Introduction
The specifics of a bank's operations to attract and place funds suggest that all banks may periodically have both a surplus and a shortage of credit resources. The interbank credit market (IBC) is a large segment of the financial market, where the purchase and sale of credit resources in the form of interbank loans and interbank deposits is organized. The main characteristic of the interbank loan is the redistribution of resources between the subjects of credit, which in this case are banks. In addition to the subjects of the loan, the essence of the interbank loan is determined by its elements - banking resources and collateral value, the nature of the movement of the interbank loan, which is a paid exchange of resources and collateral value; directions of movement when issuing interbank loans and repaying them. In general, the essence of interbank credit is the exchange of credit and collateral forms of value between the creditor bank and the borrower bank.
Interbank lending refers to the largest segments of the financial market, in which short-term credit resources are sold and purchased in the form of interbank loans and interbank deposits.
The market for credit resources differs from other segments of the financial market in its versatility in serving the needs of commercial banks, since it connects diverse interbank relationships and various banking operations. In addition, it is the most efficient source of funds for maintaining liquidity on the balance sheets of commercial banks, replenishing correspondent accounts and for conducting operations in other more profitable segments of the financial market. The interbank market is part of the loan capital market, in which temporarily free monetary resources of credit institutions are attracted and placed by banks among themselves mainly in the form of interbank deposits for short periods.
As is known, the interbank loan market in a developed market economy is one of the most important sectors of the financial market. But, unfortunately, this sector of the economy is going through quite difficult times.
When writing the work, I set myself the following tasks:
– study the essence of the interbank credit market, its formation, functions, types, as well as current state and development;
– consider the main trends and prospects for the development of the interbank credit market in conditions of the economic crisis.
Thus, the purpose of the work is to analyze the essence and purpose of interbank loans.
The object of the study is interbank loans and the interbank lending market.
The subject of the study is interbank credit, functions and goals of interbank lending, participants in the interbank lending market and the organization of interbank lending.
interbank market credit crisis
1. The essence of interbank credit
1.1 The concept of interbank credit
At the beginning of the formation of the Russian banking system For the overwhelming majority of banks, the main source of credit resources was not deposits, as is customary in world practice, but interbank credit (IBC). Free credit resources are usually available to banks that have a solid client base, or banks that pursue a balanced credit policy.
Interbank lending refers to the largest segments of the financial market, in which short-term credit resources are sold and purchased in the form of interbank loans and interbank deposits.
The market for credit resources differs from other segments of the financial market in its versatility in serving the needs of commercial banks, since it mediates diverse inter-bank relationships associated with various banking operations. In addition, it is the most efficient source of funds for maintaining liquidity on the balance sheets of commercial banks, replenishing correspondent accounts and for conducting active operations in other more profitable segments of the financial market.
The beginning of trading in credit resources dates back to 1991, when the Moscow International and Moscow Central Stock Exchanges began holding credit auctions. Further development market of interbank loans is associated with the creation of the Interbank Financial House and the Interbank Association "Orgbank", on whose sites the auction form of trading also prevailed. They took place once a week, which created certain difficulties for participating banks in a rapidly changing market environment. To solve these problems, credit stores began to be used, through which it became possible to place daily requests for the purchase and sale of resources and quickly respond to changes in market conditions.
Problems solved in the interbank loan market:
1. Ensuring current liquidity (solvency) of the bank. The interbank loan market is a unique tool for quickly attracting resources in fairly large volumes, so the problem of ensuring liquidity is solved in this market in the most natural way. But it should not be confused with the task of “patching holes,” because if the resources raised in the interbank lending market do not work with sufficient efficiency, the bank falls into a vicious circle of rising debt servicing costs, loses its image and ultimately becomes insolvent.
2. Attracting resources for the implementation of short-term and medium-term projects of the bank. It is important to emphasize two circumstances here: the relevant projects must have a relatively short payback period (no more than a year) and high efficiency.
