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Interbank foriegn exchange


dontlop
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The interbank market is the top-level foreign exchange market where banks exchange different currencies.[1] The banks can either deal with one another directly, or through electronic brokering platforms. The Electronic Broking Services (EBS) and Thomson Reuters Dealing are the two competitors in the electronic brokering platform business and together connect over 1000 banks.[1] The currencies of most developed countries have floating exchange rates. These currencies do not have fixed values but, rather, values that fluctuate relative to other currencies.

Now if you will go to this link and read number 26 thru 28

And tell me what you think the cbi is saying

http://books.google.com/books?id=Kb9lShuGRNoC&pg=PT68&lpg=PT76&ots=aC87hx0kEr&focus=viewport&dq=3.+For+purposes+of+monitoring+under+the+program,+a+program+exchange+rate+will+be+used.+This+program+exchange+rate+will+be+set+at+ID+1,170+per+U.S.+dollar.&output=html_text

I can't copy and paste here so ya got to read it

It's only two paragraphs

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Reading that leads me to believe Iraq has no intentions of an incountry exchange

If Iraq came out with a 10 cent rv they would sell like hot cakes

Everyone would know they intend to increase its value at that point

I'd think about cashing in a little at a time

Govts around the world would hoard them in their reserves

In my opinion that is

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Its old these could of been ready last year

Everything could be ready by now

Article VIII: General Obligations of Members

Section 1. Introduction

In addition to the obligations assumed under other articles of this Agreement, each member undertakes the obligations set out in this Article.

Section 2. Avoidance of restrictions on current payments

(a) Subject to the provisions of Article VII, Section 3(B) and Article XIV, Section 2, no member shall, without the approval of the Fund, impose restrictions on the making of payments and transfers for current international transactions.

(B) Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member. In addition, members may, by mutual accord, cooperate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.

Section 3. Avoidance of discriminatory currency practices

No member shall engage in, or permit any of its fiscal agencies referred to in Article V, Section 1 to engage in, any discriminatory currency arrangements or multiple currency practices, whether within or outside margins under Article IV or prescribed by or under Schedule C, except as authorized under this Agreement or approved by the Fund. If such arrangements and practices are engaged in at the date when this Agreement enters into force, the member concerned shall consult with the Fund as to their progressive removal unless they are maintained or imposed under Article XIV, Section 2, in which case the provisions of Section 3 of that Article shall apply.

Section 4. Convertibility of foreign-held balances

(a) Each member shall buy balances of its currency held by another member if the latter, in requesting the purchase, represents:

(i) that the balances to be bought have been recently acquired as a result of current transactions; or

(ii) that their conversion is needed for making payments for current transactions.

The buying member shall have the option to pay either in special drawing rights, subject to Article XIX, Section 4, or in the currency of the member making the request.

(B) The obligation in (a) above shall not apply when:

(i) the convertibility of the balances has been restricted consistently with Section 2 of this Article or Article VI, Section 3;

(ii) the balances have accumulated as a result of transactions effected before the removal by a member of restrictions maintained or imposed under Article XIV, Section 2;

(iii) the balances have been acquired contrary to the exchange regulations of the member which is asked to buy them;

(iv) the currency of the member requesting the purchase has been declared scarce under Article VII, Section 3 (a); or

(v) the member requested to make the purchase is for any reason not entitled to buy currencies of other members from the Fund for its own currency.

The multiple currency thing is still going on I think

They are still using dollars

Maybe that doesn't count

They do have one unified dinar in iraq

I think they just need to agree to the terms of article 8

When they are ready to agree or able to agree

Edited by dontlop
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The Foreign Exchange Interbank Market

By Kathy Lien on July 21, 2010

Filed Under: AUD/USD, Bank for International Settlements, Capital Market, Chicago Board of Trade, Commodity Futures Trading Commission, EUR/CAD, EUR/CHF, EUR/GBP, EUR/JPY, EUR/USD, Foreign Investment, Forex Brokers, Forex Fundamentals, Forex Theory, GBP/USD, International Markets, National Futures Association, New York Stock Exchange, NZD/USD, USD/CAD, USD/CHF, USD/JPY

