International currency market. Abstract: Foreign exchange market Foreign exchange market and its types
Before talking about the foreign exchange market, it is necessary to define such concepts as currency and the exchange rate. Currency - a type of monetary unit used to measure the value of goods, both in the domestic and international markets. The exchange rate is the price of the currency of one country, expressed in the currency of another at a certain point in time.
Under the foreign exchange market, it is customary to understand the totality of transactions for the purchase and sale of currency. However, other definitions of the foreign exchange market can be given based on different points of view:
- -Based on the economic essence, the foreign exchange market can be understood as the sphere of economic relations associated with the implementation of transactions for the purchase and sale of currency and currency values, as well as the investment of capital in foreign currency.
- -From a functional point of view, the foreign exchange market is considered as a set of various operations with currency and currency values, which includes international settlements, exchange risk insurance, diversification of foreign exchange reserves, foreign exchange interventions and speculative operations.
- -From an institutional point of view, the foreign exchange market is a set of institutional participants (currency exchanges, authorized banks, investment companies, brokerage houses, foreign banks) engaged in currency transactions.
- - From an organizational and technical point of view, the currency market is understood as a set of telephone, electronic, Internet and other communication systems that connect the participants of the currency market.
Thus, by combining all of the above, we can give the following definition of the foreign exchange market. The foreign exchange market is a system of stable economic and organizational relations that arise between participants in the foreign exchange market when carrying out transactions for the purchase or sale of foreign currency, payment documents in foreign currencies, as well as operations for the movement of capital of foreign investors, and communication systems serving them.
The purpose of the foreign exchange market is to create conditions for the circulation of currency values, transactions for the purchase and sale of foreign currency between banks and business entities, insurance of market participants from foreign exchange risks.
The main task of the foreign exchange market is to organize an uninterrupted system for the exchange of the national currency, which is legal tender only in the territory of a certain state, for a foreign one.
The main subjects of the foreign exchange market:
- - Central (National) Bank;
- - authorized banks;
- - foreign banks;
- - business entities that carry out foreign trade operations;
- - financial institutions such as currency exchanges, investment companies, etc.
Foreign exchange market instruments include:
- 1. currency values;
- 2. foreign currency;
- 3. securities in foreign currency.
The need for the existence of foreign exchange markets, in which the currency of one country is exchanged for the currency of another, is due to the lack of a single means of payment in international settlements.
Like any market, the currency market also has its own functions, which are as follows:
- 1. ensuring the timely implementation of international payments;
- 2. currency risk insurance;
- 3. diversification of foreign exchange reserves;
- 4. implementation of foreign exchange interventions;
- 5. profit from the difference in exchange rates
One of the first functions of the foreign exchange market is to ensure the timely implementation of international payments. They mean settlements in foreign trade, for goods and services, tourism, money transfers, involving the purchase and sale of foreign currency.
The second function of the foreign exchange market is the insurance of foreign exchange risks. Currency risk insurance is understood as measures aimed at reducing the currency risk in the course of foreign exchange transactions. And under the currency risk, in turn, it is customary to understand the risk of losses caused by fluctuations in exchange rates.
The third function is the diversification of foreign exchange reserves. This concept implies the storage of foreign exchange reserves not in one, but in several currencies, as well as changing this set of currencies in order to reduce the possible risk.
The fourth function is the implementation of foreign exchange interventions. Under foreign exchange interventions, it is customary to understand the intervention of the country's central bank in the foreign exchange market through the purchase and sale of foreign currency to influence the national currency rate. However, it should be noted that foreign exchange interventions can be an effective method of influencing only in the short term, since only interventions cannot ensure for a long time the levels of rates that do not correspond to the basic economic and financial indicators of the state.
The fifth function of the foreign exchange market, we identified profit from the difference in exchange rates. Profit from the difference in exchange rates is obtained through speculative foreign exchange transactions.
The foreign exchange market is part of the country's financial market, but it has its own characteristics that distinguish it from the financial market. These include:
- 1. lack of clearly defined geographical boundaries;
- 2. round the clock operation;
- 3. unlimited number of participants;
- 4. high degree of liquidity.
Due to the complex economic nature of the foreign exchange market, it can be classified according to the following criteria:
1. on a territorial basis:
a. international market;
b. regional;
c. National;
2. in terms of the distribution of foreign exchange transactions
a. world - represents a set of national markets interconnected by cable and satellite communications.
b. national - it is customary to understand the foreign exchange market that operates within a particular country.
3. according to the degree of organization:
a. exchange;
b. over-the-counter.
4. in relation to currency restrictions:
a. a free market with no currency restrictions;
b. not free, which is characterized by currency restrictions.
5. by types of applied exchange rates:
a. market with one regime - a market with a floating exchange rate, the quotation of which is set at exchange auctions;
b. dual regime market - a market with simultaneous application of fixed and floating exchange rates;
6. according to the composition of participants:
a. straight;
b. brokerage.
Under the direct foreign exchange market, it is customary to understand the market where transactions are made directly between buyers and sellers without the participation of intermediaries. The brokerage foreign exchange market is understood as a market where currency purchase and sale transactions are made with the help of brokers, i.e. professional intermediaries.
7. by types of financial assets circulating on the foreign exchange market:
a. dollar market;
b. ruble market;
c. euro market;
d. sterling market, etc.
8. by nationality of participants:
a. resident market;
b. non-resident market.
An important element of the foreign exchange market is the exchange rate, which is formed under the influence of the state, as it is the object of state regulation.
The main methods of regulating exchange rates are foreign exchange interventions such as revaluation and devaluation, discount policy and foreign exchange restrictions.
Foreign exchange intervention-the direct intervention of the state in operations in the foreign exchange market in order to influence the exchange rate of the national currency. Actions aimed at increasing the exchange rate of the national currency are called revaluation, a targeted decrease in the exchange rate of the national currency is called devaluation.
In the world practice of management, the discount policy is widely used, i.e., the regulation of the discount rate. In order to increase the exchange rate, the National (Central) Bank increases the discount rate, which stimulates the inflow of foreign capital and, as a result, the balance of payments improves, the national currency rate rises, and vice versa, the discount rate deliberately decreases and the exchange rate also decreases.
The exchange rate is also influenced by currency restrictions - this is a set of measures aimed at limiting currency transactions.
The formation of the exchange rate-a process due to the relationship of the national and world economy and politics. The establishment of rates, proportions of the exchange of foreign currency for the national currency is called the quotation of foreign currencies.
Quote - the price at which you can buy or sell the country's currency, set at a given point in time.
Purchasing power parity of currencies is the amount of one currency in units of the other required to purchase the same goods and services in the markets of both countries.
There are nominal and real exchange rates. Nominal exchange rate -- the price of one currency, defined in units of another. The real exchange rate is defined as the ratio of the prices of goods in the consumer basket of the two countries in the corresponding currency.
A cross rate is the rate of two foreign currencies relative to the rate of a third.
Each country chooses an exchange rate regime. There is a single exchange rate and a plurality of exchange rates. Single exchange rate -- the use of one exchange rate for all types of foreign exchange transactions, all participants in the foreign exchange market. The multiplicity of exchange rates is based on the legislative consolidation of various national currency rates for various participants in the foreign exchange market and depending on the types of foreign exchange transactions.
The regulation of the exchange rate regime provides for two options:
- 1. fixed exchange rate, which is based on currency parity, i.e. the officially established ratio of monetary units of different countries;
- 2. floating exchange rate, which reflects the market supply and demand for the currency and is formed in the course of trading on currency exchanges and may be subject to significant fluctuations.
Also, it is necessary to consider the concept of settlements in foreign economic transactions, in particular, the features of their conduct in the Republic of Belarus. In the civil legislation of the Republic of Belarus, settlements are understood as payments by one person in favor of another person. Although civil law does not directly define the term "settlements", the conclusion that the settlements are cash payments is contained in Art. 141 of the Civil Code of the Republic of Belarus (hereinafter referred to as the Civil Code): “The Belarusian ruble is legal tender, mandatory for acceptance at face value throughout the territory of the Republic of Belarus.”
