exchange

The first exchange to be based on an open electronic limit order book was the National Stock Exchange (NSE), which started trading debt instruments in June 1994 and equity in November 1994. In March 1995, BSE shifted from open outcry to a limit order book market. Currently, 17 of India’s stock...

According to section 15(a) (1) of SEC Act, it is unlawful for the brokers/dealers to effect any transactions or inducer the purchase or sale of a security without being registered with the Commission. The brokers/dealers can register themselves by filling prescribed application Form, which...

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. A fixed exchange rate is usually...

The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors. The basic types are a floating exchange rate, where the...

• Exchange offers If a family bought a refrigerator 10 years ago and the machine is still giving reasonable service then the family is unlikely to buy a newer and more advanced version of the refrigerator unless they get rid of the older one by selling it to someone. No one in our country is...

FOREIGN EXCHANGE SWAPS A basic foreign exchange swap is the simultaneous purchase and sale of one currency for another, where the two contracts have different dates (different positions of same or different amount on different dates). Let’s study the following illustration. An export oriented...

The main foreign exchange linked derivatives are currency forwards, currency futures, currency options and currency swaps and combination of the above. For borrowers, access to the currency derivatives ensures that they have access to the lowest cost capital markets around the world. The...

A good foreign exchange policy is critical to the sound risk management of any corporate treasury. Without a policy decisions are made ad-hoc and generally without any consistency and accountability. Its important for treasury personnel to know what benchmarks they are aiming for and its...

The days of corporate treasuries being aggressive profit centers are long gone although there are a few that still survive. These days Corporate are far more conservative with foreign exchange risk management and have reasonably well defined guidelines for the management of Forex risk. At a...

FOREIGN EXCHANGE EXPOSURE Foreign exchange risk is related to the variability of the domestic currency values of assets, liabilities or operating income due to unanticipated changes in exchange rates, whereas foreign exchange exposure is what is at risk. Foreign currency exposures and the...

In a free market, it is the demand and supply of the currency which should determine the exchange rates but demand and supply is the dependent on many factors, which are ultimately the cause of the exchange rate fluctuation, some times wild. The volatility of exchange rates cannot be traced to...

EXCHANGE BROKERS Forex brokers play a very important role in the foreign exchange markets. However the extent to which services of forex brokers are utilized depends on the tradition and practice prevailing at a particular forex market center. In India as per FEDAI guidelines the A Ds are free...

The main players in foreign exchange markets are as follows:  CUSTOMERS The customers who are engaged in foreign trade participate in foreign exchange markets by availing of the services of banks. Exporters require converting the dollars in to rupee and importers require converting rupee...

In India, foreign exchange has been given a statutory definition. Section 2 (b) of Foreign Exchange Regulation Act, 1973 states: ‘Foreign exchange’ means foreign currency and includes:  All deposits, credits and balances payable in any foreign currency and any drafts, traveler’s cheques...

EXCHANGE RATE SYSTEMS IN DIFFERENT COUNTRIES The member countries generally accept the IMF classification of exchange rate regime, which is based on the degree of exchange rate flexibility that a particular regime reflects. However, it has been generally observed that there exists no strict...

The Exchange Rate Mechanism (ERM): Currencies in the ERM had fixed central rates against each other and against the ECU, a composite European currency, but a variation margin around the central rate was permitted before central government intervention was required. However, exchange rate...

Different countries have adopted different exchange rate systems at different times. The following are some of such systems in brief  Gold Bullion In modern times, the operative system of exchange rates has evolved from a gold bullion standard to a system of floating...

Let us consider a case where a Japanese company exports electronic goods to USA and invoices the goods in US Dollars. The American importer will pay the amount in US dollars, as the same is his home currency. However the Japanese exporter requires Yen means his home currency for procuring raw...

FOREIGN EXCHANGE TRANSACTIONS I Transactions other than FCNR EEFC RFC accounts i) Foreign currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by foreign exchange Dealers Association of India...

Since the international trade implies returns and payments in a variety of currencies whose relative values may fluctuate it involves taking foreign exchange risk. The players mentioned above are facing this risk. A key question facing the players then is whether these exchange risks are...