3. Making a profit by placing the bank’s temporarily free cash resources on the market. To correctly solve this problem, it is necessary, first of all, to determine the period for which interbank credits are provided.
4. Obtaining speculative profit on the interbank lending market, i.e. carrying out simultaneous purchase and sale transactions of interbank credits with a certain margin (so-called arbitrage). The most significant circumstance here is the correspondence of the terms of attracted and allocated resources.
5. Exchange of funds with other short-term markets financial assets. The most important features here are the coordination of the timing of transactions (taking into account the flow of documents) and the existence of equal responsibility of counterparties for late payment.
6. Creation and maintenance of a positive image of the bank. It is obvious that a bank that constantly acts as a lender in the interbank lending market quite clearly demonstrates its solvency. No less important are the volumes of transactions on the interbank lending market and the accuracy in making settlements on the interbank lending market. The interbank lending market is very tight and any mistake on this site becomes known almost immediately to all its active participants.
7. Establishing partnerships with other banks. As a rule, loans in the interbank lending market are now provided under so-called general cooperation agreements. The presence of a large number of such agreements and regular work on them inevitably lead to real cooperation, mutual trust and partnership between banks.
8. Collection of information about the activities and development of other banks. The above-mentioned agreements between banks provide for the regular exchange of balance sheets and other documents that sufficiently characterize the activities of counterparties. A bank actively working in the interbank lending market gradually becomes the owner of unique data; it only needs to be able to competently process this information.
9. Making a profit through non-traditional interbank transactions.
Often, interbank loans can take a veiled form: depositing funds in a bank correspondent account; purchase and sale of bank bills, as well as overdue and non-overdue interbank loans (this is usually done after the next crisis). Such operations allow, in some cases, to avoid violating regulations or instructions of the Central Bank of Russia, reduce the tax base while maintaining the volume of profit, and simply obtain additional profit (and sometimes, due to the non-trivial nature of the operation, excess profit).
The interbank loan market interacts most closely with the interbank currency purchase and sale market (primarily US dollars). The interconnection of these markets is due to the almost complete coincidence of their characteristic features. Almost all distinctive features market for ruble interbank loans listed earlier also apply to the foreign exchange market, including:
– a large number of counterparties and significant volumes of transactions;
– closed market;
– use of counter payments;
– market liquidity;
– mobility;
– instability;
– personification.
A significant difference between the foreign exchange market and the interbank lending market is the presence of the Central Bank on it, which, if necessary, carries out its large-scale interventions here, completely changing the current trends and expectations of market participants. In other words, in fact, the Bank of Russia sets or even “prescribes” the exchange rate on the foreign exchange market.
The main task of the interbank lending market is to regulate the liquidity of financial institutions. Making a profit from placing temporarily free funds on the interbank lending market is secondary, since the issue of maintaining liquidity will always be one of the most pressing for banks. Any credit institution registered on the territory of the Russian Federation is obliged to comply with liquidity standards established by the Bank of Russia. They show the degree of reliability of the bank's financial position and its ability to fulfill obligations to clients. Failure to comply with standards is fraught with claims from the regulator and even revocation of the license.
When placing foreign currency deposits, as well as when issuing foreign currency loans, banks exchange financial statements together. Based on the analysis, the volume is determined foreign exchange transactions and general agreements on interbank cooperation are concluded.
Important role in providing normal conditions The functioning of the money market is played by the interbank market. Its role is determined by the fact that the interbank market:
=> Is an object government regulation;
=> Serves as a mechanism for the influence of government bodies on the activities of commercial banks, the state of the monetary and foreign exchange system and directly on the economy as a whole;
=> It is an important component of the financial market.
Interbank market - This is part of the loan capital market (money market), where temporarily free monetary resources of credit institutions are attracted and placed by banks among themselves mainly in the form of short-term interbank deposits for short periods.