Payments on the territory of the Republic of Belarus are made by cash and non-cash payments.
The rules for conducting foreign exchange transactions, approved by the Resolution of the Board of the National Bank of the Republic of Belarus dated April 30, 2004 No. 72, define settlements as the fulfillment of a monetary obligation by making payments in cashless form or in cash.
Thus, from the point of view of both civil and banking legislation, settlements are cash payments. However, if the concept of settlements is defined by Belarusian legislation quite unambiguously, then in foreign economic relations the issue of disclosing the concept of settlements remains very difficult. If settlements are made between a resident of the Republic of Belarus and a non-resident who has a representative office in the territory of the Republic of Belarus through such a representative office, then it seems quite legitimate to extend the settlement rules established by Belarusian legislation to the relations of these entities. However, if a non-resident is located outside the Republic of Belarus, the issue of applying Belarusian law to the relationship between a resident and a non-resident is quite controversial.
The banking legislation governing non-cash payments in Belarusian rubles and foreign currency contains provisions on the procedure for transferring funds abroad and receiving funds from abroad. Legislation on foreign exchange transactions also regulates the use of national and foreign currencies in settlements between residents and non-residents. Legislative acts and departmental instructions on currency issues define:
- - basic principles of foreign exchange transactions in the Republic of Belarus;
- - types of currencies and currency values used in the Republic of Belarus;
- - the rights and obligations of residents and non-residents in relation to the possession, use and disposal of currencies and currency values in the territory of the Republic of Belarus;
- - powers and functions of Belarusian bodies and agents of currency regulation and currency control, etc.
The main legislative acts and regulatory materials are:
- - Law of the Republic of Belarus dated July 22, 2003 No. 226-З “On currency regulation and currency control”;
- - Code of the Republic of Belarus dated October 25, 2000 No. 441-Z "Banking Code of the Republic of Belarus";
- - Law of the Republic of Belarus of November 25, 2004 No. 347-Z "On State Regulation of Foreign Trade Transactions"
- - Decree of the President of the Republic of Belarus dated March 27, 2008 No. 178 “On the Procedure for Conducting and Controlling Foreign Trade Operations”
- - Resolution of the Board of the National Bank of the Republic of Belarus dated April 30, 2004 No. 72 “On approval of the rules for conducting foreign exchange transactions”;
- - Resolution of the Board of the National Bank of the Republic of Belarus dated September 13, 2006 No. 129 “On the procedure for the implementation of the mandatory sale of foreign currency on the domestic cotton market”;
- - Resolution of the Board of the National Bank of the Republic of Belarus dated January 17, 2007 No. 1 “On approval of the instruction on the procedure for conducting foreign exchange transactions using cash foreign currency and cash Belarusian rubles”;
- - Resolution of the Board of the National Bank of the Republic of Belarus dated April 30, 2004 No. 73-38 “On approval of the Instruction on the procedure for import, export and transfer of foreign currency, Belarusian rubles, payment documents in foreign currency, documentary securities in Belarusian rubles and foreign currency by individuals persons across the customs border of the Republic of Belarus”;
- - Resolution of the Board of the National Bank of the Republic of Belarus dated April 16, 2009 No. 46 “On approval of the Instruction on the procedure for registering a transaction and performing the functions of currency control agents by banks and non-bank financial institutions”
Thus, we can conclude that the requirements of the national legislation in terms of settlements for foreign economic transactions are mandatory for both residents and non-residents, but apply only to transactions carried out in the country. In other cases, priority is given to international agreements on settlements between economic entities of the countries-participants of the agreements.
When concluding a foreign trade contract, you must specify the following information:
- - form and type of calculations;
- - timing of payments;
- -currency of payments.
Let's dwell on these issues in more detail.
Form of calculation. Article 231 of the BC provides for settlements in cash and non-cash form. At the same time, non-cash settlements mean settlements between individuals and legal entities or with their participation, carried out through a bank or a non-bank financial institution in a non-cash manner.
Since settlements in cash in relations between legal entities and individual entrepreneurs are limited by law, settlements between business entities are carried out mainly in non-cash form.
Settlements in non-cash form can be carried out in the form of:
- - bank transfer;
- - letter of credit;
- -collection.
Financial documents can be bills of exchange, checks and other documents used to receive payment, issued in order to fulfill obligations in cash.
The second condition for settlements is the timing of payments. The deadlines for the receipt of funds, determined by the Decree of the President of the Republic of Belarus dated 04.01.2000 No. 7 "On improving the procedure for conducting and controlling foreign trade operations", are mandatory.
The third condition for settlements is the determination of the payment currency. The choice of payment currency under a foreign trade contract is limited by the requirements of the currency legislation of the Republic of Belarus and the country of the second party under the contract, as well as a number of international agreements. The use of currency in settlements between residents and non-residents is mainly regulated by the Law of the Republic of Belarus dated July 22, 2003 No. 226-З “On currency regulation and currency control” and Rules No. 72.
According to Rules No. 72, Belarusian rubles in settlements between a resident and a non-resident can be used when funds are transferred from or to an account of a non-resident opened in Belarusian rubles. The use of Belarusian rubles as a payment currency is also possible in cases where the resident is a subject of a state with which the Republic of Belarus has concluded an international agreement on the use of national currencies in settlements. In this case, the payment must be made from an account or to an account of a non-resident opened with a non-resident bank of a foreign state, the subject of foreign exchange operations of which this non-resident is. In other cases, not provided for by international agreements with the participation of the Republic of Belarus, monetary obligations between a resident and a non-resident may be expressed and executed in foreign currency.
The value of the foreign exchange market for the economy is reflected in the following functions:
- 1. the foreign exchange market serves the international circulation of goods, services and works;
- 2. under the influence of supply and demand, the foreign exchange market forms the exchange rate;
- 3. the foreign exchange market acts as an instrument of the state in the conduct of monetary policy;
- 4. The foreign exchange market acts as a mechanism for protecting economic entities from foreign exchange risks and speculative transactions.
World
It unites all existing national markets that actively interact with each other thanks to the development of modern means of communication. The main elements of the international market are regional interstate markets, as well as markets of interstate concerns and transnational corporations.
National
Operates within the state. The degree of its integration into the international market directly depends on the involvement of the state economy in the global one. Includes:
- markets of individual regions or territorial districts;
- markets of historically established economic territories.
Kinds
Futures currency market
Futures are contracts that oblige the buyer to purchase and the seller to sell a certain amount of currency on a specified date at an agreed rate.
Option foreign exchange market
Option contracts are agreements that provide the right to buy or sell a currency in a predetermined volume and at a specific cost.
Differences between futures and options:
- futures are binding, options are not;
- futures agreements are always standardized, but options that are negotiated outside the trading floor may not meet generally accepted standards;
- options can be entered into on the stock exchange and out of it. Futures transactions are registered on exchanges or.
Classification
Depending on the deadlines for conducting contractual operations, there are:
Spot
It is a market where most of the conversion operations are carried out. Their main condition is the delivery of currency to the customer within 2 business days after the signing of the papers (such restrictions are typical for the "interbank" and exchanges). Settlement for the purchased currency mass in the client markets is carried out immediately.
Urgent
Transactions related to the purchase or sale of foreign exchange are concluded on it for a specific period. This type of market, in turn, is divided into 2 subspecies:
- futures currency market;
- forward currency market.
Forward agreements are contracts under which the seller is obliged to provide a currency batch at a predetermined price in a specific period. Futures agreements involve the delivery of a batch of currency after a certain time period, however, at a price that was fixed on the market at the time of the transaction.
Differences between forward and futures:
- Futures are concluded only through written execution. Forwards can also be issued with a simple exchange of "tickets".
