Doo Prime: On the current situation of the foreign exchange market and the generation of quotations!

foreign exchange marketMainly foreign exchange settlement and sales positions between banks, commonly referred to as the foreign exchange market between banks. The state stipulates that Financial Institution Groups are not allowed to conduct transactions between RMB and foreign currencies outside the market. For transactions between different foreign currencies, domestic banks can freely participate in international market transactions without policy restrictions.

In 1994, our country's foreign exchange market system and management carried out major reforms, adopted the government-driven approach, and established a unified national inter-bank foreign exchange market, which completely changed the situation of market segmentation and non-uniform exchange rates. It laid the foundation for a floating exchange rate based on market supply and demand, a single and managed exchange rate. The choice of market model fully takes into account progressiveness and unity.

On the basis of adjusting the market, develop the principle of "quotation, matching transactions, and centralized clearing" trading methods. Years of practice have fully proved that the interbank foreign exchange market has played an important role in serving Financial Institution Groups, maintaining the stability of the RMB exchange rate, supporting economic growth and reform and opening up. However, in the field of foreign exchange trading, the domestic market has been in a stage of cautious development. The domestic futures market has developed blindly. Many Hong Kong foreign exchange brokers have carried out foreign exchange futures trading business in the mainland without approval, attracting a large number of domestic enterprises and individuals to participate. However, the vast majority of participants in the market do not understand the transactions on the foreign exchange market, and blind participation has led to large-scale and large losses. Therefore, in August 1994, the China Securities Supervision Commission and other four ministries jointly issued a document banning foreign exchange futures trading. Since then, the management department has been denying and cracking down on domestic foreign exchange margin trading.

At the end of 1993, the People's Bank of China began to allow domestic banks to carry out personal foreign exchange trading business (there is no closed foreign exchange trading in the world). Since 1993, the Bank of China took the lead in launching personal foreign exchange trading, in addition to individual banks, major commercial banks across the country have also opened this business. With the standardization of the stock market, the profit margins of stock trading have been significantly reduced, and investors have begun to enter the foreign exchange market. Domestic foreign exchange trading has gradually become a new investment method and entered a stage of rapid development. At present, the rapid development of personal foreign exchange trading business has become the largest investment market in China except stocks.

After learning about the foreign exchange market,dooprimeIt is believed that it is also necessary to have a key understanding of the foreign exchange market quotation; the determinant of the foreign exchange market quotation is determined by the risk control standards of foreign exchange liabilities and foreign exchange assets. The foreign exchange reserves of the bank pose a huge market risk to the bank. In order to prevent runs or other risks, the general bank has a risk control limit for each foreign currency that is unique to it. When the holdings of a certain currency are higher or lower than the allowable range of risk control, the bank must position squaring externally so that the holdings of the currency are within the controllable risk. In addition, the bank will also make its own currency quotation according to the market price at that time, the market price they want and the quantity they need. This quotation may be similar to other banks or it may be very different.

When the exchange rate of a currency is very favorable to the bank, the bank will consider trading at this price. The price quoted by the bank to the investor is often acceptable to the bank, and it is easy to position squaring immediately. In terms of quantity, this price is much lower than the risk control limit of the currency. Once the transaction volume is too large, the bank will tell the investor another price.

Foreign exchange trading uses inquiry trading, also known as agreement trading. Banks' external quotations are independent, and investors' external quotations are often reflected in the quotations of multiple banks. For independent individuals trading, banks can quote individuals or specific groups individually.