Foreign Exchange Market

Foreign Exchange Trading
Foreign Exchange Trading or FX Trading, clients are able to hedge against, or speculate upon, changes in the exchange rate of two currencies. For example, a speculator can long EUR/USD in foreign exchange market in order to profit from capturing the appreciation of Euro against the U.S. Dollar. Foreign exchange services provide an opportunity for clients to trade FX. Foreign Exchange Trading is done on the foreign exchange market.

Foreign Exchange Spot Trading
Foreign exchange spot trading is buying one currency with a different currency for immediate delivery, rather than for future delivery.
The standard settlement timeframe for Foreign Exchange Spot trades is T+2 days; i.e., 2 days from the date of trade execution. A notable exception is the USD/CAD currency pair which settles T+1.

Foreign Exchange Reserves
(also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions. This broader figure is more readily available, but it is more accurately termed official international reserves or international reserves. These are assets of the central bank held in different reserve currencies, such as the dollar, euro and yen, and used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions.

Foreign Exchange Option
In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.

The FX options market is the deepest, largest and most liquid market for options of any kind in the world. Most of the FX option volume is traded OTC and is lightly regulated, but a fraction is traded on exchanges like the International Securities Exchange, Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts. The global market for exchange-traded currency options was notionally valued by the Bank for International Settlements at $158,300 billion in 2005.

Foreign Currency Control
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Common foreign exchange controls include:
a. Banning the use of foreign currency within the country
b. Banning locals from possessing foreign currency
c. Restricting currency exchange to government-approved exchangers
d. Fixed exchange rates
e. Restrictions on the amount of currency that may be imported or exported

Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.

Foreign Exchange Committee
Founded in 1978 the Foreign Exchange Committee is an industry group that provides guidance and leadership to the global foreign exchange market. The FXC includes representatives of major financial institutions engaged in foreign currency trading in the United States and is sponsored by the Federal Reserve Bank of New York.

Past Committee members include:
John Spurdle of JP Morgan,
Jeff Feig of Citigroup,
Lloyd Blankfein of Goldman Sachs,
Paul Kimball of Morgan Stanley,
Michael deSa of Deutsche Bank,
Robert Savage of American Express,
Mark De Gennaro of Lehman, and John Key,
The incoming prime minister of New Zealand.
source: wikipedia