- Futures contracts can be resold, but forward contracts cannot.
- Futures contracts concluded on the currency market are always standardized. Forward agreements can be concluded in any form.
- Forward contracts, as a rule, are concluded outside the currency exchanges. Futures agreements, on the other hand, must be formalized on exchanges, otherwise they will not have any legal force.
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Foreign exchange market: in simple words about complex concepts
If you look at Wikipedia, you can find the following definition:
« Currency market(eng. Foreign exchange market, currency market) is a system of stable economic and organizational relations that arise in the course of operations for the purchase and / or sale of foreign currency, payment documents in foreign currencies, as well as operations for the movement of capital of foreign investors "
Currency market very versatile. Many economists are still arguing how to properly interpret this concept. There are dozens or even hundreds of definitions of the currency market, each of which has its own peculiarities. As they say, how many people, so many opinions. But no matter how you understand, interpret the concept of "foreign exchange market", its essence will not change, it will still have clear functions and fulfill the tasks set economically. In simple terms, the foreign exchange market is a place where investors, sellers and buyers of currency values come to a certain agreed opinion.
Perhaps this article would have been written much later, but the situation that is happening in the foreign exchange market of both Russia and Ukraine made us understand some concepts in more detail, understand why there are significant jumps in the dollar and euro, who influences these changes how you can protect yourself from losing the value of money. Of course, within the framework of one article it will be difficult to consider general concepts, give an analysis of what is happening, and even delve into financial analytics. But we will try to give answers to many questions that arise as concisely and informatively as possible.
Foreign exchange market: what is it?
As you already understood, the foreign exchange market is a system of special economic relations that are built on the sale and purchase of currency values. This market has all the attributes of an ordinary market: subjects and objects, supply and demand, structure, communications, the price of goods, even its own speculators and dishonest players. The most important difference lies in the specific product. Here the currency values and the currency of different countries of the world itself are the basis.
Modern currency markets did not arise by chance, but as a result of the evolution of society and economic relations. It is worth noting that operations for buying, selling and exchanging currency existed in ancient Rome, and in Russia there were even special money changers who exchanged money, taking a small fee for this. But the first currency markets, which became the "great-grandfathers" of modern ones, appeared in the 19th century. Economists identify the following basic prerequisites for the formation of the currency market:
- Development and formation of economic relations between different states
- Creation of an international monetary system, which was designed to regulate world currency relations.
- The spread of lending not only among the population of a particular country, but also lending from one state to another.
- The development of the banking system and the interaction of banks in different countries
- The development of information technologies (telegraph, telephone), which allowed market participants to quickly communicate with each other, negotiate faster and reach agreements.
It all started with national currency markets, the development of which made it possible to form a world, global currency market, in which everyone, having fulfilled certain conditions, could buy money from the leading countries of the world.
It is clear that now the foreign exchange market has no boundaries or restrictions. The global Internet network allowed participants to buy and sell currency in a matter of seconds, being in different parts of the world.
Foreign Exchange Market: Key Features, Features and Functions
The foreign exchange market has certain features that distinguish it from other financial markets. The modern market is characterized by such features:
- Internationalization and use of all kinds of electronic means to work in the currency market. As mentioned earlier, the development of the Internet has made it possible to significantly speed up work on the foreign exchange market, and allow many people to trade in foreign exchange values without leaving their homes.
- Round the clock and continuous work. The foreign exchange market is a mechanism that does not stop. It works always, at any time, in all parts of the world.
- Unification of all currency transactions
- Operations in the foreign exchange market are used for financial protection against all kinds of financial risks. For this use hedging.
- A huge number of speculative transactions that are aimed only at buying profitably and selling even more profitably. Moreover, not only large companies and huge banks speculate, but also legal entities and individuals.
- The static exchange rate, which does not always depend on real economic indicators.
Currency market- This is a multifaceted and complex system, which can not be sorted out in a few days. Many experts have been studying the specifics of working with the market for years, the influence of certain factors on the course, the causes and consequences of sharp jumps and collapses. But if you become a specialist, then this kind of work can bring millions of dollars in a short period of time.
Without the foreign exchange market, it is already difficult to imagine the functioning of the economy. First of all, it ensures correct and uninterrupted economic cooperation between partner countries, but also performs a number of other functions:
- Ensuring timely international settlements of financial obligations
- Creates opportunities to protect against currency and credit risks
- Thanks to the world currency market, the exchange markets of various states are connected
- It creates opportunities for expanding the foreign exchange reserves of states (purchasing the required amount of foreign currency).
- Regulation of the exchange rate through supply and demand
- The foreign exchange market makes it possible to implement the state's monetary policy as an integral part of the overall economic development policy.
- Provides an opportunity to earn money by speculating on the growth and depreciation of currencies
Many people know about the foreign exchange market only because of the 7th function. But, as you can see, this is a very multifaceted concept, which, first of all, is intended to be a regulator and guarantor of economic development and interaction between states and large international companies.
Foreign exchange market: who are the participants?
Like any other market, the currency market has its participants, subjects. These include:
- 1. Central banks.
Central banks are the most important regulators of the country's domestic foreign exchange market and are responsible for economic and financial stability. Central banks act as subjects of the foreign exchange market, buying and selling currency as they need it.
- 2. Commercial banks
Banks are concentrators of funds of the population of the country, carry out the bulk of foreign exchange transactions within the state. Many market participants have their personal accounts in commercial banks through which the purchase and sale of various currency values is carried out.
We can say that banks are the subject of the foreign exchange market both directly, when they buy and sell currency, and indirectly, when buying, selling, and exchanging currency belonging to individuals and legal entities is carried out through their accounts.
Companies
Basically, these are international companies that cooperate with firms from other countries. Both importers and exporters of products need the currency of the country with whose companies they cooperate. This creates a certain supply and demand in the foreign exchange market.
By the way, jumps in the dollar exchange rate, first of all, are beneficial for those Russian companies that sell their goods in dollar price tags abroad, and employees are paid in rubles.
- International investment companies, pension and hedge funds, insurance companies.
- Currency exchanges
Many countries have their own internal currency exchanges, designed to provide the population of the country with the necessary demand for foreign currency. The state regulates the activities of these exchanges, because the general economic situation in the country depends on a well-constructed policy of responding to supply and demand for currency.
Currency brokers
These are people who buy and sell valuables on the foreign exchange market. Their main function is to provide information to the buyer and seller, to conclude an agreement and conduct a transaction. For such work, the broker takes a certain% of the transaction amount. But the amount of this commission is often less than the difference between the bank's loan interest and the bank deposit rate. Banks can also perform this function. In this case, they do not issue a loan and do not bear the corresponding risks.
Private individuals
These are the smallest participants in the foreign exchange market. Every person, when exchanging, buying and selling currency, is part of the global currency market. Let the amount of transactions is relatively small, but the total set can be a very large part of all transactions carried out in the domestic foreign exchange market.
Operations carried out in the foreign exchange market
And the last thing I would like to deal with is the operations that different participants can carry out in the foreign exchange market. The following main operations can be distinguished:
Spot - currency transaction with immediate delivery
This term refers to the implementation of this type of operations that are carried out immediately. Banks undertake to deliver the currency no later than by the end of the second day after the conclusion of the transaction. Spot is very convenient if you need a large amount of money in a very short period of time. But such operations involve a certain risk, because the exchange rate is a floating value, and if you buy today at the same price, tomorrow, at the time of delivery, the price may drop significantly.
With the help of the "spot" operation, banks meet the needs of their clients in foreign currency by transferring capital, including "hot" money, from one currency to another, and carry out arbitrage and speculative transactions.
Forward transactions with foreign currency
- forward transactions. Their peculiarity lies in the fact that the contract is signed at the moment, and the rate is fixed at the time of signing, but the supply of currency is planned for the future.
- Futures deals. These are standard contracts that are signed on exchanges for the purchase and sale of currencies. Futures have standard maturity dates. The most common is the three-month futures.
