Sunday, April 3, 2016

F O R E X


Forex (Forex, sometimes FX, from the English FOReign EXchange -. «Foreign exchange") - the interbank currency exchange market at free prices (the quote is formed without restrictions or fixed values). Therefore, the combination of "forex market" is commonly used (Eng. Forex market, FX-market). The term Forex is accepted to use to refer to the mutual exchange and not the totality of foreign exchange transactions.

Operations on Forex by objectives could be trading, speculative, hedging and regulatory (foreign exchange intervention of central banks).

August 15, 1971 US President Richard Nixon announced the decision on the abolition of the free convertibility of the dollar into gold (abandoned the gold standard).

January 8, 1976 at the meeting of the IMF's member countries ministers in Kingston (Jamaica), adopted a new agreement on the international monetary system of the device, which has the form of amendments to the charter of the IMF. The system replaced the Bretton Woods monetary system.

The system replaced the Bretton Woods monetary system. Many countries have in fact abandoned the peg of the national currency to the dollar or to gold. However, only in 1978, the IMF formally allowed such a failure. From this point freely floating rates became the main method of exchange. 

Formation of system of floating exchange rates has led to three significant results:
1.Importёry, exporters and service their banking institutions were forced to become regular participants in the foreign exchange market, because of changes in exchange rates may affect the financial results of their work with both the positive and negative side.
2.Tsentralnye banks were able to have an impact on the national currency and the impact on the economic situation in the country by market methods, and not just administrative.
3.Kursy most liquid national currencies are formed on the basis of the search market equilibrium point between the current demand and available supply and changes in demand and supply in the market causes a shift of the exchange rate in one direction or another.    

It is believed that the daily turnover in the Forex market was as follows:
- In 1977 - $ 5 billion
- In 1987 - $ 600 billion
- In late 1992 - US $ 1 trillion
- In 1997 - 1.2 trillion dollars
- In 2000 - 1.5 trillion dollars
- In 2005-2006 the volume of daily turnover on the FOREX market fluctuated, according to various estimates, from $ 2 to $ 4.5 trillion
 - in 2010 - $ 4 trillion.

This predicted further growth intraday turnover to $ 10 trillion in 2020.

Bank for International Settlements periodically conducts large-scale study of the Forex market every three years, starting in 1989. The final report contains information on the turnover of the market, the structure and dynamics. The last report was released in December 2010 and is available on the official website. 

Forex is an international interbank market. Operations are conducted through a system of institutions: central banks, commercial banks, investment banks, brokers and dealers, pension funds, insurance companies, multinational corporations and TD volume of one deal with the real delivery of currency on the second working day (spot market) is usually about 5 million US dollars or its equivalent. Conversion price of one payment is 60 to 300 dollars. In addition, will have to bear the costs of up to 6 thousand. Dollars a month on the interbank information-trading terminal. Because of these conditions, on Forex do not make direct conversions small amounts.
On the Forex does not get all the client applications, intermediaries can offer clients commissions, which significantly lower the cost of direct operations on Forex
Live Currency Quotes are used for a large number of operations that do not necessarily have direct access to Forex. An example is the change in the national currency the state bank, which is forced to maintain a proportion rate between foreign currencies according to their proportions on Forex even if the real supply and demand do not match the trends in the Forex market in the country. For example, if the domestic market has excess supply of euros, but the forex price of the euro against the dollar increases, the central bank will be forced to also raise the price, and not to reduce the pressure of oversupply.
Another striking example - margin speculative currency trading, which is focused on fixing of current quotations of Forex, but their conditions passes without real delivery. Almost all the intermediaries on currency market offer for clients not only services on the direct conversion, but also speculative trading with leverage
Recently, Forex began to receive the spread trading system aimed at reducing the impact of the broker (Electronic Communication Network, ECN). 

