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INTERNATIONAL FINANCE
Dr DUC VO

Multinational Business Finance

Chapter 5
The Foreign Exchange
Market

Slides in this presentation contain hyperlinks.

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Learning Objectives
5.1 Explore the multitude of functions of the foreign
exchange market
5.2 Detail how the structure of the global foreign exchange
market has evolved
5.3 Describe the financial and operational transactions
conducted in the foreign exchange market
5.4 Examine the forms of currency quotations used by
currency dealers, financial institutions, and agents of all
kinds when conducting foreign exchange transactions

Functions of the Foreign Exchange

Market
• The foreign exchange market is the mechanism by which
participants: the power of your money to buy s.t
– transfer purchasing power between countries;
– obtain or provide credit for international trade
transactions; and
– minimize exposure to the risks of exchange rate
changes.

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Structure of the Foreign Exchange

Market
• The foreign exchange market today has evolved
dramatically over time. The market is based on:
– supply and demand;
– market information and expectations; and
– negotiating strength.
• Global trading is a 24-hour-a-day process as shown in
Exhibit 5.1.
• When the Asian-based trading centers overlap, the global
currency markets exhibit the greatest depth and liquidity.

Exhibit 5.1 Global Currency Trading:

The Trading Day

For long description, see slide 47: Appendix 1

The currency trading day literally extends 24 hours per day. The busiest time of
the day, which historically was the London and New York overlap, has now
started shifting farther East to Asia.

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Market Participants—The Players

• Participants in the foreign exchange market include
liquidity seekers and profit seekers.
• Five broad categories of institutional participants operate
in the market:
– Bank and nonbank foreign exchange dealers
– Private individuals and firms conducting commercial
or investment transactions
– Speculators and arbitragers
– Central banks and treasuries
– Foreign exchange brokers

Market Participants: Bank and

Nonbank Dealers
• Banks and nonbank traders profit from buying foreign
exchange at a bid price and reselling it at a slightly higher
ask or offer price.
• Dealers in the foreign exchange department of large
international banks often function as “market makers.”
• These dealers stand willing at all times to buy and sell
those currencies in which they specialize and thus
maintain an “inventory” position in those currencies.

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Market Participants: Commercial

and Investment Transactors
• Importers and exporters, international portfolio investors,
multinational corporations, tourists, and others use the
foreign exchange market to facilitate execution of
commercial or investment transactions.
• Their use of the foreign exchange market is necessary,
but incidental, to their underlying commercial or
investment purpose.

Market Participants: Speculators

and Arbitragers
• Speculators and arbitragers seek to profit from trading in
the market itself.
• They operate in their own interest, without a need or
obligation to serve clients or ensure a continuous market.
• While dealers seek the bid/ask spread, speculators seek
all the profit from exchange rate changes and arbitragers
try to profit from simultaneous exchange rate differences
in different markets.

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Market Participants: Central Banks

and Treasuries
• Central banks and treasuries use the market to acquire or spend
their country’s foreign exchange reserves as well as to influence the
price at which their own currency is traded, a practice known as
foreign exchange intervention.
• They may act to support the value of their own currency because of
policies adopted at the national level or because of commitments to
other countries under exchange rate currency agreements.
• The motive is not to earn a profit as such, but rather to influence the
foreign exchange value of their currency in a manner that will benefit
the interests of their citizens.
• As willing loss takers, central banks and treasuries differ in motive
from all other market participants.

Market Participants: Foreign

Exchange Brokers
• Foreign exchange brokers are agents who facilitate
trading between dealers without themselves becoming
principals in the transaction.

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Evolution of the Market

• With the collapse of Bretton Woods and the flotation of
currencies, profit seekers entered the market in volume.
• The evolution of foreign exchange trading institutions is
described in Exhibit 5.2.
• The foreign exchange market is the world’s largest
financial market.

Exhibit 5.2 Evolution of the Modern

Currency Trading Marketplace

For long description, see slide 48: Appendix 2

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The Evolution of FX Trading: 1980s

• Foreign exchange dealers knew who they were talking to
on the phone and trades were paper-based.
• Traders did not know:
– Recent trade rates at other banks
– Quotes from other dealers
• Trades were subject to recording errors.

The Evolution of FX Trading: 1990s

• Traders are conversing using computers and the Internet,
but they still know the bank and trader on the other end of
the link.
• The computer-based process is more efficient from a
variety of operational perspectives, and more importantly,
it is conducted in a market where individual agents have
instantaneous access to much more relevant market
data.
• But there are still constraints and limitations.

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The Evolution of FX Trading: 2010

• The separation of the interdealer and customer
markets has effectively broken down (Exhibit 5.4) with
the introduction of:
– multibank trading systems (MBT)
– single-bank trading systems (SMT)
– prime brokerage (PB)
• Small customers gain access to the global currency
market through a variety of structures, including retail
aggregators.

Exhibit 5.4 The Foreign Exchange

Market Today

For long description, see slide 50: Appendix 4

Source: Constructed by authors based on “Foreign Exchange Market Structure, Players

and Evolution,” Michael R. King, Carol Osler and Dagfinn Rime, Norges Bank, Working
Paper,Research Department, 2011, 10, p. 21, and “The anatomy of the global FX market
through the lens of the 2013 Triennial Survey,” by Dagfinn Rime and Andreas Schrimpf,
BISQuarterly Review, December 2013.

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The Three Components of FX Trades

• The exchange of a foreign exchange trade today actually
involves three different components:
– The foreign exchange trade transaction agreement
– Electronic communication and notification for
payment and settlement
– Final settlement of the currency trade

FX Market Manipulations: Fixing the

Fix (1 of 2)
• Following the turmoil surrounding the setting of LIBOR
rates in the interbank market during the 2007–2009
period, similar allegations arose over the possible
manipulation of benchmarks in the foreign exchange
markets in 2013 and 2014.
• Much of the focus was on the London fix, the 4 p.m. daily
benchmark rate used by a multitude of institutions and
indices for marking value. Traders were alleged to be
exchanging emails, using social networking sites, and
even phone calls, to collaborate on market movements
and price quotes at key times.

