Forex in the Future: Implications for Cash Management - PowerPoint PPT Presentation

Loading...

PPT – Forex in the Future: Implications for Cash Management PowerPoint presentation | free to download - id: 4323ff-NzkwN



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Forex in the Future: Implications for Cash Management

Description:

Association of Financial Planners February 12, 2002 Forex in the Future: Implications for Cash Management Campbell R. Harvey Duke University, Durham, NC USA – PowerPoint PPT presentation

Number of Views:91
Avg rating:3.0/5.0
Slides: 25
Provided by: campbel4
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Forex in the Future: Implications for Cash Management


1
Forex in the Future Implications for Cash
Management
Association of Financial Planners February 12,
2002
  • Campbell R. Harvey
  • Duke University, Durham, NC USA
  • National Bureau of Economic Research, Cambridge
    MA USA
  • http//www.duke.edu/charvey

2
Forex in the Future-----Current landscape
Market 1.500 trillion in forex transacted every
day 0.020 trillion stocks transacted on
NYSE Does not include forwards, swaps, and
options!
3
Forex in the Future-----Current landscape
  • Trading
  • Basic technology has not changed in decades
  • Phone around to banks/investment banks and get a
    quotation
  • Take the best price

4
Forex in the Future-----Trading technology
  • Trading
  • Basic technology has not changed in decades
  • Phone around to banks/investment banks and get a
    quotation
  • Take the best price

5
Forex in the Future-----Trading cost
  • Components
  • Clearing fee (say on 1 million ) 9-25
  • Bid-ask spread largest component
  • 90 of the time 2-5 pips (200-500)
  • median is 5 pips

6
Forex in the Future-----Trading cost
Frequency in
7
Forex in the Future-----Trading cost
  • Why are trading costs so high?
  • Banks provide
  • Clearing
  • Credit monitoring
  • Bear inventory risk
  • Plus, they make a pile of money!

8
Forex in the Future-----New forces in the market
  • Two consoritia FXall and Atriax
  • Similar product, different partners
  • Using the Internet, press a button and get the
    best two way quote (bid-ask) from consortia
    members
  • FXall has been around one year
  • Atriax launched in July 2001

9
Forex in the Future-----New forces in the market
  • Two consoritia FXall and Atriax
  • Advantages
  • Saves time in doing phone around
  • Electronic execution

10
Forex in the Future-----New forces in the market
  • Two consoritia FXall and Atriax
  • Disadvantages
  • Does not necessarily reduce spread cost
  • Makes collusion among consortium partners a
    possibility (current DOJ investigation)
  • No cross quotes between the two consortia
  • Basically, it is the same old market facilitated
    with the Internet

11
Forex in the Future-----New forces in the market
  • Reverse auction
  • Forexster.com
  • Applied for several patents for a reverse auction
    type of system for FX trading
  • Two types of systems
  • Type 1 client communicating to many banks
  • Type 2 many clients communicating with bank

12
Type 1 unit
Bank 1
Bank 2
Client
Forexster
Bank 3
Bank 4
Bank 5
13
Type 1 unit
Bank 1
Reverse auction
Bank 2
Client
Forexster
Bank 3
Bank 4
Bank 5
14
Type 2 unit
Client 1
Client 2
Client 3
Client 4
Forexster
Bank
Client 5
Client 6
Client 7
Client 8
Client 9
15
Type 2 unit
Client 1
Client 2
Client 3
Client 4
Forexster
Direct trade
Bank
Client 5
Client 6
Client 7
Client 8
Client 9
16
Type 2
Type 1
Bank
Client
17
(No Transcript)
18
(No Transcript)
19
(No Transcript)
20
(No Transcript)
21
(No Transcript)
22
(No Transcript)
23
(No Transcript)
24
Forex in the Future-----New forces in the market
  • Further reading
  • Ben Wright, Unlocking the C2C forex riddle
  • Euromoney on-line, July 25, 2001
About PowerShow.com