1 / 31

Forex in the Future: Implications for Asset Management

Forex in the Future: Implications for Asset Management. Campbell R. Harvey Duke University, Durham, NC USA National Bureau of Economic Research, Cambridge MA USA http://www.duke.edu/~charvey. Forex in the Future: -----Current landscape. Market $1.500 trillion in forex transacted every day*

clovis
Download Presentation

Forex in the Future: Implications for Asset Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Forex in the Future: Implications for Asset Management 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 one pip is 100 USD Frequency in %

  7. Forex in the Future:-----Trading cost one pip is 10000 JPY (about $80) Frequency

  8. Forex in the Future:-----Trading cost one pip is 100 CAD (about $65) Frequency

  9. Forex in the Future:-----Trading cost one pip is 100 CHF (about $60) Frequency

  10. Forex in the Future:-----Trading cost one pip is 100 USD Frequency

  11. Forex in the Future:-----Trading cost one pip is 100 CHF (about $60) Frequency

  12. Forex in the Future:-----Trading cost one pip is 10000 JPY (about $80) Frequency

  13. Forex in the Future:-----Trading cost one pip is 100 CHF (about $60) Frequency

  14. 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!

  15. 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

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

  17. 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

  18. 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

  19. Type 1 unit Bank 1 Bank 2 Client Forexster Bank 3 Bank 4 Bank 5

  20. Type 1 unit Bank 1 Reverse auction Bank 2 Client Forexster Bank 3 Bank 4 Bank 5

  21. Type 2 unit Client 1 Client 2 Client 3 Client 4 Forexster Client 5 Bank Client 6 Client 7 Client 8 Client 9

  22. Type 2 unit Client 1 Client 2 Client 3 Client 4 Forexster Direct trade Client 5 Bank Client 6 Client 7 Client 8 Client 9

  23. Interconnected Type 1 and Type 2 units Type 2 Bank Client FXLine Direct trade Type 1

  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

More Related