FINS5550International BankingSemester 1Tutorial 3Word格式文档下载.docx

FINS5550International BankingSemester 1Tutorial 3Word格式文档下载.docx

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Centralizedanddecentralizedmarkets

Centralized:

Stockexchangesandfuturesexchanges,

Decentralized:

Foreignexchanges,

Marketmaker

Broker

qua·

si 

（kwā'

zī'

-sī'

kwä

'

zē,-sē） 

PronunciationKey 

adj. 

Havingalikenesstosomething;

resembling:

aquasisuccess

Insiderspread

Settlementrisk

2.Whatispredictableimmediacy?

Explainitsimportanceintheforeignexchangemarket.

Thetwosidequotes,maketheliquiditypossible,canbuyandsell,

Thisispredictableimmediacy.Thatmeanstheymakethemarketliquiditypossibleandpredictable.

It’simportant,withoutthisservice,themarketwon’tmove,

Orifthespreadistoowideortoothin,themarketwon’tmoveeither.

3.Whatarethepossibledeterminantsofmarketmaker’sbidandaskspread?

Thosethreedeterminants:

costrecovery,adverseselection,andinventoryadjustmentneeds.

4.Explainthemechanicsofforeignexchangetradingintheinterbankmarket.

5.Outlinethedifferencesbetweenthedealerandthebrokermarketsegmentsoftheforeignexchangemarkets.

6.Explaintheroleofnostroandvostroaccountsinforeignexchangesettlements.

AustralianBankAccount（JapaneseYenaccount）:

nostroaccount（ouraccount）

JapaneseBankAccount（Australiandollarchequeaccount）:

vostro（theiraccount）

It’sconsistent.Becausethat’souraccount（Westpac）,it’sjustlocatedinNY.ButthecurrencyisinUSD,that’swhyit’snostroaccount.

ToHSBC,theiraccountinSydney.TheiroriginalcurrencyisUSD,justhadanbranch/accountinSydney（AUD）.That’swhyit’svostroaccount.

7.DiscusstheroleContinuousLinkedSettlement（CLS）bankintheforeignexchangemarket.Explainwithanexamplehowitworks.

ConfirmwithProfessorthe（i）（ii）arrows

Hi,

Ifyoureadtheexplanationscarefully,youwillnoticethatnumbers

appearaftertheirexplanations.Ihavemovedthenumbersinfrontand

thisoneshouldmakeiteasier.

â

€œ（i）BankXhadsoldUSDtoBankYinexchangeforJPY.BankXandBankY

bothsubmitdetailsofthetradetoCLSBank.（ii）CLSBankmatchesthe

tradeandretainsthisinformationuntilsettlementdate.Atthestartof

thesettlementdayCLSBankwillcalculatethenetlongandshort（iebuy

andsell）positionsforeachbankineachcurrencyandwillprovidea

pay-inscheduletoeachbank.（iii）BanksmakepaymentstoCLSBank

accordingtotheirpay-inschedules.Fundsaretransferredfromthebanks

toCLSBankacrosscentralbanksâ

€™accountsviathelocalRTGSsystem.（iv）

CLSBankcompletesthesettlementbyadjustingtherespectivepositionsof

banksacrossitsbooks.CLSBankmakespaymentstobanksinorderto

returntheirpositionsatCLSBanktozero.（EMEAP,2001）â

€?