- Options. This is a financial instrument, which consists in the fact that the seller receives the right, but not the obligation, to sell a certain amount of currency at a fixed price in the future.
- Currency swap. This is an operation that combines the purchase and sale of various currencies at the same time with immediate delivery.
Here we briefly reviewed the basic concepts regarding the foreign exchange market. As has been said more than once, the topic is very extensive and multifaceted, therefore, within the framework of one article it is very difficult to analyze all possible aspects. Well, we gave a base, something from which you can start studying the foreign exchange market on your own.
And at the end of the article, we offer two rather interesting videos that will further replenish your knowledge of the currency markets, their structure, interaction, features of functioning and development.
We also recommend watching another rather interesting video about the foreign exchange market. We are sure that you will be able to discover new concepts, as well as find answers to dozens of questions regarding work and earnings in the foreign exchange market.
The foreign exchange market is a set of economic and organizational forms associated with the purchase or sale of currencies of different countries. The foreign exchange market as a system includes a subsystem of the currency mechanism and currency relations. The first refers to the legal norms and institutions that represent these norms at the national and international level. The second includes everyday relationships that individuals and legal entities enter into in order to carry out international settlements, credit and other monetary transactions aimed at purchasing or selling foreign currency.
The foreign exchange market includes two unequal, but mutually influencing parts:
International currency market;
national currency market.
The first consists of a system of regional markets closely connected by high-speed channel or satellite communications. Currently, there are the following regional markets: European - with centers in London, Zurich and Frankfurt; Asian - with centers in Tokyo, Hong Kong and Singapore; American - with centers in New York, Chicago and Los Angeles. In the regional currency markets, freely convertible currencies and currencies of local national markets are traded. Regional currency markets do not differ from each other in terms of the nature of operations, national ones differ in the degree of convertibility of the national currency, in the volume of foreign trade and currency exchange operations, in the degree of integration into the world community, the level of stability and openness of the economy, the level of development of communications and the degree of state regulation currency transactions.
A feature of the national currency market of Russia is the fact that since the beginning of the 90s, the country has essentially had a bi-currency monetary system, where the American dollar circulates along with the Russian ruble. The net import of dollars into Russia in 1994 amounted to 1 billion. If we convert this amount into rubles at the current exchange rate, then the volume of cash dollars imported into the country is more than twice the cash ruble mass. Despite the ban on the use of dollars as a means of payment, they appear in settlements between economic agents. They are accepted as payment for their products and services not only by small, but also by large enterprises. The country has developed an essentially parallel economy that operates with cash dollars. This circumstance is one of the causes of inflation, because it allows taxpayers to avoid paying taxes to the budget. The government and the Central Bank, unlike other countries, do not restrict the nature of transactions in the domestic market, but seek to create conditions for the gradual de-dollarization of the economy using economic methods.
The functioning of the foreign exchange market is associated with the use of a number of economic categories and generally accepted^ concepts. Let's look at some of them
EXCHANGE RATE - this is the price of a unit of foreign currency, expressed in units of the national currency. The exchange rate in Russia is expressed as the number of rubles per unit of foreign currency. When the price of a unit of foreign currency in rubles increases, there is a depreciation (cheapening) of the ruble; when the price of a unit of foreign currency in rubles falls, the ruble becomes more expensive, that is, the appreciation of the ruble corresponds to the depreciation of the foreign currency.
As noted above, the exchange rate is affected by the state of the country's balance of payments, the level of inflation, the ratio of demand and supply of freely convertible currency, the competitiveness of the country's goods on the world market, political and military factors, and a number of other circumstances.
QUOTATION is the establishment of foreign exchange rates in accordance with established practice and legislative norms. In world practice, there are two methods of quotations.
1. Direct quotation, when one unit of foreign currency is equated to a certain amount of national currency. For example, in Russia 1 US dollar is equal to a certain number of rubles, or in the USA 1 German mark is equal to a certain number of dollars or cents. This quotation is currently used in most countries of the world community.
2. Indirect quotation, when a unit of the national currency is equated to a certain amount of foreign currency. A similar system is used in a small number of countries.
When concluding purchase and sale transactions in the foreign exchange market, the following types of rates are used:
A cross rate is the ratio between two currencies, which is established from their rate in relation to the rate of a third currency. Often there are situations in which it is impossible or unprofitable to carry out a direct purchase of foreign currency of interest to the buyer. In this case, cross rates are used.
The spot rate is the price of a foreign currency unit of one country, expressed in currency units of another country and established at the time of the transaction, subject to the exchange of currencies by correspondent banks on the second business day from the date of the transaction.
Forward (forward rate) is the price at which a given currency is bought or sold, provided that it is transferred on a certain date in the future. Thus, when concluding such transactions, the parties try to guess the level of the exchange rate.
If on the date of the transaction the exchange rate differs from that stipulated in the contract, then one party will receive additional profit from the exchange rate difference, while the other will incur losses. For example, in January 1995, an agreement was concluded for the purchase of foreign currency on December 1, 1995 at the rate of 4,600 rubles for 1 US dollar. However, on December 1, 1995, the exchange rate was 4,800 rubles for 1 dollar, as a result of which an additional gain was received - 200 rubles for every US dollar. If the exchange rate on December 1, 1995 had been set at 4,500 rubles for 1 US dollar, then the loss would have been 100 rubles for every US dollar.
Futures - the rate in the future, that is, the price at which a transaction will be carried out after a certain period of time. It is determined at the time of the conclusion of the contract. For example, a deal concluded in August provides for the exchange rate in October at the rate of 5,100 rubles for 1 dollar, although in August the dollar exchange rate was 4,800 rubles. Before the execution of the transaction, a small amount compared to the amount of the transaction is deposited as a guarantee.
Settlements on international transactions between direct participants are carried out through banks that consider foreign exchange transactions as one of the ways to generate income. In this regard, when quoting, banks set two exchange rates:
buyer's rate - the rate at which the bank buys currency;
seller's rate - the rate at which the bank sells the currency.
To cover the costs of servicing operations and earning profits, there is a difference between these rates, called margin.
CONVERTIBILITY - the ability of a currency to be exchanged for other currencies. This is a very important characteristic of a currency. According to the degree of convertibility, the currency is divided into the following types:
Freely convertible;
Partially convertible;
non-convertible;
Clearing.
Freely convertible currency (hard currency) - free
and unlimited exchange for currencies of other countries
and is applied in all types of international payment
th turnover. At present, only a few states
states have a freely convertible national
currency: Austria, Great Britain, Denmark, Canada, the Netherlands, New Zealand, Singapore, Germany, Japan, the United States of America and others. Free convertibility, first of all, testifies to the stability of the country's economy, the possibility of its economic growth and, as a result, the confidence in its national currency on the part of foreign partners. Some freely convertible currencies are reserve currencies.
Reserve currencies are those that are mainly used for international payments and are kept by the central banks of other countries. These include the US dollar, pound sterling, Swiss franc, Japanese yen, German mark. These five currencies make up almost 100 percent of the world's foreign exchange reserves. The presence of a reserve currency creates additional benefits for the issuing country, allowing for a long time to have a negative balance in the balance of trade and payments without harming the national economy, because such a currency is not presented for payment in the form of a demand for the supply of goods or other assets, but remains in other countries in the form of reserves.
Partially convertible currency - is exchanged for a limited number of foreign currencies and is used with restrictions in international payments. The presence of restrictions is due to the instability of the country's economic situation and the imbalance in the balance of payments. Restrictions are imposed by the government or the Central Bank. They consist of the regulation of operations with currency and currency values. Most countries of the world, including Russia, have a partially convertible currency.
Non-convertible (closed) currency - is not exchanged for other foreign currencies and is used only within the country. Non-convertible currencies are those that are subject to import, export, purchase, sale restrictions and to which various currency regulation measures are applied.
