Bank forex traders do it differently when it comes to conducting different types of forex transactions. Especially when quoting, it is necessary to analyze various factors, and the skills of quoting will be very different. When general corporate customers or the general public inquire from the bank, the factors that determine the transaction quotation mainly include:
1. The level and development trend of interbank market quotations. Quotations quoted by foreign exchange traders to customers are generally based on the prevailing inter-bank market conditions. On this basis, the buying price is appropriately reduced or the selling price is appropriately raised to widen the gap between the buying price and the selling price. This is because the requirements of companies, enterprises or the general public to buy or sell foreign exchange are relatively clear, and the transaction amount is relatively small. the
2. The size of the transaction volume requested by the customer. For large transactions, customers can obtain a certain degree of price concessions, while for quotations for small transactions, the bid-ask spread will be higher than the former. Industrial and commercial customers usually need to specify the transaction currency when inquiring, and specify the amount of foreign exchange bought or sold, so that the bank can quote accordingly. If the client clearly requests to buy a certain amount of foreign exchange, the foreign exchange trader of the bank only needs to quote its selling price to the other party, instead of quoting the buying price at the same time. Only a small number of large companies engaged in foreign exchange trading, due to their strong capital, sometimes want to make profits from foreign exchange transactions, so they require bank foreign exchange traders to make prudent two-way quotations. the
3. The status of the outstanding positions in the quote currency of the quote bank. If the customer wants to buy the foreign exchange that the bank is in the “overbuy” situation, the quotation will often be more favorable. If the customer wants to buy the foreign exchange that the bank itself is already in the “oversold” situation, the quotation will be more stringent. When a bank foreign exchange trader is unwilling to trade in order to close a position, he will also deliberately quote the price vaguely, or widen the bid-ask spread. Of course, if the customer wants to sell the foreign exchange that the bank itself is in the “oversold” situation, or wants to buy the foreign exchange that the bank is in the “oversold” situation, this will help the bank close the position, and the quotation of the foreign exchange trader will be will be more favorable. the
4. Customer’s credit limit. In foreign exchange transactions, the number of transactions between a bank and a customer usually cannot exceed its prescribed credit limit, that is, the transaction limit. For those who exceed it, foreign exchange traders will stop trading with them, or put the risk cost into the quotation, making the quotation unfavorable to customers. the
5. The term and structure of various transactions of the bank. Foreign exchange traders should determine the quotation level according to the impact of the customer’s transaction requirements on the bank’s existing transaction period and structure. Offers are more favorable if the new deal will rationalize the terms and structure of the bank’s various deals. This point has some similarities with the third point, but there are also some differences. the
All in all, whether the bank offers customers a favorable price mainly depends on the risk that the transaction brings to the bank and the opportunity and cost for the bank to avoid the risk. Generally speaking, when the number of transactions is large and the contract period is long, bank traders are more demanding in quoting customers.
