Foreign Exchange Markets

Presented ByAJINKAY VELAPURE (C-83)

ASHOK PATEL (C-15)SANDEEP RAMRAJE (C-19)

SANTOSH SANAP (C-26)

NCRD's STERLING INSTITUTE OF MANAGEMENT STUDIES

STRUCTURE OF FOREX

FOREX MARKET

ACCORIDNG TO

TRANSACTION

DERIVATIVES

FOREX MARKET

FINANCIAL MARKET

PARTICIPANT

Spot Market Forward Market

Futures Market Swaps

Market

Options

Market

Wholesale /

Inter Bank

Market

Retail or

Client

Market

FERA AND FEMARegulated in India by the Foreign Exchange

Regulation Act(FERA),1973.Consisted of 81 sections.FERA Emphasized strict exchange control.Control everything that was specified,

relating to foreign exchange.Law violators were treated as criminal

offenders.Aimed at minimizing dealings in foreign

exchange and foreign securities.

FERA AND FEMA CONT…..DIFFERENCES FERA FEMA

PROVISIONS FERA consisted of 81 sections, and was more complex

FEMA is much simple, and consist of only 49 sections.

FEATURES Presumption of negative intention (Mens Rea ) and joining hands in offence (abatement) existed in FEMA 

These presumptions of Mens Rea and abatement have been excluded in FEMA

NEW TERMS IN FEMA Terms like Capital Account Transaction, current Account Transaction, person, service etc. were not defined in FERA.

Terms like Capital Account Transaction, current account Transaction person, service etc., have been defined in detail in FEMA  

DEFINITION OF AUTHORIZED PERSON Definition of "Authorized Person" in FERA was a narrow one ( 2(b)

The definition of Authorized person has been widened to include banks, money changes, off shore banking Units etc. (2 ( c )

MEANING OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT.

There was a big difference in the definition of "Resident", under FERA, and Income Tax Act

 

The provision of FEMA, are in consistent with income Tax Act, in respect to the definition of term " Resident".

FERA AND FEMA CONT…..DIFFERENCES FERA FEMA

PUNISHMENT Criminal offence , punishable with imprisonment as per code of criminal procedure, 1973

Civil offence only punishable with some amount of money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty.

APPEAL An appeal against the order of "Adjudicating office", Board went before High Court

An appeal from an order of Appellate Tribunal would lie to the High Court. (sec 17,18,35)

RIGHT OF ASSISTANCE DURING LEGAL PROCEEDINGS.

Did not contain Recognizes the right of appellant to take assistance of legal practitioner or chartered accountant (32)

POWER OF SEARCH AND SEIZE

FERA conferred wide powers on a police officer not below the rank of a Deputy Superintendent of Police to make a search

The scope and power of search and seizure has been curtailed to a great extent

HOW THE CURRENCY RATE EXCHANGE IS CALCULATED?

Trade value, inflation, and interest rates.1 UD Dollar = 1 British PoundAmericans own $100 & British own 100 Pounds.

CHARACTERISTICS OF THE FOREX MARKET

24-Hour MarketLeverageHigh liquidityOTC Market

EVOLUTION OF THE FOREX MARKETS

Over the past 200+ years, the world has gone though major changes its global exchange rate environment.

Gold Standard: 1816 - 1914 Bretton Woods: 1945 – 1973Smithsonian Agreement : 1971-1973The European Snake – 1972OPEC Oil Crisis – 1976European Monetary System (E.M.S) – 1979The Maastricht Treaty – 1991Birth of Euro - 1999

CURRENT EXCHANGE RATE SYSTEMS

Current exchange rate systems

Pegged/fixed Flexible/floating

Hard peg Soft peg Free float Managed float

Adjustable peg

Basket currency

Crawling peg

MAJOR CURRENCY PAIRS

MAJOR CURRENCY PAIRS

PURPOSES OF FOREIGN EXCHANGE TRADING

Fundamental analysis Technical analysisCurrency trading between banks

FLUCTUATIONS

Differentials in InflationDifferentials in Interest RatesCurrent-Account DeficitsPublic DebtTerms of TradePolitical Stability and Economic

Performance

FOREX RISKThe fraud and Scams in Forex market There is risk of losing your whole

investment! The market sometimes moves against

you! There is no main marketplace! You are relying on the dealer's

reputation credit reliability There's a risk of the trading system

break down! You can become a fraud victim!

FOREX RISK MANAGEMENT

Why is Forex risk management important?

Controlling losses

Using correct lot sizes

Tracking overall exposure

The bottom line

TURNOVER

CONCLUSION & BILBLIOGRAPHY

Websites 1. Wikipedia 2. www.nse-india.com 3. www.bis.org 4. www.qfinance.com 5. www.trading-point.com 6. http://forextrading.about.com 7. www.nse.com 8. www.investorguide.com 9. http://forexcap.com/FXGuide/evoluaion-of-fx-market.aspx 10.Http://wiki.answers.com/Q/

How_is_the_currency_exchange_rate_calculated