Clearing currency - accounting currency units that exist only as money of account in the form of accounting records of banking operations for the mutual supply of goods and the provision of services between countries participating in clearing settlements.
Further deepening of economic reform in Russia requires the preservation and improvement of the free foreign exchange market.
Its formation began in the conditions of the state monopoly on foreign trade, unsatisfied consumer demand, including for imported goods, rapidly accelerating inflation and the absence of a legislative framework for foreign exchange transactions. At the same time, economic and political instability stimulated legal entities and individuals to convert their ruble assets into dollar ones.
At the very beginning of inflation, these factors led to a high initial demand for foreign currency, which did not correspond to its supply. As a result, the stock exchange rate was almost 50 times higher than the real one, that is, reflecting purchasing power. With the development of the foreign exchange market and the growth of domestic prices due to inflation, this gap is narrowing and at present the exchange rate exceeds the real exchange rate by about three times.
Thus, in the first quarter of 1995, the exchange rate of the dollar in rubles averaged 1:4200. According to the calculations of the expert institute of the Russian Union of Industrialists and Entrepreneurs, the parity purchasing power of the Russian ruble against the US dollar in terms of the cost of a consumer basket of 265 items of goods and services in the first quarter of 1995 was in the ratio of 1:1300. As can be seen from the information in the newspaper "Financial News" (February 26, 1995), the real exchange rate of the ruble increased from January to September 1995 by 60 percent. This is due to the rise in prices and the rise in the cost of domestic production, however, it did not affect the cost of functioning fixed and working capital.
Pending the achievement of conformity between the exchange and real rates and the revaluation of fixed and circulating assets, it seems appropriate to apply a special rate for foreign investment. At the same time, ruble funds received by foreign investors during the exchange of foreign currency at a special rate could be used to purchase Russian assets by a foreign investor.
The potential of the Russian foreign exchange market is evidenced by the calculations of the European Bank for Reconstruction and Development (EBRD), according to which the foreign exchange savings of Russian enterprises and individual citizens in mid-1995 amounted to more than 43 billion US dollars. Of these, about 10 billion are kept in the form of deposits in foreign currency accounts in Russian banks; more than 15 billion - withdrawn from circulation and kept in the hands of the population; over 18 billion left Russia, moving to accounts in foreign banks.
The procedure for the functioning of the foreign exchange market in Russia, the powers and functions of the bodies of foreign exchange regulation and foreign exchange control, the rights and obligations of legal entities and individuals in relation to the possession, use and disposal of foreign exchange values, liability for violation of foreign exchange legislation are determined by the Law of the Russian Federation "On foreign exchange regulation and foreign exchange control ”, adopted by the Supreme Council of Russia in 1992. The law and regulations issued on its basis provide that all settlements in foreign currency are carried out only through authorized banks, that is, banks licensed by the Central Bank to carry out foreign exchange transactions.
Licenses obtained by commercial banks are divided into general, internal and extended internal.
A GENERAL LICENSE gives a commercial bank the right to do the following:
Performing a wide range of banking operations in foreign currency both in Russia and abroad;
Formation of a part of its statutory joint stock fund in foreign currency at the expense of Russian, foreign and international enterprises and organizations;
Creation of reserve, insurance and other funds from
profits in foreign currency;
Participation in the creation of banking institutions in Russia and abroad as a founder or shareholder using foreign currency for these purposes;
Opening of its branches and representative offices abroad.
INTERNAL LICENSE grants commercial banks the right to perform a full or limited range of banking operations in foreign currency only on the territory of Russia. Under this license, the bank can carry out the following banking operations:
Opening and maintenance of accounts in foreign currencies of legal entities and individuals (residents and non-residents), as well as ruble accounts of non-residents;
Carrying out correspondent relations with Russian banks that have a general license from the CBR;
Organization through banks with a general license, settlements related to export-import transactions of bank customers in foreign currencies in the form of a documentary letter of credit, collection, bank transfer, as well as in other forms used in international banking practice;
Foreign exchange services for legal entities and individuals, including the purchase and sale of foreign currencies in accordance with applicable law;
Attracting and placing funds in foreign currency of legal entities in the form of loans, deposits and in other forms, as well as issuing guarantees in favor of bank customers within the limits of the bank's own funds in foreign currencies.
An extended domestic license gives a commercial bank the right to carry out the same operations in Russia as under a domestic license, but, in addition, gives the right to open a limited number of correspondent accounts in specific foreign banks.
To obtain a license of any of the listed types, a commercial bank submits to the CBR a set of documents, the content and procedure for issuing which are regulated by separate instructions.
The main functionaries of the foreign exchange market are commercial banks that have the appropriate license. They are called authorized banks and carry out the following operations:
Buying and selling foreign currency at the expense of
own funds of the bank and at the expense of servicing
my clientele;
Settlements in foreign currency related to the export of goods and services, as well as various types of non-commodity transactions;
Establishment of correspondent relations with other Russian authorized and foreign banks;
Passive and active operations in foreign currency;
Deposit and conversion operations in international money markets;
Exchange for the population of foreign currency for ruble and ruble for foreign;
Operations with checks and other securities in foreign currency.
As an example, consider the activity in the foreign exchange market of two large Russian banks - St. Petersburg and Mosbusinessbank. 1,150 clients keep their funds on foreign currency accounts opened with the Bank Saint Petersburg, including 680 enterprises and organizations and 470 individuals. All international payment transfers are made using the SWIFT system. Bank Saint Petersburg is the most active user of this
recognized international system of financial telecommunications. Connecting to it allowed the bank to ensure the reliability and confidentiality of transactions, control over their conduct, efficiency in making payments and a relatively low cost of services. Thanks to the connection to the international system of interbank communications, international payments were fully automated, and the costs of making currency transfers were significantly reduced.
The Bank put into operation two of the most advanced dealing systems, which ensured the conduct of relevant transactions in the international currency markets. The bank is currently one of the largest users of the Reuters system (REUTER). The precise work of the dealers secured the leadership among the regional banks in the foreign exchange market for the Bank "Saint-Petersburg".
The bank became the first market maker in St. Petersburg, that is, an intermediary providing Russian banks with information about currency quotes on the international currency market. The presence of "clean" forex lines abroad and the ability to conduct "Swap" transactions provided the bank throughout 1994 with cheap foreign exchange resources. The volume of conversion transactions has grown to 40-50 million US dollars per day.
In 1994 Bank Saint-Petersburg, together with the largest banks in Moscow, began to conduct operations on the futures foreign exchange market within the country, intensifying its participation in the formation of this market. In 1994, under forward and option contracts, more than 40 million US dollars were sold and bought in foreign currency.
Before the introduction of the currency corridor, one of the main types of transactions in terms of volume and level of profitability was the purchase and sale of non-cash currency on the domestic market of Russia. In addition to buying/selling currencies circulating in over-the-counter turnover, Bank Saint Petersburg conducted transactions on the three largest Russian currency exchanges: Moscow, St. Petersburg and Siberian. In 1994, the Bank was especially active in the currency market of Siberia: the volume of buying and selling currencies on the Siberian International Interbank Currency Exchange for the year amounted to 27.4 million US dollars and 4.2 million German marks.
The emergence of new independent states on the territory of the former USSR, the introduction by some of them of their own national currencies, while maintaining traditional trade and economic ties with Russia, stimulated the development of operations with new, "soft" types of currencies. The bank has taken a leading position in the city in dealing with the currencies of the CIS countries and neighboring countries.
In 1994, the bank significantly increased the volume of banknote transactions. The broad opportunities currently available to the bank make this sector of the foreign exchange market one of the main ones in the structure of the income portfolio. All bank branches and exchange offices accept travelers checks and credit cards.
Enterprises and organizations, regardless of their form of ownership, including enterprises with foreign capital participation, carry out the mandatory sale of 50 percent of foreign exchange earnings from the export of goods (works, services) on the domestic market of the Russian Federation through authorized banks on interbank currency exchanges. Mandatory sale of 50 percent of foreign exchange earnings can also be carried out in addition to the exchange on the interbank foreign exchange market. It is carried out as follows.
