TREASURY OPERATIONS ON THE FX MARKET

Abstract

This paper provides a quick overview of the modern market for currency trading (FX Market) and current trading practice (FX Trading). First, we define and explain differences between three treasury types, depending on the entity in which the treasury is located: bank treasury, corporate treasury, and state treasury. Further, we elaborate on the differences between the interbank and retail markets. Second, we present the most important market participants: liquidity providers, brokers, hedgers, speculators, arbitrageurs, central banks, and retail market participants. Third, we present key trading venues: single-bank platforms that enable clients to use one FX rate, multi-bank platforms that enable clients to receive rates from multiple banks and choose the best rate, and phone trading. Fourth, we explain the commonly used quoting prices: bid/ask/mid-price, bid/ask spread, big/small figure, American/European terms, points, forward points, and swap points. Fifth, we explain the difference between spot and forward in terms of days and holidays. Finally, we discuss key products used on the FX market: Spot, Forward, SWAP, NDF, Windows Forward, and Take-up.