With the advent of Internet and shrinking of the globe the importance of commercial foreign exchange has been multiplied many times. Ordinarily the commercial foreign exchange is dealt in the foreign exchange market popularly know as Forex. It is a virtual market where you receive and send money online using electronic fund transfer, credit cards, or prepaid debit card. In essence the modern commercial foreign exchange denotes buying and selling of foreign currencies.
Over The Counter Market
Basically the commercial foreign exchange market is characteristically over the counter market. Trades invariably account for the foreign currency transaction. While banks are the largest clients and participants in the market they are not the only merchant accounts trade finance dealers. Private financiers also play a major role in the market and they are mostly run by brokers.
Commercial Foreign Exchange Market Requirement
Either for obtaining commercial loans or for carrying out any transactions beyond the national boundaries will involve buying the currency of the concerned country and then to run in to trade with them. Currency buying and selling, effected by setting up a common denominator like the American Dollar or the European euro is the essence of the commercial foreign exchange market strategies.
The price of other currencies in relation to the base currency is called the exchange rate. However to carry out such transactions a market is required, and that is the Forex or the Foreign Exchange Market. Without a foreign exchange market such transactions or exchanges of currencies may not be possible.
Commercial Foreign Exchange Market Features
Commercial foreign exchange market is not like the traditional markets. Rather it is like worldwide network of traders that is interconnected electronically and via telephone lines. No such brick or concrete market place for carrying out the transactions exists. Neither is there any central location, nor is there any specific place where you could carry out the business transactions.
Almost all the transactions are carried out in a virtual environment. However there are certain central locations where most of the transactions take place and the virtual market is controlled. Such countries are Singapore, Switzerland, Hong Kong, Germany, Australia, and France. Any of these places can be used to send money online or send money online, process payment, and for merchant accounts trade finance. Each of the markets opens at different times and closes also at divergent times thus facilitating the trade going on for 24/7.
Today the commercial foreign exchange market is a vast market and at the same time extremely volatile with nearly two trillion dollars transactions carried out every day. Buying and selling foreign currency it has become one of the most favored money making trades on the international scenario.
Use of Commercial Foreign Exchange
Usually the commercial foreign exchange is mostly required for carrying out the import and export operations for various companies or individuals. One can easily profit from short term and make good from the fluctuations in the exchange rates occurring. Such exchanges are also used to manage the existing positions as well as for purchasing foreign financial instruments. While trade can be carried out with credit card, prepaid debit card or electronic transfer, the majority of the transactions are based on the currency pairs like the Euro/USD, GBP/USD, or USD/CAD etc.
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