The most common terms of deposits are 1, 3, 6 months, the maximum terms are from one day to 2 years. Funds of the interbank market are used by commercial banks not only for short-term, but also for medium-term and long-term active operations, regulating balance sheets, and meeting the requirements of central banks. Interest rates take into account the costs of commercial banks, credit risk, supply and demand, market conditions and other factors and are the basis for calculation interest rates for other, longer-term loans on the national and international capital markets.
Interbank deposits associated with active deposit operations of banks, that is, the investment of temporarily free funds of some banks in other credit institutions, including the Central Bank. Making deposits by commercial banks to the Central Bank within the framework of required reserves is one of the methods for regulating the country's total money turnover. According to current legislation, in Ukraine commercial banks have the right to receive loans from the NBU, as the bank of last resort, through credit auctions, pawnshop operations, and rediscounting of bills on the terms of bilateral agreements.
Interbank loans- one of the main sources of formation of bank loans. Obtaining loans from other banks allows banking institutions to replenish their own credit resources. If there is an excess of resources, the bank places them on the interbank market, and if there is a shortage, it buys them on the market.
In practice, the following main types of interbank credit are used:
=> Overdraft on correspondent accounts: the corresponding account records the amounts of debit (credit) balances on correspondent accounts of banks at the end of the operating day;
=> Overnight- provided (received) by another bank; are provided for a period of no more than one business day, used to complete settlements of the current day;
=> REPO operations- related to the purchase valuable papers for a certain period with the condition of their repurchase at a pre-agreed price or with the condition of an irrevocable guarantee of repayment if the term of the repo transaction coincides with the maturity of the securities.
=> "Short money"- short-term interbank loans, issued for a period of one day to two weeks, prevail in the credit market.
One of the most common forms of economic interaction between credit institutions is interbank loans. Current rate on interbank loans - most important factor, defining accounting policy specific commercial bank for other types of loans. The specific value of this rate depends on the Central Bank, which is an active participant and direct coordinator of the interbank loan market. Lack of regulation on it could cause a crisis in interbank payments.
In Ukraine, the subjects of the interbank market are commercial banks, which act as financial intermediaries in the redistribution of funds and making payments in the financial market. The NBU carries out operations to refinance commercial banks. Credit resources are provided in the form of direct and pawnshop loans, rediscounting of bills and credit auctions. These operations are carried out when commercial banks are experiencing difficulties and cannot a short time attract resources from other sources. The NBU plays the role of lender of last resort. Such loans are short-term, issued at high interest rates and require collateral.
Commercial banks, as economically independent credit institutions, independently set the level of interest rates on interbank loans depending on supply and demand in the interbank market and the level of the discount rate.
Credit relations between commercial banks are determined on a contractual basis by concluding loan agreements with the definition of the rights and obligations of the parties and the corresponding registration of rights from interbank loans. The provision of an interbank loan is accompanied by the opening of accounts in accordance with the chart of accounts of Ukrainian banks. Controversial issues are resolved by law or through arbitration.
Commercial banks receive loans from the NBU in the form of rediscounting and re-pledge of securities, as well as as a result of the purchase of free credit resources on the interbank market (primarily from the same NBU). The total volume of interbank loans is limited to twice the size of the bank's own resources. In this way, commercial banks solve tactical problems associated with current operations.
Banks conduct transactions in the interbank market through passive operations, gaining access to credit resources to quickly increase the level of liquidity. This market has traditionally been the source of such resources. Commercial banks must use them for their intended purpose, otherwise it leads to a crisis of confidence and market decline. For banks, loans are urgent liabilities. These are the most expensive resources, but the profitability from operations with them is not very high. According to Ukrainian legislation, banks can take out loans on the interbank market against government securities included in the NBU Lombard List. Since 1995, bonds of internal state loans and internal local loans have come into circulation in Ukraine. The NBU allowed pawn loans from commercial banks against their collateral (the amount of such loans should not exceed 75% of the nominal value of the bank's securities portfolio). The period for using the pawnshop loan was 10 days. The payment for a pawn loan was set by a decision of the NBU Board and was higher than the discount rate. Since the first half of 1998, due to a sharp decrease in the volume of the government securities market, pawn loans were practically not provided in this form.