According to an April 2007 report by the Bank for International Settlements, the foreign exchange market has an average daily volume of close to $3 trillion, making it the largest market in the world. Unlike most other exchanges such as the New York Stock Exchange or the Chicago Board of Trade, the FX market is not a centralized market. In a centralized market, each transaction is recorded by price dealt and volume traded. There is usually one central place back to which all trades can be traced and there is often one specialist or market maker. The currency market, however, is a decentralized market. There isn't one "exchange" where every trade is recorded. Instead, each market maker records his or her own transactions and keeps it as proprietary information. The primary market makers who make bid and ask spreads in the currency market are the largest banks in the world. They deal with each other constantly either on behalf of themselves or their customers. This is why the market on which banks conduct transactions is called the interbank market.

The competition between banks ensures tight spreads and fair pricing. For individual investors, this is the source of price quotes and is where forex brokers offset their positions. Most individuals are unable to access the pricing available on the interbank market because the customers at the interbank desks tend to include the largest mutual and hedge funds in the world as well as large multinational corporations who have millions (if not billions) of dollars. Despite this, it is important for individual investors to understand how the interbank market works because it is one the best ways to understand how retail spreads are priced, and to decide whether you are getting fair pricing from your broker. Read on to find out how this market works and how its inner workings can affect your investments.

Who makes the prices?

Trading in a decentralized market has its advantages and disadvantages. In a centralized market, you have the benefit of seeing volume in the market as a whole but at the same time, prices can easily be skewed to accommodate the interests of the specialist and not the trader. The international nature of the interbank market can make it difficult to regulate, however, with such important players in the market, self-regulation is sometimes even more effective than government regulations. For the individual investor, a forex broker must be registered with the Commodity Futures Trading Commission as a futures commission merchant and be a member of the National Futures Association (NFA). The CFTC regulates the broker and ensures that he or she meets strict financial standards. (For more insight on determining whether you're getting a fair price from your broker, read Is Your Forex Broker A Scam? and Price Shading In The Forex Markets.)

Most of the total forex volume is transacted through about 10 banks. These banks are the brand names that we all know well, including Deutsche Bank (NYSE:DB), UBS (NYSE:UBS), Citigroup (NYSE:C) and HSBC (NYSE:HBC). Each bank is structured differently but most banks will have a separate group known as the Foreign Exchange Sales and Trading Department. This group is responsible for making prices for the bank's clients and for offsetting that risk with other banks. Within the foreign exchange group, there is a sales and a trading desk. The sales desk is generally responsible for taking the orders from the client, getting a quote from the spot trader and relaying the quote to the client to see if they want to deal on it. This three-step process is quite common because even though online foreign exchange trading is available, many of the large clients who deal anywhere from $10 million to $100 million at a time (cash on cash), believe that they can get better pricing dealing over the phone than over the trading platform. This is because most platforms offered by banks will have a trading size limit because the dealer wants to make sure that it is able to offset the risk.

On a foreign exchange spot trading desk, there are generally one or two market makers responsible for each currency pair. That is, for the EUR/USD, there is only one primary dealer that will give quotes on the currency. He or she may have a secondary dealer that gives quotes on a smaller transaction size. This setup is mostly true for the four majors where the dealers see a lot of activity. For the commodity currencies, there may be one dealer responsible for all three commodity currencies or, depending upon how much volume the bank sees, there may be two dealers.

This is important because the bank wants to make sure that each dealer knows its currency well and understands the behavior of the other players in the market. Usually, the Australian dollar dealer is also responsible for the New Zealand dollar and there is often a separate dealer making quotes for the Canadian dollar. There usually isn't a "crosses" dealer - the primary dealer responsible for the more liquid currency will make the quote. For example, the Japanese yen trader will make quotes on all yen crosses. Finally, there is one additional dealer that is responsible for the exotic currencies such as the Mexican peso and the South African rand. This setup is usually mimicked across three trading centers - London, New York and Tokyo. Each center passes the client orders and positions to another trading center at the end of the day to ensure that client orders are watched 24 hours a day. (To continue reading about currency crosses, see Make The Currency Cross Your Boss and Identifying Trending & Range-Bound Currencies.)

