pricing - page 5
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Everything that has been said about the currency pricing process on this (and all other) websites is rubbish (not true or half-true). It's all about the so-called correspondent accounts of the banks. (a search of this site didn't show that word here at all). Banks buy currency from each other to BALANCE these very correspondent Pair accounts. And also for future balancing - if they know that they (their clients) are going to have a big country-to-country flow of money. In reality, banks are not really interested in currency fluctuations - it is more important for their correspondent account balance - so that the other bank does not start charging penalty interest and take an interest for exceeding the correspondent account.
Could you go into more detail?
>> Could you elaborate on that, please?
Specify exactly what you are interested in. The technical details of the process are in Piskulov's book "Currency dealing". What is not there is a description of how currency bids are generated INTO the bank, from its own credit department and interbank operations department. The bank's internal operations are probably more relevant to price formation (or should I say price MOTION) than customer orders. There is nothing magical about this, it is just that the general public, who have not worked in a bank, does not really understand the intra- and inter-bank kitchen. So, it is these two kitchens that determine the flow of money between banks, not directly "big client bids", and therefore determine currency prices. It is not the clients or even the "big clients" who determine the exchange rate, but the current situation of the correspondent account within the bank and between a couple of banks. This is why the exchange rate often goes AGAINST all fundamentals and against all kinds of thechanalysis. this is why it is so hard to catch.
Everything that has been said about the currency pricing process on this (and all other) websites is rubbish (not true or half-true). It's all about the so-called correspondent accounts of the banks. (a search of this site didn't show that word here at all). Banks buy currency from each other to BALANCE these very correspondent Pair accounts. And also for future balancing - if they know that they (their clients) are going to have a big country-to-country flow of money. In reality, banks are not really interested in currency fluctuations - it is more important for their correspondent account balance - so that the other bank does not start charging penalty interest and take an interest for exceeding the correspondent account.
This is called "I hear a bell, but I don't know where it is".
Everything that has been said about the currency price formation process on this (and all other) websites is nonsense (not true or half-true). It's all about the so-called correspondent accounts of the banks. (a search of this site didn't show that word here at all). Banks buy currency from each other to BALANCE these very correspondent Pair accounts. And also for future balancing - if they know that they (their clients) are going to have a big country-to-country flow of money. In fact, banks are not really interested in currency fluctuations - it is more important for their correspondent account balance, so that the other bank does not start charging penalty interest and charge interest for exceeding the correspondent account limit stipulated by the agreement on opening and maintaining correspondent accounts.
1. No one is going to charge anything there. This is an internal matter of the bank, as soon as the bank exceeds any limit set by the Central Bank, not a third-party bank but the regulator starts to stroke their heads.
2. The same banks have their own reserves (in stocks). They have their own reserves (in stocks, bonds, currency). Even without the need to balance the coffers, they can buy foreign currency to support growth. Banks are not suckers to miss out on freebies... :)
3. it was pricing, not the cor account :)
4. You can argue about fluctuations, why would the bank buy a currency when analysts predict a slowdown.)
(A trivial example: RF. the beginning of the crisis. Banks gobble up currency in order to sell it to the public... at a higher price ( exchange rate fluctuations:)) Russian citizens bought less currency than the banks had stockpiled).
It's called "I hear a bell, I don't know where it is."
Ha ha, thank you. I just checked - this site hasn't even mentioned the word "nostro" until now. So where does the information on currency pricing come from?
http://en.wikipedia.org/wiki/Nostro
http://en.wikipedia.org/wiki/Correspondent_account
"Correspondent_account":
https://ru.wikipedia.org/wiki/%D0%9A%D0%BE%D1%80%D1%80%D0%B5%D1%81%D0%BF%D0%BE%D0%BD%D0%B4%D0%B5%D0%BD%D1%82%D1%81%D0%BA%D0%B8%D0%B9_%D1%81%D1%87%D1%91%D1%82
The problem is that the state of a bank's correspondent account is a mystery.
- correspondent accounts of credit institutions with the Bank of Russia CBR.
Accounts in the currency of the Russian Federation, including balances with the CSD.
Ha ha, thank you. I just checked - this site hasn't even mentioned the word "nostro" until now. So where does the information on currency pricing come from?
http://en.wikipedia.org/wiki/Nostro
http://en.wikipedia.org/wiki/Correspondent_account
"Correspondent_account":
https://ru.wikipedia.org/wiki/%D0%9A%D0%BE%D1%80%D1%80%D0%B5%D1%81%D0%BF%D0%BE%D0%BD%D0%B4%D0%B5%D0%BD%D1%82%D1%81%D0%BA%D0%B8%D0%B9_%D1%81%D1%87%D1%91%D1%82
The problem is that the state of a bank's correspondent account is a mystery.
What's up, it's the holidays and there's an influx of gurus with slingshot trousers.
At the same time, it must be a lot more work for the bespoke programmers.