Pawn loan - a loan provided by the NBU to a commercial bank through refinancing secured by government securities, gold and foreign exchange reserves and other valuables, the list of which is approved by the NBU Board and which are the property of the commercial bank and are recorded on its balance sheet.
Conducting transactions on the interbank market affects the solvency of commercial banks due to the possibility of refinancing at the NBU. Resources of the interbank market relate to the sphere of ensuring liquidity of commercial banks, if we consider this liquidity as a flow of funds, taking into account the bank’s ability to obtain a loan in the interbank market and ensure cash flow from operating activities. The lack of liquid funds pushes commercial banks to operate in the interbank market and establish a liquidity norm at the reporting date.
The money market is a special sector of the market in which the purchase and sale of money as a specific product is carried out, the demand, supply and price for this product are formed. Plays an important role in the market loan interest, which is an important element of the entire monetary policy of the state, through the NBU determines and regulates its level. The main instruments of the money market are short-term securities and money surrogates with a validity period of up to one year. The money market is characterized by high liquidity of financial assets traded on it, effective use temporarily available funds, a relatively simple pricing system; the market carries out the accumulation, turnover, distribution and redistribution of money capital between spheres of the national economy. The state uses market resources to finance its expenses and cover the budget deficit. This is the market with the lowest level of financial risk. The main actors in the money market are lenders, borrowers and financial intermediaries.
1. What markets is the money market associated with?
2. What components form the demand for money?
3. What factors influence the money supply?
4. What objects and subjects form the money market?
5. What factors influence money market conditions?
6. Distribute money market instruments by degree of liquidity, maturity, and profitability. Give them a description.
7. What are the general and distinctive features accounting, foreign exchange and interbank markets?
8. What are the accounting market instruments? Reveal their features of rotation in the domestic market.
9. The essence of call and bill loans, common features and differences between them. Which of these loans is the most common in Ukraine?
10. How are funds in the interbank market formed?
11. What banking operations are interbank deposits associated with?
12. What is the main source of bank loans?
13. Name the main directions for using funds in the interbank market. How are these funds used in Ukraine?
14. How are the current rate on interbank loans, the discount rate of a particular bank on loans issued, and the official discount rate of the Central Bank interrelated?
Literature: 2; 7, 9; 13; 16; 21; 24; 26; 28; 33; 35; 38; 42; 45.
Interbank lending- this is the attraction and placement on a contractual basis banks among themselves free monetary resources in the form of deposits and loans.
The interbank lending system has two levels: the first reflects the movement of funds between the Bank of Russia and commercial banks, the second - between various commercial banks.
IN modern conditions for prompt attraction Money use the opportunities of the interbank resource market, where funds mobilized by other credit organizations are sold.
The interbank mechanism is the main source of borrowed credit resources of commercial banks, a source of funds to maintain the solvency of the balance sheet and ensure the uninterrupted fulfillment of obligations. It is provided, as a rule, within the framework of correspondent relationships.
Attraction of interbank credit is carried out either by banks themselves through direct negotiations, or through financial intermediaries. If banks themselves agree on an interbank loan, then their relations are formalized by special agreements, which are concluded mainly for a certain period. Resources are also attracted in the form of centralized loans. Loans from the Bank of Russia are provided to commercial banks in the form of financing and on a competitive basis.
Depending on the term, interbank loans are distinguished on demand and urgent. Urgent interbank loans are attracted and placed for the following terms: 1 day, 2-7 days,
8-30 days, 31-90 days, 91-180 days, 181 days - 1 year, 1-3 years, over 3 years. The form of interbank loan on demand provides for the provision of an interbank loan for a minimum period established by the agreement, after which the loan becomes perpetual and can be claimed by the lender at any time with prior notice.
