Forex

The interbank market is a market where the banks exchange between them financial credits and borrow or lend in the short run, and where also the central bank intervenes to bring or take again liquidities. It is thus also the market making it possible the Central bank (ECB for France since transfer of competences as regards monetary policy since the law of May 11, 1998) to balance the assessment of the trade banks in the event of crisis of liquidities.

One can distinguish, although there can be other operations (for example on the derivatives)

• the monetary market interbank (see money market) where take place the placements and refinancings with very short term.

The average rates used on this market for each duration (of 1 month in 12 months) are published each day, under name, for the euro area, of Euribor (sometimes translated by French Tibeur). The day-to-day rate is for its part called Eonia. Euribor is a rate of term (the rate of the interbank money in the future term), while Eonia is a noted rate (rate of the interbank money in the last term).

The establishments admitted to treat on the interbank market, in France, are: the finance companies (trade banks), the institutions (Treasury, Banque de France, Case of the Deposits), companies of investment (but these last are not allowed with the operations of refinancing of the ECB).

The Bank for international settlements (BIS), (Bank for International English Settlements or (A)) was created in 1930. It is the oldest international financial institution

Established within the framework of the Young Plan, regulating the methods of the war reparations imposed on Germany by the Treaty of Versailles (from where its name), it was also used for to distribute the financings of the European rebuilding. Its initial function became obsolete, it naturally became the place of dialogue of the central large banks.

During the second world war, the Bank for international settlements continued to function and this, for the benefit of Germany (placement of the gold stolen by Germany for example).

It is located at Basle in Switzerland, and is called the “central bank of the central banks” (still that this name is sometimes used also for the IMF).

Roles of the BIS

The BIS has like functions:

• on the one hand to act of pivot for the systems of international monetary transactions;
• and especially to be the organization of coordination between the central large banks of the world, which are the shareholders and train his board of directors for it.

It prepares agreements on the level of its committee of Basle which specify a certain number of prudential rules (test of solvency…) applicable to the whole of the trade banks of planet: agreements of Basle, of which the last, agreements of Basle II.

The monthly meeting of the board of directors, where the governors of the central large banks meet, allows also an abstract coordination of the monetary policies of the large countries.

Lastly, the BIS centralizes the collection and ensures the publication of many statistical data on banking and the financial markets.

Various committees cover great banking subjects: Basel committee one banking supervision, total Committee one the financial system, Committee one payment and settlement systems.

This worldwide market, which is primarily interbank, is the second financial market of planet in term of total volume, behind that of interest rates. It nevertheless is concentrated the most and the first for the liquidity of the most treated products, like the parity euro/dollar.

To give an idea of the liquidity in circulation, the daily volume of the exchanges was in 2004, of 1 900 billion dollars US, that is to say:

• 600 billion in cash transactions and
• 1.300 billion in the long term

quasi-uniquement in transactions private, according to the triennial study of the Bank for international settlements (BIS).

The transactions, in volume, were:

• for 53 % between banks;
• for 33 % between a bank and a manager of funds or a nonbanking financial institution;
• and finally for 14 % between a bank and a non-financial company.

In each important bank, the operators (known as moneychangers) make the 3×8, although generally with different sites. With a team located in Asia or Australia another located in Europe then finally a third located in North America, and so on succeeds.

Nevertheless, in spite of this world character and this time dissemination between the continents, a big part (31 % of total volume, according to the BIS) of the activity of the market remains physically localised in London.

In its last triennial study, the BIS (Bank off International Settlements) showed that a growing number of private individuals choose to invest on Forex. Although they still represent a very weak minority of the transactions and volumes, a market dedicated to the private investors developed in parallel. It is enough to note the number of platforms of trading placed at their disposal on Internet as well as the tools of information in real-time formerly reserved for the professional traders in the rooms of market. From now on, the active trader of the foreign exchange market can invest minimal sums and - grace to the existence of the action leverage trader under conditions almost (!) similar to those of the professional trader. Tools of information in real-time diffuse the news forex and fundamental information (economic indicators) and thus offer to the private individuals the possibility of trader under the conditions of real-time.

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