Foreign currency receipts in favor of enterprises and organizations, including proceeds from the sale of goods (works, services) for foreign currency in Russia, are credited to accounts in authorized banks. At the same time, two accounts are opened at the same time:
Transit currency account for crediting foreign currency receipts in full;
Current currency account for crediting funds in foreign currency after the mandatory sale of a part of export earnings. In the event of receipt of export earnings in favor of the client, the authorized bank informs him about this.
The client is obliged within seven days to give an instruction to the bank for the right to sell currency on one of the interbank currency exchanges. If such an order is not received within fourteen days, the bank, within the next seven days, independently carries out the mandatory sale of 50 percent of the foreign currency received on the transit account at the auctions of one of the interbank currency exchanges at the exchange rate valid at the time of sale.
The amount of foreign currency earnings of enterprises and organizations engaged in the export of goods (works, services) subject to mandatory sale is determined on the basis of "Net", that is, minus foreign exchange costs for transportation, insurance and freight forwarding, as well as payment of export customs duties in foreign currency and payment of customs procedures.
As noted above, banks licensed to conduct foreign exchange transactions carry out the sale and purchase of foreign currency. However, in order to reduce risks and minimize the impact of speculative transactions in the foreign exchange markets, banks have set appropriate limits - the so-called open position of selling and buying currency on their own behalf and at their own expense. The limit of the open currency position is determined by the CBR based on the end of the working day of the authorized bank. Its size is calculated as the difference between the amount of foreign currency purchased by the bank at its own expense starting from January 1 of the reporting year and the amount sold by the bank at its own expense during the same period of time. The limit is set depending on the size of the bank's own funds. Thus, a bank with a capital of 1 to 5 billion rubles in 1994 had a limit of 500 thousand US dollars, and with a capital of 5 to 10 billion rubles, the limit was 1 million US dollars. For authorized banks with own funds (capital) over 10 billion rubles - according to an individual standard established by the Department of Foreign Operations of the Central Bank of Russia.
In 1995, the limit on the open foreign exchange position was significantly reduced: the calculation does not include transactions for the purchase and sale of foreign currency in cash for rubles, which are usually carried out by exchange offices. Compliance with the open currency position of commercial banks is controlled by the Main Territorial Departments of the CBR. If the limit of the open currency position is exceeded, the following measures are applied to the banks that have committed such violations in accordance with the current legislation:
Recovery of a fine;
Suspension of the bank's right to maintain an open currency position;
Petition to the CBR to revoke the license for the right to conduct transactions in foreign currency.
Thus, in the first half of 1995, the Central Bank's Central Bank for Moscow fined fines from nine authorized banks and suspended the right to conduct foreign exchange transactions from two banks.
Given that the Russian currency is limited convertible, it is important to divide market participants into two groups to characterize the rights and obligations of foreign exchange market participants. One includes residents, the other non-residents. The former include individuals permanently residing in Russia, as well as temporarily located outside of it. Residents also include legal entities and organizations established in accordance with the laws of Russia and not having such a status, including their representative offices outside of Russia. The second category includes individuals permanently residing abroad, including those temporarily residing in Russia. This even includes legal and non-legal entities, as well as their representative offices and firms established in accordance with the laws of a foreign state and operating in Russia.
When considering the participation rights of residents and non-residents in transactions in the Russian foreign exchange market, it must be borne in mind that all transactions related to the movement of foreign currency are divided into two types - current and related to the movement of capital.
Current operations include:
Transfers to or from Russia of foreign currency for settlements without deferred payment for the export and import of goods, works and services, as well as settlements related to lending to export-import operations, for a period not exceeding 180 days;
Receipt and provision of financial loans for a period not exceeding 180 days;
Transfers to and from Russia of interest, dividends and other income on deposits, investments, loans and other transactions related to the movement of capital;
Transfers of a non-commercial nature to and from Russia, including transfers of wages, pensions, alimony, inheritance, and other similar transactions.
Currency transactions related to the movement of capital include:
Direct investment, that is, investment in the authorized capital
capital of enterprises for the purpose of generating income and semi
cheniya rights to participate in the management of the enterprise;
Portfolio investment, that is, the acquisition
valuable papers;
Transfers in payment for buildings, structures, other property, including land and its subsoil, classified under the legislation of its location as real estate;
Providing and receiving deferred payment for exports and imports for a period of more than 180 days, as well as providing and receiving financial loans for the same period.
Current foreign exchange transactions are carried out by residents, as a rule, without any restrictions. Residents have the right to freely buy and sell the acquired currency through authorized banks in the domestic foreign exchange market.
The rules of customs control allow the import of foreign currency into Russia in any amount. The export of foreign currency from the country in excess of the established limit (more than 500 US dollars) is allowed only with the appropriate permission of the authorized bank.
Non-residents have the right:
Without restrictions to transport, import and send to Russia currency values in compliance with customs regulations;
Buy and sell foreign currency for Russian currency, transfer and send it from Russia in accordance with the legislation of the Russian Federation.
So, for example, foreign currency is exported from Russia without restriction if it was previously imported and it was issued in accordance with the requirements of customs rules. Non-residents are entitled to pay remuneration for work in foreign currency only to non-residents.
A two-tier foreign exchange market has developed and operates in Russia. The first level is the exchange interbank foreign exchange market. Operations here are carried out through the mediation of currency exchanges, through whose accounts all currency transactions between banks pass and which act as guarantors of settlements. Regular transactions with large lots of currencies are made here. The bidders are authorized commercial banks. The exchange rate formed in this market is the most representative: all other participants in the foreign exchange market are guided by it. The second level is the over-the-counter market. It carries out transactions directly between banks, as well as between banks and their customers. All risks associated with these transactions are borne by the banks themselves.
The dominant role in the Russian currency market belongs to currency exchanges. Leading among them is the Moscow Interbank Currency Exchange (MICEX). In addition, five more currency exchanges operate in Russia.
The dollar exchange rate at the auctions at the regional currency exchanges slightly deviates from the exchange rate at the Moscow Interbank Currency Exchange.
The difference in exchange rates opens up the possibility of arbitrage operations. The volume of transactions in the foreign exchange market in 1994 increased significantly compared to 1993: for example, the turnover of SPCE trades doubled in foreign currency and quadrupled in ruble terms.
In 1994, 29 billion US dollars and almost 3 billion German marks were sold on the Russian stock exchanges, and the entire turnover of the exchange and over-the-counter markets, taking into account the interbank currency turnover, is estimated at 83 million dollars and about 8 billion German marks. In addition, turnovers in other currencies and currencies of the CIS countries increased sharply. At the same time, the development of the Russian foreign exchange market is characterized not only by volume parameters. The most important qualitative changes include the following:
Thanks to the adopted regulations,
leading domestic currency turnover and foreign economic
activity, the foreign exchange market takes on the features
corresponding to world standards and requirements;
A mechanism is being formed for the self-development of the currency
market, due to the fact that in the relationship between the participants
kami market increasingly began to show competition.
At the same time, their voluntary associations are being created,
developing general, non-state regulated
Thanks to the active participation of the Central Bank in operations on the foreign exchange market in the form of regulating the dynamics of the exchange rate, the impact on it of random, unpredictable factors is reduced;
The development of Russia's foreign economic relations causes further intensification of foreign exchange turnover and an increase in its liquidity;
The system of communications is being improved, trust between market participants is growing. This contributes to the integration of markets operating in different regions of the country into a single system.
As an example of organizing the activities of an exchange in Russia, let us consider the procedure for conducting operations on the Moscow Interbank Currency Exchange. The exchange rate of the ruble in US dollars fixed on this exchange is the official rate of the Central Bank and is used for currency regulation and control, as well as for calculating the cross rate of other foreign currencies.