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FX Market Manipulations: Fixing the

Fix (2 of 2)
• By 2014, nearly 75% of all currency trades were
executed electronically.
• This growing dominance of electronic execution was
thought to be something of a market fix for the 4 p.m.
market spikes seen previously, thought to be caused by
collusion among traders.
• Electronic trading might still facilitate market
manipulation, just of a more sophisticated kind.
• It appears there will always be the human element in
trading.

Transactions in the Foreign

Exchange Market (1 of 3)
• A spot transaction is the purchase of foreign exchange
with delivery and payment between banks taking place
normally on the second following business day.
• Exhibit 5.5 provides a timetable of spot transactions,
forward transactions, and swap transactions.
• The date of settlement is referred to as the value date.

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Exhibit 5.5 Foreign Exchange

Transactions and Settlement
Foreign exchange operations are defined by the timing—the future date—set for
delivery. There are in principle three major categories of over-the-counter transactions
categorized by future delivery: spot (which may be overnight), forward (including
outright forward), and swap transactions.

For long description, see slide 51: Appendix 5

Spot: giao ngay - maybe 1-2 days

Forward: value - today but the money is delivered later

Transactions in the Foreign

Exchange Market (2 of 3)
• An outright forward transaction (usually called just forward)
requires delivery at a future value date of a specified amount
of one currency for a specified amount of another currency.
• The exchange rate is established at the time of the agreement,
but payment and delivery are not required until maturity.
• Forward exchange rates are usually quoted for value dates of
one, two, three, six, and twelve months.
• Buying forward and selling forward describe the same
transaction (the only difference is the order in which currencies
are referenced).

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Transactions in the Foreign

Exchange Market (3 of 3)
The market mainly for the commercial banks
• A swap transaction in the interbank market is the
simultaneous purchase and sale of a given amount of
foreign exchange for two different value dates.
• Both purchase and sale are conducted with the same
counterparty.
• Some different types of swaps are:
– Spot against forward
– Forward-forward
– Nondeliverable forwards (NDF)
Hợp đồng kỳ hạn - 1 dạng swap

Size of the Foreign Exchange Market

• The Bank for International Settlements (BIS) estimated
daily global net turnover in the foreign exchange market
to be $5.1 trillion in April 2016, a 5% decline from its peak
in 2013.
• Exhibit 5.6 shows data from 1989 to 2016.

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Exhibit 5.6 Global Foreign Exchange

Market Turnover, 1989-2016

For long description, see slide 52: Appendix 6

Source: Bank for International Settlements, “Triennial Central Bank Survey: Foreign
Exchange and Derivatives Market Activity in April 2016: Preliminary Results,” September
1, 2016, www.bis.org.

Geographical Distribution
• Exhibit 5.7 shows the proportionate share of foreign
exchange trading for the most important national markets
in the world between 1992 and 2016.
• The United Kingdom (London) continues to be the world’s
major foreign exchange market in traditional foreign
exchange market activity with 37% of the global market.
• Currency trading in Asia is growing at the fastest rate.

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Exhibit 5.7 Top 6 Geographic

Trading Centers in the FX Market

For long description, see slide 53: Appendix 7

Source: Bank for International Settlements, “Triennial Central Bank Survey: Foreign
Exchange and Derivatives Market Activity in April 2016: Preliminary Results,” September
2016, www.bis.org. Japan’s market share fell 6% in 2016, while Switzerland’s fell to 2.4%.

Currency Composition
• Exhibit 5.8 shows global shifts in the currency composition
of trading.
• The U.S. dollar increased its presence to 87.4% of global
currency trades reversing a more than decade decline in
market share.
• The Japanese yen and the European euro both showed
declines in recent years in trade share, their roles as two
of the world’s three most frequently traded currencies
appearing to be under siege by the Chinese renminbi
(3.8%, nearly doubling since 2013) and a number of other
emerging market currencies.

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Exhibit 5.8 Daily FX Trading by

Currency Pair (percent of total)

For long description, see slide 54: Appendix 8

Source: Constructed by authors based on data presented in Table 3, p. 11, of “Triennial Central Bank Survey, Foreign
exchange turnonver in April 2016: preliminary global results,” Bank for International Settlements, Monetary and
Economic Department, September 2016.

Foreign Exchange Rates and

Quotations (1 of 7)
• A foreign exchange rate is the price of one currency
expressed in terms of another currency.
• A foreign exchange quotation (or quote) is a statement
of willingness to buy or sell at an announced rate.

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Foreign Exchange Rates and

Quotations (2 of 7)
• Quotations may be designated by traditional currency symbols
or by ISO codes.
• All electronic trading between institutions in the global
marketplace uses the three-letter ISO codes.
• The paper currency of most countries continues to be
represented using the country’s traditional currency symbol.
Currency Traditional Symbol ISO 4217 Code
U.S. dollar $ USD
European euro € EUR
Great Britain pound £ GBP
Japanese yen ¥ JPY
Mexican peso Ps MXN

Foreign Exchange Rates and

Quotations (3 of 7)
• Every currency exchange involves two currencies: the base or unit
currency (CUR1), and the price or quote currency (CUR2):
CUR1 / CUR2
• The quotation indicates the number of units of CUR2 required in
exchange for receiving one unit of CUR1.
• For example, a quotation of
EUR / USD1.2174
designates the euro (EUR) as the base currency, the dollar (USD)
as the price currency.
– The exchange rate is USD 1.2174 = EUR 1.00.
• Exhibit 5.9 provides an overview of the multitude of terms used to
quote currencies.
Copyright © 2019 Pearson Education, Inc. All Rights Reserved

