The economics of money, banking and financial markets forex market

Concept of foreign exchange market Foreign exchange market is the international currency market where foreign currency transactions and means of payment have the same value as foreign cu

BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC KINH TẾ - TÀI CHÍNH

THÀNH PHỒ HỒ CHÍ MINH

UF

ĐẠI HỌC KINH TẾ TÀI CHÍNH

THE ECONOMICS OF MONEY, BANKING AND

FINANCIAL MARKETS

FOREX MARKET

LECTURER : TANG MY SANG

MEMBERS GROUP 6:

Doan Huynh Nhu — 225020344 V6 Ngoc Minh Thu — 225020017

Lé Duc Anh — 215142097 Đặng Phước Thông - 225026818 Nguyễn Ngọc Nhi - 225022652

Lê Thị Tố Nhi — 190012291

Thành phố H ôChí Minh, tháng 1Ô năm 2023

BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC KINH TẾ - TÀI CHÍNH

THÀNH PHỒ HỒ CHÍ MINH

UF

ĐẠI HỌC KINH TẾ TÀI CHÍNH

THE ECONOMICS OF MONEY, BANKING AND

FINANCIAL MARKETS

FOREX MARKET

LECTURER : TANG MY SANG

MEMBERS GROUP 6:

Doan Huynh Nhu — 225020344 V6 Ngoc Minh Thu — 225020017

Lé Duc Anh — 215142097 Đặng Phước Thông - 225026818 Nguyễn Ngọc Nhi - 225022652

Lê Thị Tố Nhi — 190012291 Thành phố H ôChí Minh tháng 10 năm 2023

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CHAPTER 1: THEORETICL BASIS 0L SH HH ket 3

1.1 _ Concept of foreign exchange market - - che 3

9 no 9 nh e - Ả ố 3 1.2.1 Based on the nature of operations, the exchange market is divided into 5 types: 3

1.2.2 Based on the nature of business, the foreign exchange market is divided into: 4

1.3 Main operations of the foreign exchange markel se 5 1.4 _ Characteristics of the foreign exchange market che 6 1.5 The role of the foreign exchange market chi rrerre 6

CHAPTER 2: REALITY - LH HH KH KH KH Hku 7

2.1 Current status of Vietnam's foreign exchange market - ‹‹‹- 7 2.2 The formation and development process of Vietnam's foreign exchange

market 8

2.3 Evaluate the operations of Vietnam's foreign exchange market 8

2.3.2 Weakn©SS@S: nh ng hen tk tk khe TT 9 2.3.3 ODpOFTUniTÏ@S: LQ Tnhh KHE gà KEE* 9 2.3.4 TAPAS! nh dai 10

CHAPTER 3: PROPOSED SOLUTIONS TO IMPROVE THE OPERATION OF PEER - TO - PEER (P2P) LENDING MARKETS IN VIETNAM c.ằ 10

CHAPTER 1: THEORETICL BASIS

1.1 Concept of foreign exchange market

Foreign exchange market is the international currency market where foreign currency transactions and means of payment have the same value as foreign currency In other words, the foreign exchange market is where the buying, selling and exchanging of foreign currencies and international means of payment that have the same value as foreign currencies take place

1.2 Types of forex markets

1.2.1 Based on the nature of operations, the exchange market is divided into 5 types:

O Spot market is a market to satisfy customers' daily foreign currency needs This market allows to immediately meet the demand for foreign currency so that subjects can pay for due goods, due debt, etc For the spot market, buyers and sellers of foreign currency must accept to buy and sell according to the terms of the contract actual exchange rate, there is no other choice, except not to make the purchase

O Forward Market is a market for trading forward foreign currency trading contracts,

a foreign currency trading contract in which the transfer of foreign currency is carried out after a certain period of time from the date of purchase contract

agreement Thanks to the operation of the futures market, subjects are assured of

their need to buy and sell foreign currencies within a specified period This market creates conditions for subjects to apply measures to prevent exchange rate risks

O Swaps market is a market that allows investors to exchange debt denominated in

one currency for debt denominated in another currency Through the swap market, investors can transfer risk in one market or currency to another market or currency