How do banks determine the price?

Bank dealers will determine their prices based upon a variety of factors including, the current market rate, how much volume is available at the current price level, their views on where the currency pair is headed and their inventory positions. If they think that the euro is headed higher, they may be willing to offer a more competitive rate for clients who want to sell euros because they believe that once they are given the euros, they can hold onto them for a few pips and offset at a better price. On the flip side, if they think that the euro is headed lower and the client is giving them euros, they may offer a lower price because they are not sure if they can sell the euro back to the market at the same level at which it was given to them. This is something that is unique to market makers that do not offer a fixed spread.

How does a bank offset risk?

Similar to the way we see prices on an electronic forex broker's platform, there are two primary platforms that interbank traders use: one is offered by Reuters Dealing and the other is offered by the Electronic Brokerage Service (EBS). The interbank market is a credit-approved system in which banks trade based solely on the credit relationships they have established with one another. All of the banks can see the best market rates currently available; however, each bank must have a specific credit relationship with another bank in order to trade at the rates being offered. The bigger the banks, the more credit relationships they can have and the better pricing they will be able access. The same is true for clients such as retail forex brokers. The larger the retail forex broker in terms of capital available, the more favorable pricing it can get from the interbank market. If a client or even a bank is small, it is restricted to dealing with only a select number of larger banks and tends to get less favorable pricing.

Both the EBS and Reuters Dealing systems offer trading in the major currency pairs, but certain currency pairs are more liquid and are traded more frequently over either EBS or Reuters Dealing. These two companies are continually trying to capture each other's market shares, but as a guide, the following is the breakdown where each currency pair is primarily traded:

EBS Reuters

EUR/USD GBP/USD

USD/JPY EUR/GBP

EUR/JPY USD/CAD

EUR/CHF AUD/USD

USD/CHF NZD/USD

Cross currency pairs are generally not quoted on either platform, but are calculated based on the rates of the major currency pairs and then offset through the legs. For example, if an interbank trader had a client who wanted to go long EUR/CAD, the trader would most likely buy EUR/USD over the EBS system and buy USD/CAD over the Reuters platform. The trader then would multiply these rates and provide the client with the respective EUR/CAD rate. The two-currency-pair transaction is the reason why the spread for currency crosses, such as the EUR/CAD, tends to be wider than the spread for the EUR/USD.

The minimum transaction size of each unit that can be dealt on either platform tends to one million of the base currency. The average one-ticket transaction size tends to five million of the base currency. This is why individual investors can't access the interbank market - what would be an extremely large trading amount (remember this is unleveraged) is the bare minimum quote that banks are willing to give - and this is only for clients that trade between $10 million and $100 million and just need to clear up some loose change on their books. (To learn more, see Wading Into The Currency Market.)

Conclusion

Individual clients then rely on online market makers for pricing. The forex brokers use their own capital to gain credit with the banks that trade on the interbank market. The more well capitalized the market makers, the more credit relationships they can establish and the more competitive pricing they can access for themselves as well as their clients. This also means that when markets are volatile, the banks are more obligated to give their good clients continuously competitive pricing. Therefore, if a forex retail broker is not well capitalized, how they can access more competitive pricing than a well capitalized market maker remains questionable. The structure of the market makes it extremely difficult for this to be the case. As a result, it is extremely important for individual investors to do extensive due diligence on the forex broker with which they choose to trade.

For related reading, see A Primer On The Forex Market, Getting Started In Forex and Common Questions About Currency Trading.

by Kathy Lien

Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications. She also appears regularly on CNBC – US, Asia and Europe and on Sky Business.