Forex trading is based on the principle of free currency conversion, which involves the absence of government intervention at the conclusion of foreign exchange transactions (there is no official exchange rate, there are no restrictions on the direction of prices and volumes of transactions) and guarantees of freedom of such operations. At the same time, usually set rules and restrictions on the provision of mediation services, which regulate primarily customer relationships (trader) and the intermediary (broker).
Financial Regulation and Supervision Authority (Eng. Financial Services Authority, FSA) performs regulatory functions in the financial markets in the UK.
The US regulator of the foreign exchange market is the government's "Futures Trading Commission for goods." In addition, a lot of work on the development of trading rules, conditions of brokerage services and conflict resolution NGO conducts "National Futures Association" (eng. National Futures Association, NFA). The organization also collects and analyzes specific reporting, which are required to provide brokers - members of the association. To listen NFA requirements, not only in the United States, as US traders and private funds beware open an account with a company that does not comply with them.
NFA rules and requirements are more severe than the FSA regulations. Sometimes they are not so much to help and protect, as limiting the trader. A recent example - the requirement to close the client transaction sure using the FIFO rule (first come - first left). 
On July 15, 2011 restrictions Dodd - Frank (born Dodd-Frank Wall Street Reform and Consumer Protection Act.), According to which US citizens (individuals and entities) are prohibited OTC transactions with financial instruments.  

In February 2012, the Malaysian National Fatwa Council ruled that trade on the foreign exchange market (forex) is forbidden for Muslims. Board Chairman Tan Sri Abdul Shukur Husin said:
A study committee found that such trading involves currency speculation, which contradicts Islamic law.
For this reason, the National Fatwa Council has decided that for Muslims to participate in such trading is haram.
The ban applies primarily to private individuals. Banks and specialized exchangers continue to work without restrictions.

The use of leverage not only leads to an increase in profitability of operations, to increase the rate of growth of capital, but also to proportional repeated increase in the risk of loss, and to an increase in the loss rate.
Fluctuations in exchange rates simultaneously affects a huge amount of conflicting and divergent factors. Accidental temporary imbalance acting forces can lead to significant price movements, which are difficult to predict, but which could have a material impact on the results of speculative trading, particularly at high leverage.
In addition to the risks associated with market price fluctuations, there are risks associated with a particular broker activity:
- Can be fast considerable changes in prices with an equally rapid return to its original state, which is not confirmed by independent sources of quotations.
- Problematic issues can be orders processing mechanism of transactions at predetermined prices (processing of warrants), which does not guarantee compulsory enforcement of the order.
- When bankruptcy broker his clients often can not get their money from accounts.
Sometimes fraud dealing centers are prosecuted. In US courts equate to fraud "promise consistent profits, failure to disclose information about the risks for traders, the assignment of nonexistent ranks and licensing documents" and sought the closure of offending companies, indemnification, compensation. Even in offshore zones because of the "threat to the national security of the country and protection of its reputation as a financial services center" Some unscrupulous brokers to suspend the licenses.    

Cuisine - in the brokerage jargon designation of internal clearing, when the customer orders for transactions are met at the expense of counter orders of other clients of the same broker or by the broker. This allows you to increase the speed and reduce the cost of operations. Internal clearing became popular not only in the OTC segments of the stock and currency markets, but also widely used in the calculations with the use of plastic cards.
If the broker is no counter order and held the foreign operation, the broker independently performs the opposite party to the transaction and there is a conflict of interests - the client turns a profit loss for the broker and the client's loss - the broker profits. The only guarantee is no such conflict of interest is to carry out all contracts through a stock exchange, which leads to an increase in overhead costs.
If the broker is no counter order and held the foreign operation, the broker independently performs the opposite party to the transaction and there is a conflict of interests - the client turns a profit loss for the broker and the client's loss - the broker profits. The only guarantee is no such conflict of interest is to carry out all contracts through a stock exchange, which leads to an increase in overhead costs.
"Kitchen" is prohibited by law in some countries: it may be considered a fraud and a criminal offense. But this responsibility is valid with respect to those assets that are traded on stock exchanges. Some experts believe that the legislative ban on many forms of internal clearing, entered at the beginning of the 20th century, are obsolete and should be repealed.
Forex is inherently counter market, where limited or no government regulation. Some forex brokers work with the extensive use of internal clearing (for "kitchen" scheme).    
  
 
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