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Exhibit 5.9 Foreign Currency

Quotations
European terms American terms
Foreign currency price of one U.S. dollar price of one euro (EU
dollar (USD) R)
USD/EUR 0.8214 EUR/USD 1.2174
or or
USD 1.00 = EUR 0.8214 EUR 1.00 = USD 1.2174
USD is the base or unit currency EUR is the base or unit currency
EUR is the quote or price USD is the quote or price
currency currency

1
= USD 1.2714 / EUR
EUR 0.8214 / USD

Foreign Exchange Rates and

Quotations (4 of 7)
• European terms, the quoting of the quantity of a specific
currency per one U.S. dollar, is most common.
• There are two major exceptions: the euro and the U.K.
pound sterling.
• Both are normally quoted in American terms—the U.S.
dollar price of one euro and the U.S. dollar price of one
pound sterling.
• American terms are also utilized in quoting rates for most
foreign currency options and futures, as well as in retail
markets that deal with tourists.

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Foreign Exchange Rates and

Quotations (5 of 7)
• Foreign exchange quotes are at times described as either
direct or indirect.
• In this pair of definitions, the home or base country of the
currencies being discussed is critical.
US
• A direct quote is a home currency price of a unit of
foreign currency.
EUR
• An indirect quote is a foreign currency price of a unit of
home currency.
• The form of the quote depends on what the speaker
regards as “home.”

Foreign Exchange Rates and

Quotations (6 of 7)
• Interbank quotations are given as a bid and ask. Exhibit 5.10 shows
how these quotations may be seen in the market.
buying
• A bid is the price (i.e., exchange rate) in one currency at which a dealer
will buy another currency.
selling
• An ask is the price (i.e., exchange rate) at which a dealer will sell the
other currency.
• Dealers bid (buy) at one price and ask (sell) at a slightly higher price,
making their profit from the spread between the buying and selling
prices.
ask
• A bid for one currency is also the offer for the opposite currency.
• See Exhibit 5.11 for closing rates for selected currencies (plus the SDR)
as quoted by The Wall Street Journal.
From the bank point of view: buy < sell => profit

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Exhibit 5.10 Bid, Ask, and Mid-Point

Quotation

buy sell cho đồng tiền ở trên

For long description, see slide 57: Appendix 9

In text documents of any kind, the exchange rate may be stated as mid-point
quote, the average of bid and ask, of
For example, The Wall Street Journal would quote the following
currencies as follows:
Blank Last Bid Blank Last Bid
Euro (EUR/USD) 1.2170 Brazilian Real (USD/BRL) 1.6827
Japanese Yen (USD/JPY) 83.16 Canadian Dollar (USD/CAD) 0.9930
U.K. Pound (GBP/USD) 1.5552 Mexican Peso (USD/MXN) 12.2365

Copyright © 2019 Pearson Education, Inc. All Rights Reserved

Exhibit 5.11 Exchange Rates: New

York Closing Snapshot

For long description, see slide 58: Appendix 10

Note: SDR from the International Monetary Fund; based on exchange rates for U.S., British and Japanese currencies.
Quotes based on trading among banks of $1 million and more, as quoted at 4 p.m. ET by Reuters. Rates are drawn
from the The Wall Street Journal online on January 2, 2018.

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Foreign Exchange Rates and

Quotations (7 of 7)
• Many currency pairs are only inactively traded, so their
exchange rate is determined through their relationship to
a widely traded third currency (cross rate).
• Cross rates can be used to check on opportunities for
intermarket arbitrage.
nghiệp vụ mua bán cùng thời
điểm cho cùng loại tiền ở 2 thị
trường khác nhau để kiếm lời
US/AUD = lớn hơn 1 vì đô mĩ
lớn hơn đô Úc

Intermarket Arbitrage
US - mua GBP - mua
• Quoted rates EUR- mua lại US
Citibank quotes U.S. dollars per euro USD1.3297 = 1 EUR
Barclays Bank quotes U.S. dollars per pound sterling USD1.5585 = 1 GBP
Dresdner Bank quotes euros per pound sterling EUR1.1722 = 1 GBP

• Cross rate calculation based on Citibank and Barclays

Bank quotes
USD1.5585 / GDP
= EUR1.721/ GDP
USD1.3297 / EUR
For long description, see slide 60: Appendix 11

• Which is .001 less than the Dressner Bank quote, which

results in triangular arbitrage.
Copyright © 2019 Pearson Education, Inc. All Rights Reserved

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Exhibit 5.12 Triangular Arbitrage by a

Market Trader
risk-less profit

For long description, see slide 61: Appendix 12

Forward Quotations
• Spot rates are typically quoted on an outright basis
(meaning all digits expressed) whereas forward rates are
typically quoted in points or pips (the last digits of a
currency quotation).
• Forward rates of one year or less maturity are termed
cash rates; for longer than one-year they are called
swap rates.
• As shown in Exhibit 5.13, the bid and ask spot quotes are
outright quotes, but the forwards are stated as points
from the spot rate.

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Exhibit 5.13 Spot and Forward Quotations

for the Euro and Japanese Yen

For long description, see slide 62: Appendix 13

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Appendix 1
Long Description for a diagram represents a trading day in global currency trading.

