financial markets - 2500 words
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Dealingsessionslides-practice-2-1.pptxThe Foreign Exchange Trading Session (Week 6)
BAFI 1002
FINANCIAL MARKETS
5/15/19
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For next week – Market View
Work individually to prepare your Market View
Analyse your currency pair
Research economic factors influencing currencies values (see FX topic notes)
Individual MV Report must be submitted online by the end of week 7.
Use your market view to formulate your speculation strategy!
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LOGIN DETAILS
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User Name: .\eikon
Password:
Use student login details for side computers
Login details for the middle computer
FX TRADING
Overview
Scenario objectives/tasks – market makers and price takers
FX market quotations
Portfolio summaries - tracking portfolio changes
Profit / loss calculation – expected vs. realized profit / loss
Market terminologies (long/short, spread, pips etc)
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DEALING ROOM
FX Market
This is an “over the counter” market
All deals must be negotiated over the telephone.
Desks
Teams 11 to 15 are banks
Teams 16 to 20 are corporations.
FX Dealing Simulation (next week): Groups to return to same desks.
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TRADING RULES
BANKS (Price Maker)
The bank must provide a 2-way quote if asked to do so.
Bank to bank: the caller is price taker.
CORPORATION (Price Taker)
Can refuse to trade with banks; can give quotes to other corporations.
Corp. to corp.: The caller is price taker.
Bank to corp: Corp is the price taker
If the quote is accepted, you must go head with the transaction
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CURRENCY QUOTES
The Price maker sets the bid and offer
The bid : The price at which trader (price maker) is prepared to buy the commodity currency.
The offer or ask: The price at which a trader (price maker) is prepared to sell the commodity currency.
Opposite is true for price taker
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AUD/USD = 0.7994 1 AUD = 0.7994 USD
AUD commodity currency / USD terms currency
This gives the price of the AUD ‘in terms of’ the USD.
Example: Spot AUD/USD = 0.7994 / 0.7998
The price maker will buy 1 “Aussie” in exchange for 0.7994 USD. (will sell 1 AUD for 0.7998 USD)
The price taker can sell 1 “Aussie” for 0.7994 USD
(or buy 1 AUD for 0.7998 USD).
Remember there are two sides to every FX transaction
SPOT FOREIGN EXCHANGE
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RMIT TRADING PLATFORM
2 components:
Eikon Market Information Screen
Real time financial data and news
Trading Screen
Transactions recording and position keeping
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EIKON DATABASE
Double Click on Eikon icon on the Desktop
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FX WORKSPACE
This screen provides us with live rates – note that these rates serve only as a benchmark– you must negotiate your own rates.
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FX WORKSPACE
This screen provides us with live rates – note that these rates serve only as a benchmark– you must negotiate your own rates.
To display the FX workspace, click on “FX” tab in the top right hand corner
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This screen provides us with live rates – note that these rates serve only as a benchmark– you must negotiate your own rates.
Real time spot rates
Real time FX news
Real time forward rates
Historical rates
FX WORKSPACE
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UPDATING GRAPHS AND NEWS
This screen provides us with live rates – note that these rates serve only as a benchmark– you must negotiate your own rates.
Click on the desired currency code
2. Drag and drop into the historical rates area
The news section will update automatically
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UPDATING GRAPHS AND NEWS
This screen provides us with live rates – note that these rates serve only as a benchmark– you must negotiate your own rates.
Click here to change the graph frequency
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LAUNCHING RMIT TRADER
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RMIT TRADER - LOGIN
Enter Team ID and Password as shown on the top of your Scenario sheet
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ENTERING TEAM DETAILS
Edit Button allows entry of details
Click on Team Tab
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Student Number and Name required for all team members
Click Save when finished
Enter AUD opening cash balance
ENTERING TEAM DETAILS
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FX OPENING BALANCE ENTRY
Select Open Cash/FX tab
Highlight Row
Click Edit Row
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OPENING BALANCE ENTRY
Select Open Cash/FX tab
Highlight Row
Edit Row
Enter Opening Balance Amount
Save when finished
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ENTERING FX DEALS
Click “Spot FX Deals” tab
2. Click “New Spot FX Deal” button
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SPOT FX DEAL ENTRY
Select Counterparty
Select Commodity CCY
Enter Spot Rate
Select Buy or Sell (Commodity Currency)
Select Terms CCY
Enter the Commodity CCY amount or the corresponding term currency amount
Save when finished
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FX POSITION SUMMARIES
Rates Overview
Positions Table
Transaction log
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Position Summary Tab
Transaction Log
FX POSITION SUMMARIES
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TRADING REPORTS
Trading reports are available for saving and printing
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SAVING REPORTS
Select report
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SAVING REPORTS
Export
Report
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RULES
Rate negotiations are acceptable however it is up to the price maker whether they would like to accept the new rate for trading.
DO NOT ADD RATES – THEY ARE NOT CORRECTLY CALCULATED. Severe penalties apply. Any kind of FX transaction can be made with the default rates available to you.
Communication with other groups may only take place over the phone as this is a dealing simulation taking place worldwide.
You have an obligation to pick up phones. Not picking up phones or hanging up the phone instantly is regarded as a rejection to trade.
Do not block trade.
Banks cannot refuse to trade. Corporations as price makers can only refuse to trade currencies if they don’t have the requested currency available.
Remember to initiate your calls by identifying yourselves and asking for a two-way quote on your desired currency pair.
Be careful! – You may receive an unsuspecting call from the Central Bank.
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CORRECTING ERRORS
Once a deal is saved it CANNOT be deleted!
If a deal is entered incorrectly (eg wrong counterparty, wrong amount, wrong rate, wrong CCY etc), you must enter a new REVERSING deal to cancel the original.
Enter all details as per original incorrect deal, and change buy to sell (or sell to buy):
ie: if wrong deal was a “buy” enter a new matching deal as a “sell” and vice versa.
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FINAL WORDS
2 Billion is the maximum amount PT for JPY (Min=100 million).
20 Million is the maximum amount PT for all other currencies (Min= 1 million).
Read the scenarios carefully and try to meet your objective.
If you need help…ASK YOUR INSTRUCTOR!
Trading can be challenging so remember to:
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