Trading on the stock exchange is carried out using the "fixing" method, which has proven its simplicity and efficiency, as well as a high degree of protection of the interests of all bidders. Prior to the start of trading, participating banks submit applications to the exchange broker indicating the amounts they offer for the purchase or sale of foreign currency. The preliminary bid includes the amounts of purchase or sale of foreign currency at a rate not higher (when buying) and not lower (when selling) fixed at the previous auction. The minimum amount of buying or selling currency (lot) is 10 thousand US dollars, 10 thousand German marks, 10 million karbovanets, 1 million tenge, 10 million Belarusian rubles, etc. All amounts specified in preliminary and additional bids must be multiples of the minimum lot. The last fixed exchange rate is used as the initial exchange rate of the foreign currency against the ruble.
Having accepted applications from all participants, the broker announces the beginning of the next exchange session and announces the amounts of applications for purchase and sale (initial demand and offer) corresponding to the specified rate, as well as the difference between them. Starting from this moment, bidders through their dealers can submit additional bids to change the purchase or sale amount. However, these changes are made only in such a way as to reduce the difference between supply and demand. If demand exceeds supply, the dealer has the right to either add a currency for sale, or withdraw his order (or part of it) to buy the currency. The reverse situation occurs when the supply is greater than the demand. If the total supply of foreign currency at the beginning of trading exceeds the total demand for it, then the exchange broker lowers the exchange rate against the ruble. Otherwise, he announces a depreciation of the ruble. The minimum step in changing the exchange rate is officially considered to be one ruble, but in reality, to speed up trading, a step within the limits of up to 20 rubles is most often used.
The size of the step is determined by the exchange broker, depending on the situation on the market and the activity of dealers. As soon as demand equals supply, the broker announces a "fixing" and the exchange session ends. All settlements between bidders are made at the exchange rate and within the framework of those bids that were recorded at that moment. Thus, there is no sale or purchase rate on the exchange: the currency is bought and sold at one price fixed at the end of the auction.
Settlements between trading participants and the exchange take place no later than on the second business day after trading. When making settlements, the exchange deducts a commission from the participants. Each currency has its own procedure for settlements based on the results of trading. For example, payments in rubles for transactions with US dollars are made through the CBR's cash and settlement center in Moscow. To do this, bidders also open their correspondent accounts in rubles with the RCC, which speeds up settlements. Payments in dollars for transactions with US dollars concluded at the auction in Moscow are made in the USA through the "Bank of New York" ("Bank of New York"). Between him. and MICEX have an agreement on the conduct of relevant operations.
Trading participants open their correspondent accounts in US dollars with US banking institutions that are members of one of the interbank clearing settlement systems. Traders who do not have accounts with US banking institutions may settle their trades in US dollars through other participants who have such accounts. A trading participant making settlements on behalf of other participants is obliged to provide the interbank exchange with a written guarantee of fulfillment by him of all obligations in US dollars arising from the results of exchange trading with those participants whose settlements he performs.
After the completion of exchange trading, transactions concluded on them are formalized by exchange certificates, in which the obligations of the exchange and trading participants to each other are recorded. In order to participate in trading as net buyers, exchange member banks must first transfer funds in rubles to its account with the cash and settlement center, sufficient to purchase foreign currency. On the basis of exchange certificates, trading participants draw up payment orders for the transfer of funds in US dollars in favor of the exchange in a timely manner that ensures the timely transfer of funds to its account with the Bank of New York. Funds in US dollars are debited from correspondent accounts of trading participants and credited to the exchange's account on the first business day (taking into account holidays in the USA) after the day of exchange trading. To do this, the exchange draws up payment orders for the transfer of funds in rubles in favor of sellers
currencies. The exchange gives orders in foreign currency in favor of buyers. On the basis of such instructions, money is credited to the corresponding correspondent accounts of sellers or buyers.
Funds in dollars are debited from the Exchange's Bank of New York account on the second business day after trading (including US holidays). Within the same period, dollars are credited to correspondent accounts of Russian buyer banks opened with the same bank. If the dollar correspondent account of the participant is in another foreign bank, then the money is credited within the time limits established by the respective banks. In case of violation by the participants of trading of their obligations to the exchange, a system of fines and temporary suspension from participation in trading is provided. In case of prolonged or systematic violations of obligations, a trading participant may be excluded from the membership of the exchange.
The prospect of development of the Russian foreign exchange market is associated with the formation of an over-the-counter interbank foreign exchange market. Currency exchanges, having played their role in the formation and development of the foreign exchange market, will eventually lose their dominant role. In 1994, 34% of the turnover was accounted for on the exchange exchange transactions in the US dollar, 66% in the over-the-counter market, 37% and 63% in the German mark, respectively. According to the Prime news agency, in mid-1995, 45 banks were operating on the over-the-counter market in Moscow alone, their turnover amounted to $ 1 billion per day.
The active development of the over-the-counter foreign exchange market in the future is due to the following circumstances. Until 1995, exporters were required to sell 50 percent of foreign exchange earnings only through the stock exchange. In 1995, they were granted the right to carry out this sale on the over-the-counter market, which would entail an outflow of currency from the exchange market. Already in 1994, many enterprises that sold currency in excess of the mandatory sale limit did not use the services of the exchange for the following reasons:
Banks' confidence in each other has increased;
Currency transactions carried out without intermediaries reduce circulation costs and speed up settlements.
One of the necessary conditions for the development of the over-the-counter foreign exchange market is to increase the role of the Central Bank as an organizer and controller of foreign exchange transactions. The current situation in the foreign exchange market is criticized by practitioners and scientists. The issue of the role of state regulation of transactions in the foreign exchange market and the choice of the ruble exchange rate model - regulated, free-floating, fixed - is being discussed.
The state of the foreign exchange market and possible ways to overcome the negative phenomena present here have been studied at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO RAS). The research results are presented in the articles of Academician SM. Borisov, published in a number of issues of the newspaper "Economics and Life" in 1995. He notes that the law on currency regulation, in accordance with which the internal convertibility of the ruble was introduced, provided for a limited range of current foreign exchange transactions - and transactions related to the movement of capital, the latter requiring permission from the Central Bank. Thus, it is understood that in the foreign exchange market there will be a sale and purchase of foreign currency for rubles to service real economic transactions and, above all, those related to foreign trade.
In practice, however, currency exchanges abstained from selecting currency transactions on these grounds. They accept for execution any orders for the purchase and sale of currency from commercial banks participating in the auction, which, in turn, do not control the division of currency transactions into current and capital. Consequently, in violation of the Law, both in the exchange and in the interbank turnover, any transactions on the exchange of ruble funds for foreign currency, including purely financial transactions on the change, are made without hindrance. the transfer of money from one sphere to another, as well as the speculative sale and purchase of currency in order to profit from exchange rate fluctuations. Numerous exchange offices operate in the same practically uncontrolled regime, operating with foreign currency in cash.
As a result, the entire infrastructure of the domestic foreign exchange market (currency exchanges, authorized commercial banks, exchange offices), which should serve only real foreign economic transactions, has in fact largely turned into an intermediary that ensures the free circulation of unproductive and speculative capital between the ruble and currency areas.
Calculations made at the IMEMO of the Academy of Sciences show that, for example, in 1993, out of the total amount of foreign exchange funds sold on the Russian foreign exchange market in the amount of 15 billion dollars, only 8 billion were intended to pay for import purchases, and the remaining 7 billion .dollars went to replenish the foreign exchange funds of private commercial structures and moved to Western banks.