The interbank lending market in Russia is very narrow. The most active 30 banks account for about 60% of the interbank lending (IBC) market. Low activity on the interbank market and the growth of market share among banks indicate a low level of confidence in the interbank market as a whole.
Research shows that the turnover of funds in the interbank market for periods of up to 1 week is about 90% of the total volume of interbank transactions.
Thus, by assessing the level of activity of banks in the short-term interbank market, the level of activity of banks in the short-term interbank lending market and the effectiveness of short-term liquidity management in the banking sector are assessed.
By degree of involvement in the interbank market Russian banks can be classified into three echelons.
Interbank loans
Interbank loan- a loan provided by one bank to another, or bank deposits placed in other banks.
The subjects of credit relations in this case are banks - commercial and central. Banks with free credit resources sell these resources on the interbank loan market - the money market. With the help of interbank loans, banks can quickly manage their liquidity, quickly raise funds if necessary, or place temporarily free credit resources.
Participants in the interbank loan market, along with banks that conduct their operations irregularly, include active operators of the interbank loan market - dealer banks acting on their own behalf and at their own expense. The latter can act as borrowers or lenders. Their income is the interest margin, i.e. the difference between placement and fundraising rates.
A commercial bank can attract a loan from another bank directly or through an intermediary (another bank, brokerage house, etc.). Interbank credit is a rather expensive credit resource, however, unlike deposits, it no reserve requirements are established, and therefore the entire amount of the interbank loan received can be used by the bank for profitable investments.
Interbank lending rates
The price of credit resources—the interest rate on a loan in the interbank lending market—is determined by supply and demand. An idea of the state of the interbank loan market is given by special indicators, which include:
- MIBOR(Moscow Interbank Offered Rate) - average rate for offers for sale;
- MIBID(Moscow Interbank Bid) - average bid on purchase offers;
- MIACR(Moscow Interbank Actual Credit Rate) - the weighted average actual interest rate on interbank loans.
The above indicators are calculated for the largest banks in Russia - participants in the interbank lending market.
The level of interest rates in the interbank loan market is differentiated depending on the terms of the loan.
To start working in the interbank lending market, a commercial bank must calculate the limit for the counterparty bank. There are special methods for calculating the limit on counterparty banks that make it possible to adequately assess the condition of any bank based on an analysis of balance sheet data, economic standards, and transcripts of individual balance sheet accounts taken over time. Most often, the limit is calculated based on data on the equity capital of the counterparty bank using a special synthetic coefficient. reflecting the financial position of the bank. This coefficient is developed by the counterparty bank itself.
Contracts on the interbank loan market are mainly long-term in nature. Credit transactions are concluded on the basis of a general agreement on general conditions conducting operations on the domestic foreign exchange and money markets. In Russian practice, interbank loans are provided by banks without collateral as blank loans, the only guarantee of repayment of which is the loan agreement.
Authorized employees (dealers) of the creditor bank and the borrower bank negotiate and conclude transactions by telephone, fax, and also through the REUTERS DEALING-2000 system. The loan is considered received when the funds are credited to the correspondent account of the party receiving Russian rubles in one of the cash register centers, clearing centers or in the bank through which settlements are made.
To register and carry out activities, the parties provide each other with the following documents:
- notarized copies of constituent documents (memorandum of association, charter);
- notarized copies of licenses for banking operations;
- a notarized copy of the card with sample signatures of authorized bank employees;
- detailed balance sheet for 2nd order accounts and calculation of ratios as of the last reporting date, signed by authorized persons and sealed by the bank;
- a notarized copy of the bank’s state registration certificate.
The parties undertake to maintain strict confidentiality of information regarding transactions and recognize the legal force of documents transmitted electronically on an equal basis with the originals.
