About EUREX

Eurex is a major futures and options exchange for European benchmark derivatives featuring open and low-cost electronic access globally. Its electronic trading and clearing platform offers a broad range of products and amongst other, operates the most liquid fixed income markets. Eurex was established in 1998 with the merger of Deutsche Terminbörse (DTB, the German derivatives exchange) and SOFFEX (Swiss Options and Financial Futures).

Eurex Repo is the electronic trading solution for repos (sale and repurchase agreements). In its Euro segment, standardized baskets for the General Collateral (GC) market, the German GC Basket, the German Jumbo Basket and the German KfW/Laender Basket (bonds issued by the Kreditanstalt für Wiederaufbau and the German federal states) are offered. Market participants can also trade Repos with Austrian Government Bonds and Treasury Bonds of the European Investment Bank as securities The German GC Basket comprises all German government bonds and bonds issued by the privatization agency (Treuhandanstalt). The German Jumbo Basket comprises Jumbo Mortgage (Pfandbrief) bonds issued by German companies. The KfW/Laender Basket comprises KfW bonds and bonds of the German federal states.

Eurex Repo operates the Swiss Franc Repo Market and the Euro Repo Market.

The Euro Repo Market allows financial service providers across Europe to access a full range of refinancing instruments using European securities. With Eurex Repo, financial institutions are able to use defined GC (General Collateral) baskets to optimize their liquidity management, as well as to benefit from the market transparency that is inherent to an electronic trading system.

Over a hundred international banks use the Swiss Franc Repo Market to manage their liquidity. Market participants from Switzerland as well as from abroad can execute their funding and collateral management operations directly in the Swiss Franc interbank market and take part in the liquidity-auctions conducted by the Swiss National Bank (SNB), which take place almost daily.

Eurex Repo stands for the seamless integration of trading, clearing and settlement of repo transactions in the European and Swiss repo market. Eurex Clearing AG acts as the central counterparty between buyers and sellers, thereby guaranteeing anonymity, efficient risk management and swift settlement at all times.

Participation in the Eurex Bond and Eurex Repo Market is generally open to all banks and financial service providers. Participants must be subject in their country of domicile to a financial market supervisory authority. For private investors, trade at Eurex Repo is not possible at present, as it is a mere interbank market.

Risks involved in Forex

There are two types of currency risk: transaction risk and translation risk. Transaction risk refers to actual conversions of cash flows from one currency to another, and the extent to which exchange rate changes will affect a company's cash flow. Translation risk is more of an accounting issue, and refers primarily to the impact of exchange rates on earnings and balance sheet items when consolidating financial statements from foreign subsidiaries. From a business standpoint, transaction risk is the more relevant of the two.

There are five general types of risk that are faced by all businesses: market risk (unexpected changes in interest rates, exchange rates, stock prices, or commodity prices), credit/default risk; operational risk (equipment failure, fraud); liquidity risk (inability to buy or sell commodities at quoted prices); and political risk (new regulations, expropriation). Businesses operating in the petroleum, natural gas, and electricity industries are particularly susceptible to market risk—or more specifically, price risk—as a consequence of the extreme volatility of energy commodity prices. Electricity prices, in particular, are substantially more volatile than other commodity prices.

Country risk can be divided into two parts, economic risk and political risk. Economic risk refers to the stability of a country's economy. It embodies concerns such as dependence on individual industries or markets, the ability to sustain a vibrant level of activity and to grow, and the supply of natural resources and other important inputs.

Political risk is more concerned with the stability of the government that manages the economy. It encompasses concerns such as the ability to move capital in and out of the country, the likelihood of a smooth transfer of power after elections, and the government's overall attitude toward foreign firms. Obviously, these two branches of country risk overlap significantly. There are a variety of services that provide in-depth assessments of country risk for virtually every country; multinational firms make considerable use of these services to form their own decisions regarding international projects.

FOREIGN EXCHANGE SERVICE

In finance, a foreign exchange service provides clients with an on-line platform to trade currency, such as the U.S Dollar and the Euro. Clients may hedge against, or more likely speculate upon, changes in the exchange rate for different currencies.

The small "retail traders" who are likely to use these services are often the target of forex scams. The U.S. Commodity Futures Trading Commission, which loosely regulates many foreign exchange traders in the U.S., has warned of an increase in the number of these scams.

forex exchange regime

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

The basic types are a floating exchange rate, where the market dictates the movements of the exchange rate, a pegged float, where the central bank keeps the rate from deviating too far from a target band or value, and the pegged exchange rate, which ties the currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro.

Fixed rates are those that have direct convertibility towards another currency. In case of a separate currency, also known as a currency board arrangement, the domestic currency is backed one to one by foreign reserves.

Foreign Exchange Dealers Coalition (FXDC)

The Foreign Exchange Dealers Coalition (FXCD) is an alliance of the largest U.S. foreign exchange market dealers. It was created to pool together industry resources to create awareness and recognition that forex dealers are a powerful choice for individuals who choose to speculate in financial markets.

The FXDC partnership was formed in the fall of 2007 to demonstrate the viability of the forex industry and to ensure fair regulation and oversight that does not hamper freedom of choice, innovation or job creation.
A forex dealer provides online trading services to allow individuals to speculate on rapidly changing foreign exchange rates. Forex Dealer Members (FDMs) are regulated by the CFTC and National Futures Association in the United States, as well as by national and local regulatory bodies where they conduct business, and are held to stringent business and ethical standards.
Many U.S. and international companies provide online trading software and services for individuals (traders) who want to speculate on the exchange rate differences between two currencies. In doing so, these speculators buy or sell currencies with the objective of making a profit when the value of the currencies changes in their favor, whether those fluctuations derive from market news, supply and demand principles, or geo-political events taking place throughout the world. In addition, the forex market is available to trade 24 hours a day, 5.5 days a week, allowing traders more freedom to trade when they want to, not just when an exchange is open.

FX OPTION

In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world. Most of the FX option volume is traded OTC but a fraction is traded on exchanges like the Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts.

For example a GBPUSD FX option might be specified by a contract allowing the owner to sell £1,000,000 and buy $2,000,000 on December 31. In this case the pre-agreed exchange rate, or strike price, is 2.0000 GBPUSD or 0.5000 USDGBP and the notional is £1,000,000. This type of contract is both a call on dollars and a put on sterling, and is often called a GBPUSD put by market participants. If the dollar is stronger than 2.0000 GBPUSD come December 31 (say at 1.9000 GBPUSD) then the option will be exercised, allowing the owner to sell GBP at 2.0000 and immediately buy it back in the spot market at 1.9000, making a profit of (2.0000 - 1.9000)*1,000,000 GBP = 100,000 USD in the process. If he immediately exchanges his profit, this amounts to 100,000/1.9000 = 52,631.58 GBP.

FOREX MARKET SPACE

FXMarketSpace is the first centrally-cleared, global foreign exchange (FX) trading platform for the over the counter (OTC) market. It was formed through a 50/50 joint venture between Reuters and the Chicago Mercantile Exchange to serve the evolving needs of the FX market, including speed, efficiency, centralized clearing and complete anonymity.

The joint venture was announced in May of 2006. On the 26th of March, 2007 the platform announced that it was fully operational and open for trading.

Initially the platform enables trading in Spot FX across six major currencies - the Euro, Japanese Yen, British Pound, Australian Dollar, Swiss Franc, and Canadian Dollar against the US Dollar, as well as four cross-currency pairs.