In this regard, it seems appropriate to strengthen the role of state regulation of operations in the foreign exchange market. This does not mean a return to the state currency monopoly that took place in the past, but a transition to a system of state regulation, which is used by other countries in crisis situations in the economy. Given the current economic and political situation in Russia, the need for the gradual implementation of separate but interconnected measures is obvious. In particular, these could include:
Strengthening state control over the activities of participants in the exchange and over-the-counter foreign exchange markets in order to comply with laws on foreign exchange transactions under all conditions;
Changing the official exchange rate policy, first by establishing a more reasonable exchange rate ratio between the ruble and foreign currencies, taking into account the quotations of regional currency exchanges and the over-the-counter market, and then by switching to a regulated fixed exchange rate;
Increasing the role of the ruble in international settlements and the transition to its external convertibility, which would be important for attracting foreign investment;
The displacement of the dollar from the economic and monetary circulation within the country by limiting and then stopping its circulation;
Pursuing a restrictive policy regarding the admission of commercial banks to foreign exchange transactions, by concentrating such operations with a relatively small number of the largest banks, working in close cooperation with the Central Bank and ensuring the implementation of a single monetary policy.
Some of these measures are debatable, but their application is possible in the context of a reduction in inflation, the leveling of domestic and world prices, the growth of industrial and agricultural production and the production of competitive products. At present, participation in operations in the foreign exchange market significantly affects the structure of the balance sheets of commercial banks. Investments in foreign currency reach impressive proportions in total assets, in many cases exceeding the relative size of loans provided to enterprises. The share of foreign currency liabilities is comparable to the share of balances on current accounts and deposits of enterprises. This is confirmed by the data given in table No. 22.
It is noteworthy that in nine out of ten banks considered in Table 22, the share of foreign exchange assets exceeds the share of the corresponding liabilities. The same situation has developed in almost all Moscow banks. The structure of the asset and liability of their consolidated balance sheet indicates that the largest share in the balance sheet currency is occupied by foreign currency and settlements on foreign operations. Accordingly, the share of these
of funds in the asset balance is 45.3 percent, and in liabilities - 41.5 percent. This testifies to the priority of operations in the foreign exchange market in comparison with operations on lending to industry.
The emerging trend, although caused by objective reasons beyond the control of banks, should be regarded as negative. Decreased inflation, stabilization of the economy and the introduction of restrictions on the amplitude of exchange rate fluctuations will inevitably lead to a reorientation of banks from the foreign exchange to the credit market in terms of providing loans to the real sector of the economy.
foreign exchange market called the system of economic relations between banks, as well as between banks and their customers regarding the purchase and sale of foreign currency.
Foreign currency- these are banknotes in the form of banknotes, treasury notes, coins that are in circulation and are legal tender of the corresponding foreign state.
Non-cash foreign currency- funds in the form of entries in bank accounts in monetary units of a foreign state.
Foreign currency purchase and sale transactions are carried out, firstly, between two authorized banks (this means that the Central Bank issued them a license to conduct banking operations in foreign currency), and secondly, by the bank's clients, entering into relationships with it (the bank).
It is forbidden to carry out operations for the purchase and sale of foreign currency bypassing banks.
Based on the legal status of foreign exchange market participants, both banks and clients, residents and non-residents are distinguished.
- Residents- These are individuals permanently residing in the territory of the Russian Federation, and legal entities established in accordance with the legislation of the Russian Federation and located in the territory of the Russian Federation.
- Non-residents- These are individuals permanently residing abroad, and legal entities established in accordance with the laws of a foreign state and located on its territory.
- transactions are made on the currency exchange;
- transactions for the purchase and sale of foreign currency are made on the interbank foreign exchange market, when banks enter into relationships bypassing the exchange.
- maintenance of international turnover (payments) of goods, works, services;
- the foreign exchange market forms the exchange rate under the influence of supply and demand;
- the foreign exchange market acts as an instrument of the state (the Central Bank of the Russian Federation) for conducting monetary policy;
- the foreign exchange market acts as a mechanism for protecting economic entities from foreign exchange risks and speculative transactions.
- the existence of an organizational mechanism that ensures the implementation of foreign exchange transactions. This mechanism includes financial infrastructure(banks, stock exchanges, brokerage companies) and the principles of behavior of participants in the global foreign exchange market, fixed in regulations and rules of activity;
- the peculiarity of the world currency market is its ability to serve , ;
- the functioning of the world currency market is based on the fundamental market laws of supply and demand. In the world currency market, the currencies of different countries become objects of international market valuation.
Functions of the foreign exchange market
Functions are a practical manifestation of the economic essence of the world currency market.
Main functions of the world currency market: commercial, value, informational, regulatory, speculative.
a commercial function is the provision of market segments with foreign and national currency.
value function - the establishment of such a level of the exchange rate at which the world currency market and the economic system as a whole will be in balance.
Informational function - providing participants in the foreign exchange market with information about its functioning.
Regulatory function - the organization of the world currency market in accordance with national and international laws.
Currency risk
Currency risk is risk of currency losses during the transaction of buying and selling currencies.
Conducting foreign exchange transactions is always associated with the risk of losses. For protection (insurance) against currency losses in transactions of purchase and sale of foreign currencies, a system is used hedging, which is a variety of methods and techniques for insuring the risks of currency losses. The world currency market is also characterized by speculative function, since a number of systematically organized speculative operations are carried out in this market on exchange rate movements. Speculative and insurance functions (hedging) are closely related and represent two sides of one phenomenon - the world currency market.
The place of the currency market in can be represented as follows (Fig. 79):
Rice. 79 The place of the foreign exchange market in the national economywhere 1 - loans and deposits of enterprises; 2 - and consumption; 3 - currency savings of the population; 4 - export and import; 5 - export and import, monetary component; 6 - loans and deposits of the population; 7 - attraction and placement of loans; 8 - purchase of securities; 9 - investments in foreign currency; 10 - attraction and placement of capital.
The structure of the foreign exchange market
The world currency market is a complex system consisting of many elements that are classified according to a number of criteria.
By venue distinguish exchange And over-the-counter sectors of the foreign exchange market. Exchange the foreign exchange market is the trading of currencies on specially organized currency exchanges. On the over-the-counter In the market, currency trading is carried out mainly between commercial banks.
Depending on the forms of payment distinguish spot And cashless sectors of the foreign exchange market.
Depending on the term of operations distinguish current And urgent currency market.
In real practice, the world currency market is classified as follows: exchange, over-the-counter, futures and current. The formation of the national currency market, as a rule, begins with the currency exchange. The largest sector of the currency exchange is urgent currency market. The derivatives market is divided into futures And forward(Table 4).
Table 4 Differences between futures and forward foreign exchange markets
Main characteristics |
futures market |
forward market |
Counterparties of foreign exchange transactions |
Seller - clearing house; |
Seller-buyer - commercial banks |
The size and term of the currency contract |
Standard |
Determined on an individual basis |
Pricing |
Based on the movement of stock quotes |
free agreement |
Real currency supply |
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Availability |
No restrictions, but through brokers |
Limited to bank customers |
Guarantees |
Reserve deposit |
Installed individually |
Information transparency |
Limited |
Foreign exchange market participants
Members world currency market - legal entities and individuals performing operations in the world currency market.
By goals participation in operations on the world currency market, the participants of this market are divided into five groups: entrepreneurs, hedgers, speculators, intermediaries And foreign exchange authorities. Entrepreneurs- these are participants in the foreign exchange market, whose task is to ensure foreign exchange transactions. This category of participants is primary in relation to others. Hedgers- these are participants in the foreign exchange market who insure the foreign exchange risk when performing foreign exchange transactions. Speculators- participants in the world currency market, carrying out the bulk of operations on the difference in exchange rates. Intermediaries— specialize in providing currency trading services. Brokers- These are exchange intermediaries that carry out foreign exchange transactions at the expense and on behalf of clients. Dealers act on the foreign exchange market on their own behalf and at their own expense.
Currency regulation and control bodies are state institutions whose functions include regulation, supervision and control over foreign exchange operations and the foreign exchange market.
Foreign exchange market participants
Market Participants |
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Commercial banks |
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Enterprises (importers, exporters) |
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Central banks |
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Currency Exchanges |
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