4.5 Futures Contracts
Futures contracts are like forward contracts except they are traded on an exchange, have a standard quantity of foreign currency, have standardised delivery rules and dates and their performance is guaranteed by the exchange’s clearing house.
4.4 Other Forex Forwards
The following other forex forwards can be found in the forex market: Forward forwards: A swap deal between two forward dates, settlement takes place on second forward date. A foreign exchange agreement: A forward-forward, but settlement takes place on the first settlement date. Exchange rate agreement: The same as foreign exchange agreement but account differently […]
4.3 Foreign Exchange Swaps
A Forex swap is the exchange of two currencies now at a specified exchange rate coupled with an agreement to exchange the same two currencies at a specified future date at the specified exchange rate plus or minus the swap points. For example, if a US bank needs temporary working capital in Germany and does […]
4.2 Outright Forward
An outright foreign exchange forward transaction, like a spot transaction, is a straightforward single purchase of one currency for another. The only difference is that where a spot transaction is settled or delivered on a value date (settlement date) no later than two business days after the deal date, an outright forward transaction is settled on any pre-determined date […]
4.1 Introduction
A spot transaction is a transaction involving the trade in a currency based on the spot rate. The spot rate is quoted for ‘immediate’ (in practice, two working days) delivery as illustrated in following. Figure 4.1: Spot transactions – dealing and value dates There are two spot rates for a currency. The bid rate is […]
3.3 Forex Global Code of Conduct
The FX Global Code is a set of global principles of good practice in the foreign- exchange market, developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign-exchange market. It was developed by a partnership between central banks and market participants from 16 jurisdictions around the […]
3.2 Code of Conduct for FSPs Conducting Forex Investment Business
In addition to the General Code of Conduct and any other specific codes that might apply, a financial services provider that is authorised to provide financial services in foreign investments must also comply with the Code of Conduct for FSPS conduction Forex Investment business. A. Introduction The reference to foreign currency denominated investments, excluding foreign […]
3.1 Introduction FIC
Exchange controls have been imposed on South African residents since the early 1930’s and they have been periodically tightened and relaxed ever since, largely in the an attempt to prevent capital flight as a result of increased political tensions in the country during the years of the apartheid regime. In the last several years, the […]
1.5 Currency as an Asset Class
Foreign exchange as long been regarded by institutional investors as a by-product of international asset allocation decisions. Through time investment banks and other institutions have developed currency overlap products to manage foreign exchange risk more actively for such investors, in order to assist them with generating overall higher return on their investment. More recently, a […]
1.4 Foreign Exchange Market Participants
There are many participants in the foreign exchange markets. A. Commercial banks Commercial banks participate in the foreign exchange market by: Offering to buy and sell foreign exchange on behalf of their customers (retail or wholesale) as a standard financial service. Trading in foreign exchange as intermediaries and market makers. Managing their proprietary foreign exchange […]