O Futures market is a type of futures market, a market that helps customers make future transactions - a transaction in which two parties agree to buy and sell a certain amount of assets determined basis with the price agreed upon at the time of today’s transaction but the delivery time is at a future time

3

O Options market is a type of market where a forward foreign currency trading contract will allow the "option" buyer to have the right to execute the contract or not execute the contract This market not only helps customers prevent exchange

rate risks but also creates flexible conditions for them to exercise their rights to their advantage

1.2.2 Based on the nature of business, the foreign exchange market is divided into:

O Wholesale market (Interbank): A market where buying and selling transactions take place between commercial banks and currency brokers for many different purposes such as insurance (hedging), speculation (speculation) ), arbitrage

O Retail market (also known as customer market) is the market where buying and

selling transactions take place between retail customers and commercial banks In

which commercial banks are price makers, retail customers are price takers Customers retail foreign currency to carry out import and export activities, international investment, borrow and repay debt in foreign currency, transfer money

for trade fees, etc

1.2.3 Based on trading location, the foreign exchange market is divided into:

O A centralized market on an exchange is a market where individuals and organizations trade contracts standardized by the exchange

O Over-the-counter market (OTC): not all transactions are performed on the centralized market The decentralized market is an important alternative to the centralized market Investors in this market do not necessarily meet each other, they

contact each other through internet and phone connection systems Transactions are

conducted over the phone and typically take place between two financial institutions

or between a financial institution and its customer Financial institutions are often market makers with fairly commonly traded instruments This means that they are always willing to list both the buying and selling prices

1.2.4 Based on legal nature, the foreign exchange market is divided into:

O Official market (legal market): This is a type of organized exchange market, with

market operating regulations, member standards, and transaction procedures

Payment is strictly regulated and safe In the official market, transactions can be made during trading hours (usually from 9:00 a.m to 3:00 p.m daily) and can also

be done over the counter (OTC) but through a computer system network connection, fax, telex, directly between buyer and seller - OTC transaction method

takes place continuously when electronic data is connected

O Unorganized market (black market, underground market - Unorganized Market) is

a place to buy and sell directly and in cash A type of market that is not legally recognized This market quickly solves foreign currency and cash needs for subjects

but has very high risks

1.2.5 Based on market size, the foreign exchange market is divided into:

O The international foreign exchange market is an exchange market whose scope of

operations is international The members of this market include domestic members and qualified overseas members

O Domestic foreign exchange market: is a market whose only participants are banks, companies, etc in the same country The operation of this market does not affect

foreign currency flows into or out of the country Countries that do not have a stable

financial market usually only organize a domestic exchange market to avoid the impact of external factors

1.2.6 Based on transaction method, the foreign exchange market is divided into:

QO Direct trading market: In this market, members participate in buying and selling transactions directly with each other, without going through any intermediaries

O Market transactions through brokers: Market transactions are carried out through

brokers Market participants place orders to brokers, and brokers rely on them to

search for orders that match customer orders Through brokerage activities, the

broker will collect commissions from the buying bank and from the selling bank 1.3 Main operations of the foreign exchange market

5

Foreign affairs delivered immediately

Exchange rate difference business operations

O

O

O Forward foreign exchange operations

O Foreign exchange swap operations are a scam

O Future foreign exchange operations

O Foreign exchange options operations

1.4 Characteristics of the foreign exchange market

O The object of purchase and sale is foreign exchange, which inherently has international elements

O The foreign exchange market does not necessarily have an existing centralized trading location, but is wherever the buying and selling of different currencies takes place

O Onan international scale, the foreign exchange market is a market that operates 24/7

due to the difference in time zones between regions in the world

O Commodity prices in the foreign exchange market are exchange rates that are formed flexibly based on the relationship between supply and demand of foreign exchange in the market Therefore, the foreign exchange market is highly sensitive (continuously fluctuating)

Oo The foreign exchange market is a global market

Oo The center of the foreign exchange market is the interbank market whose members are mainly commercial banks

O The most used currency in foreign exchange market transactions is the US Dollar (USD), followed by other strong foreign currencies such as Euro (EUR), Japanese

Yen (JPY), British Pound (GBP),

1.5 The role of the foreign exchange market

O The foreign exchange market creates an effective mechanism to meet the needs of

buying and selling foreign currencies to serve import and export activities of goods,

services and other foreign economic activities.