A diagram represents a trading day in global currency trading. The diagram has a line at the bottom indicating the
Greenwich Mean Time, GMT, from midnight up to 11.59 p m.
• The currency trading day literally extends 24 hours per day. The busiest time of the day, which historically was the
London and New York overlap, has now started shifting farther East to Asia.
• Hong Kong stretches from 22 hundred the previous day to 0 800 on the day of trading.
• Tokyo and Sydney stretch from 0 100 to 0 800.
• Bahrain’s trading hours are from 0 400 to 10 hundred.
• Singapore has longer trading hours from 0 2 hundred to 11 30.
• The Hong Kong, Tokyo, Sydney, and Singapore markets overlap between the hours 0 100 to 08 30.
• Frankfurt’s currency trading begins from 07 30 and continues until 15 30.
• London’s trading hours are from 08 30 to 16 30.
• New York’s hours range from 13 hundred to 20 hundred.
• The London New York overlap is from 0 9 30 to 0 5 30.
• Chicago trades currencies between 14 hundred to 21 hundred.
• San Francisco stretches from 16 hundred to 23 hundred.

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Appendix 2
Long Description for a timeline represents the evolution of the modern currency trading marketplace.

The timeline illustrates the development of the modern currency trading marketplace from 1970 to 2016. The evolution
of the marketplace can be divided into two major eras. the Telephone Era of Currency Trading from 1970 to 1987 and
the Computer Era of Currency Trading from 1987 to the present. The following list provides the notable events during
the Telephone Era by year.
• 1971. Bretton Woods begins to break down.
• 1973. SWIFT initiated.
• 1974. Bankhaus Herstatt Closure introduces settlement risk.
• 1987. Reuters launches system for bilateral trades between dealers and launches FX FX page.

The following list provides the notable events during the Computer Era by year.
• 1990. EBS launches competitive product to Reuters.
• 1992. Reuters launches online limit order system.
• 1996. State Street launches retail aggregator FX Connect.
• 1999. Currenex multi bank trading system.
• 2002. Continuous Linked Settlement Bank, CLS, opens.
• 2005 to 2007. Interdealer and customer FX market tiering ends with introduction of multitude of electronic systems.
• 2016. Cyber attacks on central bank currency transaction messages in SWIFT.

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Appendix 3
Long Description for a diagram compares foreign exchange
trading in the nineteen eighties and nineteen nineties.
The diagram compares how customers, brokers, and dealers
interacted in the nineteen eighties versus how they interacted in
the nineteen nineties. In the nineteen eighties, all trades were
conducted by telephone between dealers and currency brokers.
Retail customers were outsiders with limited access. In the
nineteen nineties, electronic brokers began to conduct trades by
voice and by electronic messaging with major dealers, but retail
customers remained outsiders.

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Appendix 4
Long Description for a diagram represents the structure of the
present day foreign exchange market.
The present day foreign exchange market is dominated by
electronic trading, allowing customers all kinds of direct access to
global trading. The two tier structure that separated the interdealer
market and the customer market for so many years is effectively
gone. Dealers now interact with electronic brokers, voice brokers,
prime brokers, single bank trading systems, and multi bank
training systems. Retail aggregators and single bank trading
systems connect customers to dealers. Hedge fund customers
interact with prime brokers and multi bank trading systems, and
emergent market customers interact with voice brokers.
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Appendix 5
Long Description for a diagram represents the process of foreign exchange transaction and
settlement.

A diagram represents the process of foreign exchange transaction and settlement. Foreign
exchange operations are defined by the future date set for delivery. Over the counter
transactions can be divided into three major categories based on future delivery. The
categories are as follows. spot, which may be overnight, forward, which can include outright
forward, and swap transactions. The delivery periods may be today, tomorrow, the day
after tomorrow, two or more days after tomorrow, or later than two or more days after
tomorrow. The following list provides the delivery period for each category. Spot
transactions stretch from tomorrow to the day after tomorrow. Overnight transactions
stretch from today to the day after tomorrow. Forward or Outright Forward deliveries may
occur two or more days after tomorrow. Swap transactions include spot against forward,
forward, forward swaps, and non deliverable forwards. Swap transactions can take place
from the day after tomorrow to any period later than two or more days after tomorrow.

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Appendix 6
Long Description for a stacked bar graph represents the average daily turnover in April in billions of US
dollars from 1989 to 2016.
A stacked bar graph represents the average daily turnover in April in billions of US dollars for the period
from 1989 to 2016. Each stacked bar is divided into segments representing spot transactions, outright
forwards, FX swaps, and options and other. As illustrated by the bar graph, spot transactions and FX
swaps accounted for over 80% of the average daily turnover in April for any given year. In 1989, spot
transactions produced more turnover than FX swaps, but FX swaps grew faster relative to spot
transactions. By 1995, FX swaps accounted for the largest portion of the total turnover, and this trend
generally continued through 2016. For each year, the following table provides the total daily turnover in
billions of US dollars and the percent change.
A table has 10 rows and 3 columns. The columns have the following headings from left to right. Year,
Daily Turnover, Percent Change,. The row entries are as follows. Row 1. Year, 1989. Daily Turnover,
590. Percent Change, blank. Row 2. Year, 1992. Daily Turnover, 820. Percent Change, plus 39. Row 3.
Year, 1995. Daily Turnover, 1190. Percent Change, plus 45. Row 4. Year, 1998. Daily Turnover, 1527.
Percent Change, plus 28. Row 5. Year, 2001. Daily Turnover, 1239. Percent Change, minus 19. Row 6.
Year, 2004. Daily Turnover, 1913. Percent Change, plus 54. Row 7. Year, 2007. Daily Turnover, 3324.
Percent Change, plus 74. Row 8. Year, 2010. Daily Turnover, 3972. Percent Change, plus 19. Row 9.
Year, 2013. Daily Turnover, 5345. Percent Change, plus 35. Row 10. Year, 2016. Daily Turnover, 5088.
Percent Change, minus 5.

