the City). In the Asian region, the Singapore currency market is developing most rapidly, which ranked second after Tokyo in terms of daily turnover.
40% of world currency turnover falls on the European market, 40% - on the American market, 20% - on the Asian market.
On the world currency markets, banks carry out transactions with currencies that are widely used in the global payment turnover, and almost never make transactions with currencies of regional and local significance, regardless of their status and reliability.
Modern world currency markets are characterized by the following main features.
1. Internationalization of foreign exchange markets based on the internationalization of economic relations, the widespread use of electronic means of communication and the implementation of transactions and settlements on them.
2. Operations are performed continuously throughout the day, alternately in all parts of the world. Work on the currency markets in accordance with calendar days according to the countdown of time zones from the zero meridian passing through Greenwich - Greenwich Meridian Time (GMT), begins in New Zealand (Wellington) and passes successively time zones in Sydney, Tokyo, Hong Kong, Singapore, Moscow , Frankfurt am Main, London, New York and Los Angeles.
3. The technique of currency transactions is unified, settlements are carried out on correspondent accounts of banks.
4. Broad development of foreign exchange operations for the purpose of insuring foreign exchange and credit risks. At the same time, previously practiced foreign exchange transactions are replaced by futures and other foreign exchange transactions.
5. Speculative and arbitrage transactions far outnumber the foreign exchange transactions associated with commercial transactions, the number of participants has increased dramatically and includes not only banks and TNCs, but also others.
6. Instability of currencies, the exchange rate of which, like a kind of exchange commodity, often has its own trends that do not depend on fundamental economic factors. The world currency market is the most powerful and liquid, but extremely sensitive to economic and political news.
II. By the urgency of foreign exchange transactions There are three main segments of the foreign exchange market:
a) spot market - trading market with immediate delivery of currency (within 2 working days); it accounts for up to 65% of the total currency turnover;
b) forward (terms) market - a market in which the following operations are carried out: forward, futures, option. Up to 10% of foreign exchange transactions are carried out in this market
If a participant in the foreign exchange market needs to buy a foreign currency after a certain period of time, he can enter into a futures contract to buy this currency. Forward currency contracts include forward contracts, futures contracts and currency options.
Both forward and futures contracts are an agreement between two parties to exchange a fixed amount of currency at a certain date in the future at a predetermined (term) exchange rate. The difference between them is that forward contract is off-exchange, and futures contract is purchased and sold only on the currency exchange in compliance with certain rules by means of an open offer of the currency price by voice.
currency option- a contract that provides the right (but not the obligation) to one of the participants in the transaction to buy or sell a certain amount of foreign currency at a fixed price for a certain period of time. The buyer of an option pays a premium to its seller in return for his obligation to exercise the above right.
in) swap market - a market that combines operations for the purchase and sale of currency on the terms "spot" and "forward". It implements up to 25% of all foreign exchange transactions.
III. By entities operating with currency, the foreign exchange market is subdivided into the interbank, client and exchange markets.
On the exchange segment foreign exchange market transactions with currency can be made through the currency exchange or by trading derivatives (derivatives) in the currency departments of commodity and stock exchanges. Currency exchanges are not available in all states (for example, they are absent in the Anglo-Saxon countries).
In general, most foreign exchange transactions (about 80% of all foreign exchange transactions) are carried out on interbank segment foreign exchange market (currency exchange operations between banks) and mainly on the current (spot) market. It is in the course of interbank transactions that the exchange rate is directly formed.
The interbank market is divided into direct and brokerage.
brokerage: Other market participants hold accounts in banks and carry out the necessary conversion operations with them. Banks, as it were, accumulate (through transactions with clients) the total needs of the market in currency conversions, as well as in attracting and placing funds, and go with them to other banks.
Straight: In addition to satisfying customer requests, banks can conduct operations on their own at their own expense.
In addition, all foreign exchange operations can be divided into those that serve international trade(they account for about 10% of all foreign exchange transactions), and foreign exchange transactions that are not directly related to servicing exports and imports, but are purely financial transfers (speculation, hedging, investments). It is financial transfers that dominate the foreign exchange market.