1. No one is going to charge anything there. This is an internal matter of the bank, as soon as the bank exceeds any limit set by the Central Bank, not a third-party bank but the regulator starts to stroke their heads.
2. The same banks have their own reserves (in stocks). They have their own reserves (in stocks, bonds, currency). Even without the need to balance the coffers, they can buy foreign currency to support growth. Banks are not suckers to miss out on freebies... :)
3. it was pricing, not the cor account :)
4. You could argue that the bank does not need to buy hard currency if analysts predict a slowdown, so they throw money down the drain).
( a trivial example: RF. the beginning of the krysis. Banks gobble up currency in order to sell it to the public... at a higher price ( exchange rates fluctuate:)) the citizens of Russia. bought less currency than the banks had stockpiled)
1. What do you mean by "will" or "won't"? They are STILL coming! My friend, you are confusing intra-country inter-bank payments, that are in one currency and are made through a clearing house (this is usually the Central Bank, but there are also local clearing houses between ten banks), - you are confusing this with international payments, that are made in multiple currencies and balancing them is so complicated that only ten large banks or a specialized bank like Bankers Trust should do it.
http://en.wikipedia.org/wiki/Bankers_Trust
Deutsche Bank bought them in 1998 for a reason - just to ease the nightmare of international settlements.
Sorry, it's hard for me to explain this to people who have never sent a swifttrade. But I will try.
2. That's the problem, the correspondent account has a limited reserve. This means that if bank A transfers a large amount to bank B, then for a few days bank A CREDITS, I repeat CREDITS bank B. Up to the limit of the correspondent account this is FREE, and beyond that - for a fee, and above the limit 2 - also with penalties.
3. Money is exchanged between banks all over the world NOT ONLY through a very complex system of correspondent accounts. That is why the entire foreign exchange system is based on them. I can assure you - maintaining a correspondent account is an important task in ANY bank.
4. What do you mean by nakuya? And how will the bank receive money from customers tomorrow, if today a big customer transferred (withdrew) a billion yen to another bank and the correspondent account is so skewed that, under the terms of the correspondent account agreement, that bank CANNOT transfer money any further in the same way? (it will have to either go to another correspondent bank or urgently buy/sell a combination of currencies to equalise the correspondent account to the limit). There can't be any arbitrary amount of money lying around in the correspondent account, you see? There is a limit there.
1. What do you mean by "will" or "won't" ? They are INCREDIBLE! You, my friend, are confusing inter-bank domestic settlements, which are in one currency and which go through a clearing and settlement centre (this is usually the Central Bank, but there are also local clearing and settlement centres between a dozen banks), - confused with international settlements, which are in many currencies and balancing them is so complex that only a dozen big banks, or a specialised bank like Bankers Trust, are entrusted with balancing them.
http://en.wikipedia.org/wiki/Bankers_Trust
Not for nothing did Deutsche Bank buy them in 1998 - just to ease the nightmare of international settlements.
Sorry, it's hard for me to explain this to people who have never sent a swifttrade. But I will try.
2. That's the problem, the corrs account has a limited reserve. This means that if bank A transfers a large amount to bank B, then for a few days bank A CREDITS, I repeat CREDITS bank B. Up to the limit of the correspondent account this is FREE, and beyond that - for a fee, and above the limit 2 - also with penalties.
3. Money is exchanged between banks all over the world NOT ONLY through a very complex system of correspondent accounts. That is why the entire foreign exchange system is based on them. I can assure you - maintaining a correspondent account is an important task in ANY bank.
4. What do you mean by nakuya? And how will the bank get money from customers tomorrow if today a big customer transferred (withdrew) a billion yen to another bank and the correspondent account is so skewed that, under the terms of the correspondent account agreement, that bank CANNOT TRANSFER money in the same way any more? (it will have to either go to another correspondent bank or urgently buy/sell a combination of currencies to equalise the correspondent account to the limit). There can't be any arbitrary amount of money lying around in the correspondent account, you see? There's a limit there.
I wonder how much of this is roughly the total volume of forex trading? So this process is unpredictable? Although, why, if clients start buying currency, the bank will start to buy it too, because it has to equalise its accounts. So it is a kind of a buffer. So, customers' purchases will not affect the rate immediately. Isn't it like that?
- correspondent accounts of credit institutions with the Central Bank of Russia.
Accounts denominated in the currency of the Russian Federation, including balances with the CBR.
This is INCREDIBLE, I repeat INCREDIBLE in Russia. And these are general figures, the sum total. It is not and never has been a secret. The secret is how close EVERY large bank is on its EXTERNAL VOLUME correspondent accounts to the limits set by interbank agreements. The Central Bank rarely sticks its nose in there and it won't understand anything there. Why? Because the banks themselves often do not quite understand what they have in their correspondent accounts - and more importantly, what will happen there the next day, how much money is in the queue to go out.