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Appendix 7
Long Description for a bar graph shows average daily turnover in April for 6 geographic trading centers in
the F X market from 1995 to 2016.
The bar graph provides the average daily turnover in April in billions of U S dollars for the following F X
trading centers. United Kingdom, United States, Japan, Singapore, Switzerland, and Hong Kong. For
each country, the following table provides the April turnover for each year, followed by the percentage of
the total in 2016. All values are estimated.
A table has 6 rows and 10 columns. The columns have the following headings from left to right. Country,
1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, Percentage of total in 2016. The row entries are as
follows. Row 1. Country, United Kingdom. 1995, 500. 1998, 700. 2001, 550. 2004, 800. 2007, 1500.
2010, 1800. 2013, 2700. 2016, 2450. Percentage of total in 2016, 37. Row 2. Country, United States.
1995, 300. 1998, 400. 2001, 300. 2004, 500. 2007, 750. 2010, 900. 2013, 1250. 2016, 1250. Percentage
of total in 2016, 19. Row 3. Country, Japan. 1995, 250. 1998, 200. 2001, 200. 2004, 250. 2007, 300.
2010, 400. 2013, 400. 2016, 400. Percentage of total in 2016, 6. Row 4. Country, Singapore. 1995, 100.
1998, 200. 2001, 100. 2004, 100. 2007, 300. 2010, 300. 2013, 400. 2016, 550. Percentage of total in
2016, 8. Row 5. Country, Switzerland. 1995, 80. 1998, 80. 2001, 50. 2004, 50. 2007, 300. 2010, 300.
2013, 250. 2016, 200. Percentage of total in 2016, 2.4. Row 6. Country, Hong Kong. 1995, 80. 1998, 80.
2001, 50. 2004, 80. 2007, 200. 2010, 250. 2013, 300. 2016, 400. Percentage of total in 2016, 7.

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Appendix 8 (1 of 3)
Long Description for four tables illustrate daily FX trading by currency pair as a percentage of total
trading.
Four tables illustrate daily FX trading by currency pair as a percentage of total trading. The first table
lists trading for different currency pairs versus the dollar for the years 2001, 2004, 2007, 2010, 2013,
and 2016. The first table reads as follows.
A table has 14 rows and 8 columns. The columns have the following headings from left to right.
Currency Pair, Versus Dollar, 2001, 2004, 2007, 2010, 2013, 2016. The row entries are as follows.
Row 1. Currency Pair, USD, EUR. Versus Dollar, Euro. 2001, 30. 2004, 28. 2007, 26.8. 2010, 27.7.
2013, 24.1. 2016, 23. Row 2. Currency Pair, USD, JPY. Versus Dollar, Japanese yen. 2001, 20.2.
2004, 17. 2007, 13.2. 2010, 14.3. 2013, 18.3. 2016, 17.7. Row 3. Currency Pair, USD, GBP. Versus
Dollar, British pound. 2001, 10.4. 2004, 13.4. 2007, 11.6. 2010, 9.1. 2013, 8.8. 2016, 9.2. Row 4.
Currency Pair, USD, AUD. Versus Dollar, Australian dollar. 2001, 4.1. 2004, 5.5. 2007, 5.6. 2010, 6.3.
2013, 6.8. 2016, 5.2. Row 5. Currency Pair, USD, CAD. Versus Dollar, Canadian dollar. 2001, 4.3.
2004, 4. 2007, 3.8. 2010, 4.6. 2013, 3.7. 2016, 4.3. Row 6. Currency Pair, USD, CHF. Versus Dollar,
Swiss franc. 2001, 4.8. 2004, 4.3. 2007, 4.5. 2010, 4.2. 2013, 3.4. 2016, 3.5. Row 7. Currency Pair, U
SD, MXN. Versus Dollar, Mexican peso. 2001, No data. 2004, No data. 2007, No data. 2010, No data.
2013, 2.4. 2016, 2.1. Row 8. Currency Pair, USD, CNY. Versus Dollar, Chinese renminbi. 2001, No
data. 2004, No data. 2007, No data. 2010, 0.8. 2013, 2.1. 2016, 3.8. Row 9. Currency Pair, USD, NZ
D. Versus Dollar, New Zealand dollar. 2001, No data. 2004, No data. 2007, No data. 2010, No data.
2013, 1.5. 2016, 1.5. Row 10. Currency Pair, USD, SEK. Versus Dollar, Swedish krona. 2001, No
data. 2004, No data. 2007, 1.7. 2010, 1.1. 2013, 1. 2016, 1.3.

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Appendix 8 (2 of 3)
Row 11. Currency Pair, USD, INR. Versus Dollar, Indian rupee. 2001, No data. 2004, No data. 2007, No
data. 2010, 0.9. 2013, 0.9. 2016, 1.1. Row 12. Currency Pair, USD, RUB. Versus Dollar, Russian ruble.
2001, No data. 2004, No data. 2007, No data. 2010, No data. 2013, 1.5. 2016, 1. Row 13. Currency Pair,
Other, USD. Versus Dollar, USD versus others. 2001, 16. 2004, 15.9. 2007, 18.3. 2010, 15.8. 2013,
12.4. 2016, 13. Row 14. Currency Pair, Blank. Versus Dollar, Dollar total. 2001, 89.8. 2004, 88.1. 2007,
85.5. 2010, 84.8. 2013, 86.9. 2016, 87.4.
The second table lists trading for different currency pairs versus the euro for the years 2001, 2004, 2007,
2010, 2013, and 2016. The second table reads as follows.
A table has 9 rows and 8 columns. The columns have the following headings from left to right. Currency
Pair, Versus Euro, 2001, 2004, 2007, 2010, 2013, 2016. The row entries are as follows. Row 1. Currency
Pair, EUR, GBP. Versus Euro, British pound. 2001, 2.1. 2004, 2.4. 2007, 2.1. 2010, 2.7. 2013, 1.9. 2016,
2. Row 2. Currency Pair, EUR, JPY. Versus Euro, Japanese yen. 2001, 2.9. 2004, 3.2. 2007, 2.6. 2010,
2.8. 2013, 2.8. 2016, 1.6. Row 3. Currency Pair, EUR, CHF. Versus Euro, Swiss franc. 2001, 1.1. 2004,
1.6. 2007, 1.9. 2010, 1.8. 2013, 1.3. 2016, 0.9. Row 4. Currency Pair, EUR, SEK. Versus Euro, Swedish
krona. 2001, No data. 2004, No data. 2007, 0.7. 2010, 0.9. 2013, 0.5. 2016, 0.7. Row 5. Currency Pair, E
UR, NOK. Versus Euro, Norwegian krone. 2001, No data. 2004, No data. 2007, No data. 2010, No data.
2013, 0.4. 2016, 0.6. Row 6. Currency Pair, EUR, AUD. Versus Euro, Australian dollar. 2001, 0.1. 2004,
0.2. 2007, 0.3. 2010, 0.3. 2013, 0.4. 2016, 0.3. Row 7. Currency Pair, EUR, CAD. Versus Euro,
Canadian dollar. 2001, 0.1. 2004, 0.1. 2007, 0.2. 2010, 0.3. 2013, 0.3. 2016, 0.3. Row 8. Currency Pair,
Other. Versus Euro, Other versus euro. 2001, 1.6. 2004, 1.9. 2007, 2.5. 2010, 2.6. 2013, 1.8. 2016, 2.
Row 9. Currency Pair, Blank. Versus Euro, Euro Total. 2001, 7.9. 2004, 9.4. 2007, 10.3. 2010, 11.4.
2013, 9.4. 2016, 8.4.