If there are temporarily free monetary resources or a need to purchase credit funds, the parties' dealers via communication systems send an offer to conclude a transaction (offer), which contains the following conditions:
- amount and currency of interbank credit;
- interest rate and interest payment terms;
- dates of crediting funds to the corresponding correspondent accounts;
- instructions for making relevant payments;
- reference to the number and date of the current master agreement.
The transaction is considered concluded at the moment the party that sent the offer (the offeror) receives the response of the other party (the acceptor). In this case, the party’s response agreeing to conclude a transaction on terms different from those proposed by the other party does not constitute acceptance. Such a response is a refusal of acceptance and at the same time a new offer.
Interest for using the loan is accrued for each calendar day of using the interbank loan, starting from the date of crediting the funds to the borrower's correspondent account to the date of crediting the funds to the lender's correspondent account.
There is no provision for prolongation of the interbank loan within the framework of the general agreement. If there is a mutual agreement, the delay of credit resources from the borrower is formalized with the consent of the lender as a new transaction with the beginning of the action falling on the expiration date of the previous one, with the obligatory payment of interest on the previous transaction.
Repayment of an interbank loan is made in one amount at the end of the loan term. If the amount of funds received from the borrower aimed at repaying the debt on the loan is insufficient to repay the debt and pay accrued interest, the lender has the right to first repay the amount of the penalty, then the main interest on the interbank loan. and send the remaining amount to repay the interbank loan, regardless of the repayment procedure specified in payment order borrower.
Early repayment of an interbank loan or part thereof is permitted only with the written consent of the lender. When early repayment Without the written consent of the creditor, interest is accrued and paid for the entire period of its use, established by the relevant transaction.
Interbank lending can also be carried out in the form mutual lending correspondent accounts. If there is a temporary lack of funds in the LORO current account of the correspondent bank, it is provided with an overdraft loan, the terms of which are usually specified in the correspondent agreement. In the case of an intraday overdraft, interest on the loan is calculated based on the period of use of the loan, calculated in minutes. A fixed amount can also be set for using funds during the day. The borrowing bank pays the interest debt for the provided overdraft based on the NOSTRO correspondent account statement.
See also: Bank of Russia loans
The possibility of providing an interbank loan allows financial institutions to use their assets with maximum rationality and efficiency. That is, to lend, as a rule, at a small interest rate, unclaimed for this moment cash.
The availability of short-term loans helps banks maintain their liquidity in full, meeting their obligations in the event of a shortage of funds when they are due in the near future.
How is interbank lending carried out?
Interbank loans are loans in the form of lines of credit that banks open to each other. For this purpose, banking institutions:- exchange statutory documentation;
- conclude contracts;
- set credit limits.
The main creditor of the market is the Central Bank of Russia. Most often, borrowing funds is carried out on the basis of one-time loan agreements or by placing deposits in other banking institutions.
In the interbank lending market, transactions are concluded in three ways:
- direct contact of one bank with another;
- with the participation of an interbank broker;
- using electronic trading platforms.
- largest banks with state participation;
- second-tier banking institutions;
- all other financial and credit institutions.
Interbank loans are short-term loans that are issued for one day (overnight) or for a longer time if the loan amount is small.
Types of interbank loans
As a rule, loans on the interbank market are provided on short term to maintain the current liquidity of banks, their solvency, as well as ensure operational stability. As mentioned earlier, the source of interbank loans is the temporarily available funds of financial institutions, as well as deposits stored in (correspondent) bank accounts with the Central Bank of Russia.There are several types of interbank credit used in practice:
- Overnight loan. A loan provided for one business day. Used to complete current calculations for the day.
- Overdraft loan. Correspondent account loan (opened by one banking institution in another for the purpose of providing loans or receiving funds from enterprises cooperating with the bank).
- Funds raised through REPO transactions (a transaction involving the sale of securities with their subsequent repurchase at a pre-agreed price).
The main benefit of an interbank loan for a financial institution is the speed of obtaining a loan, since the stable operation of the bank depends on this.
