Know about the Macro Economy | An introduction to the interbank foreign exchange market

interbank foreign exchange mart

The interbank foreign exchange market refers to the exchange market between RMB and foreign currency between domestic financial institutions (including banks, non bank financial institutions and foreign-funded financial institutions) approved by the State Administration of foreign exchange to conduct foreign exchange business through China foreign exchange trading center.

The organizational structure and operating mechanism of inter bank foreign exchange market

1. Implement computer network trading. China Foreign Exchange Trading Center (CFETS) conducts online transactions with sub centers and adjustment centers across the country through computer

2. Implement membership system. Financial institutions established with the approval of the people's Bank of China and permitted by the State Administration of foreign exchange to handle foreign exchange business may apply to the China foreign exchange trading center to become a member of the foreign exchange trading center and participate in foreign exchange market transactions at home and abroad. Members are divided into self-employed members and agent members. Self supporting members may concurrently engage in agency business, while agency members can only engage in agency business, and may not concurrently engage in self operated business.

3. Implement the bidding transaction mode of separate quotation and matching transaction. In China's foreign exchange trading system, after the trader quotes, the trading system matches the transaction according to the principle of price priority and time priority. When the bid price and the offer price are the same, the quotation is the transaction price; when the bid price is higher than the sell quotation, the transaction price is the arithmetic average of the bid offer and the sell quote. When the amount quoted by both parties is equal, the amount quoted by both parties shall be concluded; if the amount quoted by both parties is not equal, if the amount of transaction is less than the amount quoted, the unsettled part may be retained, altered or cancelled.

4. Implement centralized clearing of domestic and foreign currency funds. In the system of China's foreign exchange market, RMB funds are subject to two-level liquidation, that is, each sub center is responsible for the settlement of local members, and the general center is responsible for the balance settlement of each sub center. The liquidation of RMB funds shall be handled through the RMB account opened in the people's Bank of China. The implementation and liquidation of foreign exchange funds, that is, the general center is responsible for the liquidation among members. The settlement of foreign exchange funds is handled through the foreign exchange account opened by China foreign exchange trading center. The clearing speed of domestic and foreign currency funds is t + 1

5. In the unified inter-bank foreign exchange market of the whole country, there are clear regulations on the trading time and types. Generally, the trading market is open from 9:20 to 11:00 a.m. from Monday to Friday, and is not open on domestic legal holidays. Transaction currencies include US dollar, Hong Kong dollar, Japanese yen, etc.