Appendix 8 (3 of 3)
The third table lists trading for different currency pairs versus the Japanese yen for the years 2001, 2004,
2007, 2010, 2013, and 2016. The third table reads as follows.
A table has 5 rows and 8 columns. The columns have the following headings from left to right. Currency
Pair, Versus Japanese Yen, 2001, 2004, 2007, 2010, 2013, 2016. The row entries are as follows. Row 1.
Currency Pair, JPY, AUD. Versus Japanese Yen, Australian dollar. 2001, No data. 2004, No data. 2007,
No data. 2010, 0.6. 2013, 0.9. 2016, 0.6. Row 2. Currency Pair, JPY, CAD. Versus Japanese Yen,
Canadian dollar. 2001, No data. 2004, No data. 2007, No data. 2010, No data. 2013, 0.1. 2016, 0.1. Row
3. Currency Pair, JPY, NZD. Versus Japanese Yen, New Zealand dollar. 2001, No data. 2004, No data.
2007, No data. 2010, 0.1. 2013, 0.1. 2016, 0.1. Row 4. Currency Pair, Other. Versus Japanese Yen, Other
versus yen. 2001, 1.2. 2004, 1.4. 2007, 2. 2010, 1.3. 2013, 1.8. 2016, 1.1. Row 5. Currency Pair, Blank.
Versus Japanese Yen, Yen total. 2001, 1.2. 2004, 1.4. 2007, 2. 2010, 2. 2013, 2.9. 2016, 1.9.
The fourth table lists trading for all other currency pairs for the years 2001, 2004, 2007, 2010, 2013, and
2016. The fourth table also provides the global annual totals based on adding the values in the
corresponding columns of all four tables. The fourth table reads as follows.
A table has 2 rows and 8 columns. The columns have the following headings from left to right. Currency
Pair, Blank, 2001, 2004, 2007, 2010, 2013, 2016. The row entries are as follows. Row 1. Currency Pair,
Other currency pair. Blank, All others. 2001, 1.1. 2004, 1.1. 2007, 2.2. 2010, 1.8. 2013, 0.8. 2016, 2.3.
Row 2. Currency Pair, Global Total. Blank, Blank. 2001, 100. 2004, 100. 2007, 100. 2010, 100. 2013,
100. 2016, 100.

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Appendix 9
Long Description for a diagram illustrates the bid, ask, and midpoint
quotes.
The total quote reads as follows. EUR, USD 1.2170, 1.2178. The
following list provides the meaning of each part of the quote.
• EUR = base currency
• USD = quote currency
• 1.2170 = you can sell 1 euro for $1.2170, Bid
• 1.2178 = you can buy 1 euro for $1.2178, Ask
• Traders might only quote the last two digits on a rate. So 1.2170,
1.2178 might be written as 1.2170, 78.

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Appendix 10 (1 of 2)
Long Description for a table provides the New York closing snapshot of exchange rates.
A table provides the New York closing snapshot of exchange rates on August 12, 2016. The table has columns for the
following information from left to right. country, currency, symbol, code, USD equivalent, and currency per USD. The
table is divided into four sections for the Americas, Asia, Europe, and the Middle East and Africa. The name of each
section appears in the Country column, with all other cells in that row being blank. The table reads as follows.
A table has 30 rows and 6 columns. The columns have the following headings from left to right. Country, Currency,
Symbol, Code, USD equivalent, Currency per USD. The row entries are as follows. Row 1. Country, Americas.
Currency, blank. Symbol, blank. Code, blank. USD equivalent, blank. Currency per USD, blank. Row 2. Country,
Argentina. Currency, peso. Symbol, P s. Code, ARS. USD equivalent, 0.0538. Currency per USD, 18.6035. Row 3.
Country, Brazil. Currency, real. Symbol, R dollar sign. Code, BRL. USD equivalent, 0.3019. Currency per USD, 3.3124.
Row 4. Country, Canada. Currency, dollar. Symbol, C dollar sign. Code, CAD. USD equivalent, 0.7968. Currency per U
SD, 1.2551. Row 5. Country, Chile. Currency, peso. Symbol, dollar sign. Code, CLP. USD equivalent, 0.001625.
Currency per USD, 615.5. Row 6. Country, Mexico. Currency, new peso. Symbol, dollar sign. Code, MXN. USD
equivalent, 0.0509. Currency per USD, 19.6596. Row 7. Country, Asia. Currency, blank. Symbol, blank. Code, blank. U
SD equivalent, blank. Currency per USD, blank. Row 8. Country, Australia. Currency, dollar. Symbol, A dollar sign.
Code, AUD. USD equivalent, 0.7804. Currency per USD, 0.1284. Row 9. Country, China. Currency, yuan. Symbol, the
symbol for yen is a capital letter Y with 2 horizontal bars across the vertical bar of the y.. Code, CNY. USD equivalent,
0.1538. Currency per USD, 6.5031. Row 10. Country, Hong Kong. Currency, dollar. Symbol, HK dollar sign. Code, HK
G. USD equivalent, 0.1275. Currency per USD, 7.8405. Row 11. Country, India. Currency, rupee. Symbol, R s. Code, I
NR. USD equivalent, 0.01565. Currency per USD, 63.88. Row 12. Country, Indonesia. Currency, rupiah. Symbol, R p.
Code, IDR. USD equivalent, 0.0000737. Currency per USD, 13561.

