Foreign Exchange Futures-What is the currency futures?
Foreign Exchange Futures are trading at a future time, the two sides agree, based on the ratio is now agreed to exchange one currency to another currency trading standardized contracts. Refers to the exchange rate for the subject matter of the futures contracts used to avoid exchange rate risk. It is the financial futures in the earliest varieties. Since May 1972 the Chicago Mercantile Exchange's International Monetary Market division launched the first foreign exchange futures contracts, along with the development of international trade and world economic integration process has accelerated, foreign exchange futures trading has maintained a strong momentum of development. It is not only for the majority of investors and financial institutions and other economic subjects provide an effective hedging tool, but also for arbitrageurs and speculators to provide a new means of profit.
Foreign Exchange Futures - History
In May 1972, the Chicago Mercantile Exchange, the formal establishment of the international currency markets division, launched a seven kinds of foreign exchange futures contracts, thus opening a futures market innovation and development of the regiment. Since 1976, the rapid development of foreign exchange futures market, trading volume increased by several dozen times. 1978, the New York Mercantile Exchange has also increased the foreign exchange futures business in 1979, the New York Stock Exchange also announced the establishment of a new exchange to specifically engage in foreign currency and financial futures. In February 1981, the Chicago Mercantile Exchange for the first time opened its Euro-dollar futures. Subsequently, Australia, Canada, the Netherlands, Singapore and other countries and regions have also opened a foreign exchange futures market, Since then, the currency futures market is booming up.
At present, the main varieties of foreign exchange futures are: U.S. dollar, British pound, German mark, Japanese yen, Swiss franc, Canadian dollar, Australian dollar, French franc, Dutch guilder and so on. From a global perspective, the major currency futures markets in the United States, which has largely focused on the Chicago Mercantile Exchange's International Monetary Market (IMM), Central America Commodity Exchange (MCE) and Philadelphia Futures Exchange (PBOT).
The international currency markets mainly for Australian dollars, British pound, Canadian dollar, deutsche mark, French franc, Japanese yen and Swiss franc futures contract transactions;
Central America, commodity exchanges pounds, Canadian dollars, deutsche mark, Japanese yen and Swiss franc futures exchange;
In addition, the major currency futures exchange include: the London International Financial Futures Exchange (LIFFE), the Singapore International Monetary Exchange (SIMEX), the Tokyo International Financial Futures Exchange (TIFFE), French International Futures Exchange (MATIF) and so on, each exchange are basically there is the national currency with the other major currencies traded futures contracts. In the foreign exchange market, there is a traditional way of forward foreign exchange transactions, which in many respects, and foreign exchange futures have the same or similar, is often mistaken for futures trading. At this point, it is necessary for them to make a simple distinction. The so-called forward foreign exchange transactions refer to transactions in the transaction when the two sides agreed on a future date at an exchange rate determined at the time transactions settled a certain amount of a foreign exchange transaction. Forward foreign exchange transactions are generally by banks and other financial institutions with each other by phone, fax, etc. to reach, trading volume, duration, price freely agreed, compared with more flexible foreign exchange futures. In hedging, the long-term transactions, more targeted, often can make all the hedging risk. However, the forward price of the transaction futures prices do not have that kind of openness, fairness and impartiality. Forward transaction is not exchanges, clearing houses as the intermediary, flow well below the futures, but also faces the risk of counterparty default.
Foreign Exchange Futures - Specifications
Foreign exchange futures contracts based on foreign exchange as the standardization of the content delivery futures contracts. It includes the following aspects:
First, the foreign exchange futures contracts trading units, each of the foreign exchange futures contracts trading unit of the required standards by the exchange. For example, the German mark trading of futures contracts for each unit of 125,000 marks;
Second, the delivery month, the international currency market all foreign exchange futures contracts are the same delivery month for each year in March, June, September and December. Delivery on the third Wednesday of the delivery date for that month;
Third, the universal code, in the day, making operation, exchanges and futures dealers and futures commission price list are coded to indicate the foreign exchange futures. Eight kinds of major currencies, currency futures are a common code, the pound BP, the Canadian dollar CD, Dutch guilders DG, Deutsche Mark DM, Yen JY, Mexican peso MP, Swiss Franc SF, French franc FR;
Fourth, the minimum price fluctuation in international currency markets for each currency futures quotes makes provision for the smallest fluctuations. In the trading floor, brokers bid or bid made only in multiples of the smallest fluctuations. Eight major fluctuations in foreign currency futures contracts, the minimum price is as follows; sterling 0.0005 U.S. dollars, Canadian dollars 0.0001 U.S. dollars, Dutch guilders 0.0001 U.S. dollars, German marks 0. 0001 U.S. dollars, Japanese yen 0.0000001 U.S. dollars, Mexican pesos 0.00001 U.S. dollars, Swiss francs 0.0001 U.S. dollars, French franc 0.00005 U.S. dollars; Fifth, the Daily Price Limit the amount of daily Price Limit the amount of a futures contract in one day than the previous day's settlement price higher or lower than the maximum fluctuation. Eight kinds of foreign exchange futures contracts rose daily limit of the amount as follows: Mark 1250 U.S. dollars, Japanese yen 1250 U.S. dollars, Swiss francs 1875 U.S. dollars, 1,500 U.S. dollars Mexican peso NLG 1250 U.S. dollars, French franc 1250 U.S. dollars, once the bid exceeds the amount of circuit breakers, then the transaction is invalid .
Philadelphia Futures Exchange, the main trading French, British pound, Canadian dollar, Australian dollar, Japanese yen, Swiss franc, German mark and the European Currency Unit.
