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A Foreign exchange market is a market in which currencies are bought and sold. It is to be
distinguished from a financial market where currencies are borrowed and lent. General Features
Foreign exchange market is described as an OTC (Over the counter) market as there is no
physical place where the participants meet to execute their deals. It is more an informal
arrangement among the banks and brokers operating in a financing centre purchasing and selling
currencies, connected to each other by telecommunications like telex, telephone and a satellite
communication network, SWIFT. The term foreign exchange market is used to refer to the
wholesale a segment of the market, where the dealings take place among the banks. The retail
segment refers to the dealings take place between banks and their customers. The retail segment
refers to the dealings take place between banks and their customers. The retail segment is
situated at a large number of places. They can be considered not as foreign exchange markets,
The leading foreign exchange market in India is Mumbai, Calcutta, Chennai and Delhi is other
centers accounting for bulk of the exchange dealings in India. The policy of Reserve Bank has
been to decentralize exchanges operations and develop broader based exchange markets. As a
result of the efforts of Reserve Bank Cochin, Bangalore, Ahmadabad and Goa have emerged as
new centre of foreign exchange market. Size of the Market Foreign exchange market is the
largest financial market with a daily turnover of over USD 2 trillion. Foreign exchange markets
were primarily developed to facilitate settlement of debts arising out of international trade. But
these markets have developed on their own so much so that a turnover of about 3 days in the
foreign exchange market is equivalent to the magnitude of world trade in goods and services.
The largest foreign exchange market is London followed by New York, Tokyo, Zurich and
Frankfurt.
DEFINITIONS
The simple definition of Foreign Exchange is the exchange of one currency for another. The foreign
exchange market allows Companies, Banks and individuals to buy and sell foreign currency. Unlike other
financial market, the foreign exchange market has no single location-trading is done globally via
telephone and computer links. The forex market is huge: the trading volume is in excess of 1.9 trillion
USD per day, providing the greatest liquidity to the investors.
In the past small investors have limited access to the lucrative forex market. The interbank market is no
longer the exclusive domain of large players. Technological leaps (such as state of the art deal boo FX2
trading software) have opened up this exciting market to small speculations. Real-time interbank dealing
rates allow the trader to place a buy or sell order and see it executed within a fraction of a second. There
are always buyers and sellers in the forex market. The market absorbs trading volumes. A trader is never
struck in a position due to a lack of market interest, volume and/or liquidity.
When companies conduct business across borders, they must deal in foreign currencies. Companies must
exchange foreign currencies for home currencies when dealing with receivables, and vice versa for
payables. This is done at the current exchange rate between the two countries. Foreign exchange risk is
the risk that the exchange rate will change unfavorably before the currency is exchanged. An over-the-
counter market where buyers and sellers conduct foreign exchange transactions. The Forex market is
useful because it helps enable trade and transactions between countries, and it also allows an investment
opportunity for risk seeking investors who don't mind engaging in speculation. Individuals who trade in
the Forex market typically look carefully at a country's economic and political situation, as these factors
can influence the direction of its currency. One of the unique aspects of the Forex market is that the
volume of trading is so high, partially because the units exchanged are so small.
The Forex, and also known as "The Foreign Exchange" market exists wherever one currency is traded for
another. It's the largest financial market in the world. Simply if we compare the New York Stock
Exchange trades vs changing hands in forex, we will discover Forex market is a lot of times larger than
both Equity and Treasury markets combined. There are more and less popular pairs of exchange in the
forex market. Euro Dollar is one of the most important pairs and you are likely to see it written in the
form of EUR/USD on all forex display screens. There are of course other tradable pairs such as
GPB/USD (British Pound/ American dollar), USD/JPY (American dollar/Japanese Yen), USD/CHF
(American dollar/Swiss Franc). Yet, they are far less popular than the EUR/USD pair.
NEED FOR THE STUDY
The simple definition of Foreign Exchange is the exchange of one currency for another. The
foreign exchange market allows Companies, Banks and individuals to buy and sell foreign
currency. Unlike other financial market, the foreign exchange market has no single location-
trading is done globally via telephone and computer links. The forex market is huge: the trading
volume is in excess of 1.9 trillion USD per day, providing the greatest liquidity to the investors.
In the past small investors have limited access to the lucrative forex market. The interbank
market is no longer the exclusive domain of large players. Technological leaps (such as state of
the art deal boo FX2 trading software) have opened up this exciting market to small speculations.
Real-time interbank dealing rates allow the trader to place a buy or sell order and see it executed
within a fraction of a second.
There are always buyers and sellers in the forex market. The market absorbs trading volumes. A
trader is never struck in a position due to a lack of market interest, volume and/or liquidity.
When companies conduct business across borders, they must deal in foreign currencies.
Companies must exchange foreign currencies for home currencies when dealing with
receivables, and vice versa for payables. This is done at the current exchange rate between the
two countries. Foreign exchange risk is the risk that the exchange rate will change unfavorably
before the currency is exchanged.
An over-the-counter market where buyers and sellers conduct foreign exchange transactions.
The Forex market is useful because it helps enable trade and transactions between countries, and
it also allows an investment opportunity for risk seeking investors who don't mind engaging in
speculation. Individuals who trade in the Forex market typically look carefully at a country's
economic and political situation, as these factors can influence the direction of its currency. One
of the unique aspects of the Forex market is that the volume of trading is so high, partially
because the units exchanged are so small.
OBJECTIVES OF THE STUDY:
3 To know and analyze the procedure of loan disbursement and its evaluation criteria.
4 To study and analyze the factors contributing to default rate and their interrelations.
Foreign exchange is the monetary mechanism by which transactions in two or more currencies are
affected.
In the beginning, trade took place on a barter basis. That had an obvious disadvantage: each of the parties
in a transaction had to have something the other wanted. The basis of the alternative, a monetary
exchange system, is a material that has an intrinsic value that is relatively stable and so is wanted by both
parties in a transaction. Therefore the need of foreign exchange has been araised.
With the development of nations, each with its own monetary system, and international trade, a
foreign exchange mechanism became necessary and was developed. By means of foreign
exchange, goods produced in one country can be purchased in another country.
Regardless of its direction, such an international transaction must be denominated in a currency
other than that of either the seller or buyer; that is, one party to the transaction must either buy or
sell a foreign currency.
It does so through the international banking system, and the result is a foreign exchange
transaction. The problem that then arises is convertibility, or the relative values of two different
currencies.
Despite the existence of an international monetary system, changes in the value of one currency
in relation to another are common, and they make the management of international business more
complex.
Changes in monetary values are of two kinds: those that reflect supply and demand in the day-to-
day market, and those that reflect an imbalance between the economies of countries.
RESEARCH METHODOLOGY OF THE STUDY:
The study is both descriptive and analytical in nature. It is a blend of primary data and secondary data.
The primary data has been collected personally by approaching the online share traders who are engaged
in share market. The data are collected with a carefully prepared questionnaire. The secondary data has
been collected from the books, journals and websites which deal with online share trading.
Source of data
Primary Sources: The primary data was collected through structured unbiased questionnaire and
personal interviews of investors. For this purpose questionnaire included were both open ended & close
Websites
Journals
Text books
The methodology used for this purpose is Survey and Questionnaire Method. It is a time consuming and
expensive method and requires more administrative planning and supervision. It is also subjective to
Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.
LIMITATIONS OF THE STUDY