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Appendix 10 (2 of 2)
Row 13. Country, Japan. Currency, yen. Symbol, the symbol for yen is a capital letter Y with 2 horizontal bars across
the vertical bar of the y.. Code, JPY. USD equivalent, 0.00888. Currency per USD, 112.67. Row 14. Country,
Singapore. Currency, dollar. Symbol, S dollar sign. Code, SGD. USD equivalent, 0.7478. Currency per USD, 1.3372.
Row 15. Country, South Korea. Currency, won. Symbol, W. Code, KRW. USD equivalent, 0.0009375. Currency per US
D, 1066.64. Row 16. Country, Thailand. Currency, baht. Symbol, B. Code, THB. USD equivalent, 0.03071. Currency
per USD, 32.56. Row 17. Country, Vietnam. Currency, dong. Symbol, d. Code, VND. USD equivalent, 0.00004403.
Currency per USD, 22710. Row 18. Country, Europe. Currency, blank. Symbol, blank. Code, blank. USD equivalent,
blank. Currency per USD, blank. Row 19. Country, Czech Republic. Currency, koruna. Symbol, K c. Code, CZK. USD
equivalent, 0.04701. Currency per USD, 21.274. Row 20. Country, Denmark. Currency, krone. Symbol, D k r. Code, DK
K. USD equivalent, 0.1612. Currency per USD, 6.202. Row 21. Country, Euro. Currency, euro. Symbol, a capital c with
2 horizontal bars across its center.. Code, EUR. USD equivalent, 1.2006. Currency per USD, 0.833. Row 22. Country,
Norway. Currency, krone. Symbol, NK r. Code, NOK. USD equivalent, 0.122. Currency per USD, 8.1977. Row 23.
Country, Russia. Currency, ruble. Symbol, R. Code, RUB. USD equivalent, 0.01734. Currency per USD, 57.678. Row
24. Country, Sweden. Currency, krona. Symbol, SK r. Code, S E K. USD equivalent, 0.1223. Currency per USD,
8.1796. Row 25. Country, Switzerland. Currency, franc. Symbol, F r dot. Code, CHF. USD equivalent, 1.0259. Currency
per USD, 0.9748. Row 26. Country, Middle East, Africa. Currency, blank. Symbol, Blank. Code, blank. USD equivalent,
blank. Currency per USD, blank. Row 27. Country, Egypt. Currency, pound. Symbol, A cursive capital L with a
horizontal bar across its center.. Code, EGP. USD equivalent, 0.0563. Currency per USD, 17.7655. Row 28. Country,
Israel. Currency, shekel. Symbol, S h k. Code, ILS. USD equivalent, 0.2874. Currency per USD, 3.4795. Row 29.
Country, Saudi Arabia. Currency, riyal. Symbol, SR. Code, SAR. USD equivalent, 0.2666. Currency per USD, 3.7512.
Row 30. Country, South Africa. Currency, rand. Symbol, R. Code, ZAR. USD equivalent, 0.0808. Currency per USD,
12.3712.

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Appendix 11
Long Description for a formula expresses a cross rate
calculation.
Start fraction u, s, d 1.5585 divided by g, d, p over u, s, d
1.3297 divided by e, u, r end fraction equals e, u, r 1.721
divided by g, d, p

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Appendix 12
Long Description for a diagram represents triangular arbitrage by a market trader.

Triangular arbitrage involves Citibank New York, Barclay’s Bank London, and Dresdner
Bank. The following list outlines the process.
• Start with USD 1,000,000.
• The trader at Citibank sells USD 1,000,000 to Barclays Bank at USD 1.5585 per GBP.
• The trader receives GBP 641,643.
• The trader sells GBP 641,643 to Dresdner Bank at EUR 1.1722 per GBP.
• The trader receives EUR 752,133 from Dresdner Bank.
• The trader sells EUR 752,133 to Citibank at USD 1.3297 per EUR.
• The trader receives USD 1,000,112.
• End with USD 1,000,112.