More From Kathy Lien..

Forex Trading The Martingale Way

Making Sense Of The EUR/CHF Relationship

Find Equity Opportunities With Currency Moves

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Citi group is one of the ten top banks in the forex

Noticing citi group set up a Baghdad office 1 year ago

It just so happens there's no information on citi groups Baghdad branch since the announcement of the Baghdad branch opening

Wonder what they been up to

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Number 26 talks about interbank exchange

26 ) To improve functioning of foriegn exchange auctions , we plan to develop organized exchange markets outside the central bank, including an interbank foriegn exchange market . Our aim is to establish a forward market in Iraqi dinars in the near future .

That one is number 26

Doesn't look like any in country exchange

They want to go on the international exchange

Edited by dontlop
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The forward exchange market is a market for contracts that ensure the future delivery of a foreign currency at a specified exchange rate. The price of a forward contract is known as the forward rate

Forward rates are usually negotiated for delivery one month, three months, or one year after the date of the contract's creation. They usually differ from the spot rate and from each other. If one currency is expected to depreciate against a second, it is said the first currency is selling at a discount on the forward market. The term selling at a premium on the forward market is used for cases in which appreciation is expected.

What determines the forward rate?

If there is no government intervention on the value of a currency, the forward market will be governed by supply and demand. In such a case it is possible that the forward rate provides information on the future spot rate, but ultimately uncertain. What is certain is that the forward rates reflect the expectations forward market participants have on the changes of the spot rate during the specified interval. If the forward rate and the spot rate are the same, forward market participants do not expect much change in the price of a currency over the given period of time.

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So they can change the official exchange rate

Creating a bounty rate to bring in all the dinar they can

But previously offering a forward rate higher to specific banks or country's

We cash in the banks would buy our dinar knowing in a year from then their contract forward rate would go into effect and they would profit from the exchange process

Dontlop...do you trade Forex?

No

I've looked into computerized trading platforms that tell you when to buy and sell or automatically do it for you

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I don't trust anyone anymore

I'm looking for a huge scam to jump in on like the dinar

If the elite have a plan to rv the dinar I'm gonna make them pay me too

This one could work because no one loses anything but some people make huge gains

So no one will call the cops

No one was robbed

Just a bunch of new currency created

and I have some of it

Why would anyone want this currency ?

But for some reason we were there to hear what we heard and bought some

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There is that possibility that they needed us to spread this wealth out

If it all ended up in the hands of a few major players it would look suspicious

So the new plan was to creat a few trillion dollars worth of currency and give half of it away to common people and this would be the cover up

Us we are their cover

We will justify it with all the bs we learned over the past ten years

I can see the interviews on tv

People like me will talk circles and they will think I'm some kind of currency expert that is way beyond their common thinking

Eventually they will just give up like the lopsters

But they will never be able to figure it out

And if they get close those jackabutts will create a diversion

And soon this will be on a back burner somewhere

Then the lights will go out completely

And we will spend all our money and it will end up in those elites bank accounts anyway

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Forex trading is something I figured I could drop a couple grand into and watch it grow never removing any money for around a decade

Then see what I had

The more money you start out with the quicker you get to your end point

Ya need to find a way to make 1% on your money every day

There are ways explained for the stock market to do that thru day trading

But ya got to be on top of it 5 days a week

For a couple hours each morning before the market opens

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Forex trading is something I figured I could drop a couple grand into and watch it grow never removing any money for around a decade

Then see what I had

The more money you start out with the quicker you get to your end pointYa need to find a way to make 1% on your money every day

There are ways explained for the stock market to do that thru day trading

But ya got to be on top of it 5 days a week

For a couple hours each morning before the market opens

Hey donlop

Thanks for the response! I, like Snowglobe, am interested in the Forex. I am interested in using mechanisms like I use for stock trading. If this is possible, I will like to investigate active trading strategies like I am able to use with stocks akin to level II trading. I will reach out to Snowglobe as if seems we are on the same quest.

Blessings,

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