O The foreign exchange market operates continuously and globally, so it meets the

foreign currency needs of buyers and sellers

O The foreign exchange market is a tool for the central bank to implement monetary policy to control the economy according to the government's goals

O The foreign exchange market is a tool to prevent exchange rate risks

O Through forward trading operations, options of the foreign exchange market will help companies and businesses prevent risks

CHAPTER 2: REALITY

2.1 Current status of Vietnam's foreign exchange market

Currently, Vietnam's foreign exchange market is experiencing positive

development Foreign exchange trading activities and foreign capital flows have increased

in recent years This shows the interest and potential of international investors in the Vietnamese market

Some factors that have positively affected the operations of Vietnam's foreign exchange market include:

O Openness and linkages with international financial markets: Vietnam has expanded its linkages with stock exchanges and supervisory organizations from other countries, helping to attract a large amount of capital from foreigner

O Enhance economic stability: Vietnam's economy has made steady developments in recent years, which makes the market more attractive to international investors

O Favorable policies: The Vietnamese government has applied many favorable policies to support the operations of foreign investors, including reducing ownership limits and ownership rights in Vietnamese companies

However, there are also some challenges and risks that exist in the Vietnamese foreign exchange market Some issues include:

O Risk of exchange rate fluctuations: The foreign currency market can be affected by exchange rate fluctuations and related risks

1 Liquidity limitations: Vietnam's foreign exchange market is still small compared to

other markets, so liquidity may not be high

O Legal regulations: Some legal regulations related to trading activities and ownership

by foreigners can make operating in this market difficult

O Overall, although there are still some risks and challenges, the activities of Vietnam's foreign exchange market are developing positively and attracting the attention of international investors

2.2 The formation and development process of Vietnam's foreign exchange market

O Early 1990s: Starting from the late 1980s, Vietnam began to carry out economic reforms and open the market During this period, foreign exchange transactions were mainly carried out through the State Bank and commercial banks

O 1995: The State Bank of Vietnam (SBV) established the Foreign Exchange Department (FED) to manage foreign exchange transactions

O 2003: SBV allowed commercial banks to freely trade foreign currencies with

individual and corporate customers

O 2007: SBV issued Decision No 160/2007/QD-NHNN, allowing financial institutions not under SBV's management to operate in the field of currency and foreign exchange transactions

O 2015: SBV issued Decision No 1804/QD-NHNN, allowing financial institutions

not under the management of SBV to open foreign exchange accounts and conduct transactions on the foreign exchange market

O Present: Vietnam's foreign exchange market has developed significantly with an increase in the number of participants and trading volume Commercial banks,

securities companies and other financial institutions provide foreign exchange trading services to individuals and businesses

2.3 Evaluate the operations of Vietnam's foreign exchange market

SWOT

O Stable economic growth O Motivation to seek short-ter

O Favorable investment environme profits

O Technology limitations

O High transaction costs

Opportunities Threats

O Increased demand in internatio O Global economic risks

business O Competition from other markets

O Development of industry ar QO Financial risk management: Lack

services understanding and skills

2.3.1 Strengths:

O Stable economic growth: Vietnam is considered one of the fastest growing

economies in the world, contributing to the growth of the foreign exchange market

O Favorable investment environment: Supportive policies and improvements in the business environment have attracted the attention of foreign investors, creating many opportunities for the Vietnamese foreign exchange market

2.3.2 Weaknesses:

O Motivation to seek short-term profits: Some investors in the Vietnamese foreign exchange market tend to seek quick profits, leading to risk and instability

O Technology limitations: Vietnam's foreign exchange market still lacks technological development, transactions and information management are not optimized

O High transaction costs: Transaction costs such as brokerage fees and high exchange

rates can reduce the attractiveness of the Vietnamese foreign exchange market

2.3.3 Opportunities:

O Increased demand in international business: Vietnam has signed many free trade

agreements, creating new opportunities for market opening and increasing foreign

exchange activities.