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Appendix 13 (1 of 2)
Long Description for two tables provide spot and forward quotations for the euro and Japanese yen.
The first table provides spot and forward quotations for the euro, in U S D per euro. The table has columns for the
following information from left to right. cash rates or swap rates, bid points, bid rate, ask points, and ask rate. The table
reads as follows.
A table has 14 rows and 6 columns. The columns have the following headings from left to right. Cash Rates or Swap
Rates, Term, Bid Points, Bid Rate, Ask Points, Ask Rate. The row entries are as follows. Row 1. Cash Rates or Swap
Rates, Blank. Term, Spot. Bid Points, blank. Bid Rate, 1.0897. Ask Points, blank. Ask Rate, 1.0901. Row 2. Cash Rates
or Swap Rates, Cash Rates. Term, 1 week. Bid Points, 3. Bid Rate, 1.09. Ask Points, 4. Ask Rate, 1.0905. Row 3.
Cash Rates or Swap Rates, Cash Rates. Term, 1 month. Bid Points, 17. Bid Rate, 1.0914. Ask Points, 19. Ask Rate,
1.092. Row 4. Cash Rates or Swap Rates, Cash Rates. Term, 2 months. Bid Points, 35. Bid Rate, 1.0932. Ask Points,
36. Ask Rate, 1.0937. Row 5. Cash Rates or Swap Rates, Cash Rates. Term, 3 months. Bid Points, 53. Bid Rate, 1.95.
Ask Points, 54. Ask Rate, 1.0955. Row 6. Cash Rates or Swap Rates, Cash Rates. Term, 4 months. Bid Points, 72. Bid
Rate, 1.0969. Ask Points, 76. Ask Rate, 1.0977. Row 7. Cash Rates or Swap Rates, Cash Rates. Term, 5 months. Bid
Points, 90. Bid Rate, 1.0987. Ask Points, 95. Ask Rate, 1.0996. Row 8. Cash Rates or Swap Rates, Cash Rates. Term,
6 months. Bid Points, 112. Bid Rate, 1.1009. Ask Points, 113. Ask Rate, 1.1014. Row 9. Cash Rates or Swap Rates,
Cash Rates. Term, 9 months. Bid Points, 175. Bid Rate, 1.1072. Ask Points, 177. Ask Rate, 1.1078. Row 10. Cash
Rates or Swap Rates, Blank. Term, 1 year. Bid Points, 242. Bid Rate, 1.1139. Ask Points, 245. Ask Rate, 1.1146. Row
11. Cash Rates or Swap Rates, Swap Rates. Term, 2 years. Bid Points, 481. Bid Rate, 1.1378. Ask Points, 522. Ask
Rate, 1.1423. Row 12. Cash Rates or Swap Rates, Swap Rates. Term, 3 years. Bid Points, 750. Bid Rate, 1.1647. Ask
Points, 810. Ask Rate, 1.1711. Row 13. Cash Rates or Swap Rates, Swap Rates. Term, 4 years. Bid Points, 960. Bid
Rate, 1.1857. Ask Points, 1039. Ask Rate, 1.194. Row 14. Cash Rates or Swap Rates, Swap Rates. Term, 5 years. Bid
Points, 1129. Bid Rate, 1.2026. Ask Points, 1276. Ask Rate, 1.2177.

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Appendix 13 (2 of 2)
The second table provides spot and forward quotations for the Japanese yen, in yen per U S D. The table has columns
for the following information from left to right. cash rates or swap rates, bid points, bid rate, ask points, and ask rate.
The table reads as follows.
A table has 14 rows and 6 columns. The columns have the following headings from left to right. Cash Rates or Swap
Rates, Term, Bid Points, Bid Rate, Ask Points, Ask Rate. The row entries are as follows. Row 1. Cash Rates or Swap
Rates, Blank. Term, Spot. Bid Points, blank. Bid Rate, 118.27. Ask Points, blank. Ask Rate, 118.37. Row 2. Cash Rates
or Swap Rates, Cash Rates. Term, 1 week. Bid Points, minus 10. Bid Rate, 118.17. Ask Points, minus 9. Ask Rate,
118.28. Row 3. Cash Rates or Swap Rates, Cash Rates. Term, 1 month. Bid Points, minus 51. Bid Rate, 117.76. Ask
Points, minus 50. Ask Rate, 117.87. Row 4. Cash Rates or Swap Rates, Cash Rates. Term, 2 months. Bid Points,
minus 95. Bid Rate, 117.32. Ask Points, minus 93. Ask Rate, 117.44. Row 5. Cash Rates or Swap Rates, Cash Rates.
Term, 3 months. Bid Points, minus 143. Bid Rate, 116.84. Ask Points, minus 140. Ask Rate, 116.97. Row 6. Cash
Rates or Swap Rates, Cash Rates. Term, 4 months. Bid Points, minus 195. Bid Rate, 116.32. Ask Points, minus 180.
Ask Rate, 116.47. Row 7. Cash Rates or Swap Rates, Cash Rates. Term, 5 months. Bid Points, minus 240. Bid Rate,
115.87. Ask Points, minus 237. Ask Rate, 116. Row 8. Cash Rates or Swap Rates, Cash Rates. Term, 6 months. Bid
Points, minus 288. Bid Rate, 115.39. Ask Points, minus 287. Ask Rate, 115.5. Row 9. Cash Rates or Swap Rates,
Cash Rates. Term, 9 months. Bid Points, minus 435. Bid Rate, 113.92. Ask Points, minus 429. Ask Rate, 114.08. Row
10. Cash Rates or Swap Rates, Blank. Term, 1 year. Bid Points, minus 584. Bid Rate, 112.43. Ask Points, minus 581.
Ask Rate, 112.56. Row 11. Cash Rates or Swap Rates, Swap Rates. Term, 2 years. Bid Points, minus 1150. Bid Rate,
106.77. Ask Points, minus 1129. Ask Rate, 107.08. Row 12. Cash Rates or Swap Rates, Swap Rates. Term, 3 years.
Bid Points, minus 1748. Bid Rate, 100.79. Ask Points, minus 1698. Ask Rate, 101.39. Row 13. Cash Rates or Swap
Rates, Swap Rates. Term, 4 years. Bid Points, minus 2185. Bid Rate, 96.42. Ask Points, minus 2115. Ask Rate, 97.22.
Row 14. Cash Rates or Swap Rates, Swap Rates. Term, 5 years. Bid Points, minus 2592. Bid Rate, 92.35. Ask Points,
minus 2490. Ask Rate, 93.47.

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