The absence of problems in the interbank lending market is the key to stable operation of the banking sector as a whole. Even temporary financial problems in a large banking institution can trigger a series of non-repayments of short-term loans from banks to each other, which inevitably leads to an interbank crisis.
Data on the state of the interbank loan market are freely available. This information is very useful for both company managers and individuals. After analyzing these figures, we can predict a crisis in the banking system.
Forex is presented on the portal in real time.
The site lists the main types of transactions and contracts usually used in trading on world exchange platforms. Single interbank rate Electronic trading systems allow you to instantly carry out exchange transactions between financial institutions. Interbank trading on the over-the-counter Forex market have a daily turnover of 7 trillion. US dollars.
| Type | Last | Chg. | Chg.% | Time |
|---|---|---|---|---|
| EURUSD Euro to dollar exchange rate | 1.10332 | -0.00390 | -0.35223 | |
| AUDCAD Australian Dollar/Canadian Dollar | 0.95727 | +0.04830 | +5.31371 | |
| AUDUSD Australian dollar to US dollar exchange rate | 0.71501 | +0.02858 | +4.16357 | |
| EURCHF Euro/Swiss Franc | 1.14008 | +0.04072 | +3.70397 | |
| EURGBP Euro/Great Britain Pound | 0.88431 | -0.00122 | -0.13777 | |
| EURJPY Euro / Japanese Yen | 125.8 | +6.122 | +5.115 | |
| GBPJPY Great Britain Pound/Japanese Yen | 145.402 | +10.314 | +7.635 | |
| GBPUSD Pound to dollar exchange rate | 1.24728 | -0.00235 | -0.18806 | |
| NZDUSD New Zealand Dollar / US Dollar | 0.66833 | +0.03278 | +5.15774 | |
| USDCAD Canadian dollar to US dollar exchange rate | 1.33885 | +0.01468 | +1.10862 | |
| USDCHF US Dollar / Swiss Franc | 1.01425 | +0.02136 | +2.15130 | |
| USDJPY Yen to dollar exchange rate | 111.931 | +3.832 | +3.545 | |
| USDCNH Chinese yuan to US dollar exchange rate | 7.08009 | -0.00526 | -0.07424 |
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Exchange rates on the interbank market published on the portal daily, except weekends. Currency purchase and sale transactions are carried out continuously throughout the day - both on all world exchanges and on the over-the-counter Forex market, using modern means electronic communications.
Availability of supply and demand of trading participants: national banks of countries, commercial banks, brokerage houses, pension funds, insurance companies, traders' associations, industrial and financial groups determines how they change market rates in a certain period of time relative to a particular currency pair.
Interbank trading take place on Forex and several world exchanges, through the conclusion of the following types of transactions between financial institutions:
1. With immediate delivery of funds:
a) with immediate delivery and payment of currency - TOD transaction (from the English today - today);
b) with payment at a fixed price the next day - TOM transaction (from the English tomorrow - tomorrow);
c) with payment at a fixed price one day after the date of conclusion of the contract - a “spot” transaction.
2. With the delivery of currency within a certain period of time:
a) forward contracts - providing for individual in each specific case: terms of payment, delivery time, position volume, place of settlement;
b) futures - contracts of a standard type, used on all exchanges in the world and mandatory for execution by trading participants;
c) options - transactions in which the acquirer receives the right - but not the obligation - to buy or sell in the future at a pre-agreed strike price a certain amount of cash; d) currency swaps - banking transactions for the purchase and sale of interbank exchange rate with immediate delivery and simultaneous reverse transaction for a specified period with the same monetary units.
By participating in transactions on the over-the-counter Forex market, central banks of various countries gain additional leverage over the value of the national currency. The use of the ECN electronic trading system makes it possible to reduce to a minimum the time for conducting bank exchange transactions on the over-the-counter market.
The turnover of day trading on the interbank Forex market is growing every year and, according to data for 2016, already exceeds the amount of 7.6 trillion. US dollars.