JAGRAN LAKECITY UNIVERSITY 

JLU SCHOOL OF COMMERCE AND ECONOMICS

SEMESTER 5TH

FOREIGN EXCHANGE MANAGEMENT

BCBFC18503
PRESENTATION FOLLOWED BY VIVA VOICE 

SUBMITTED TO                                                                                                  SUBMITTED BY  

MR SARVESH MOHANIA                                                                                                                                                        KANAK MEENA(JLU04926) 
                                                                                                                                                                                          PRIYANSHU RAIKWAR(JLI04459)
                                                                                                                                                                                        TANISHKA SHARMA (JLU04222)
IMPORTANCE
PARTICIPANTS IN 
FOREIGN EXCHANGE MARKET

This Photo by Unknown author is licensed under CC BY.

 FOREIGN EXCHANGE
MARKET
◦ The foreign exchange market—also called forex, FX, or currency market.
◦ The foreign exchange market or forex market is the market where
currencies are traded. The forex market is the world’s largest financial
market where trillions are traded daily.
◦ It is  is an over-the-counter (OTC)  market.
◦ The most popular forex market is the euro to US dollar exchange rate
(EUR to USD), which trades the value of euros in US dollars.
◦ Foreign exchange markets can be considered as a linkage of banks, non -
bank dealers, and forex dealers and brokers who all are connected via a
network of telephones, computer terminals, and automated dealing
systems.
◦ The foreign exchange market in India started when in 1978 the
government allowed banks to trade foreign exchange with one another.
◦ Foreign Exchange Market in India operates under the Central Government
of India and executes wide powers to control transactions in foreign
exchange.
◦ The Foreign Exchange Management Act, 1999 or FEMA regulates the
whole Foreign Exchange Market in India.
PARTICIPANTS IN FOREIGN
EXCHANGE MARKET
1. INVESTMENT BANKS 
2. CENTRAL AND COMMERCIAL BANKS
3. BROKER 
4. INDIVIUALS
 INVESTMENT
BANKS 
◦ Investment Banking is a financial service provided by a  banking division or finance
company. It assists high-net-worth individuals, companies, or government to raise or
create capital.
◦ The nineteenth century saw the rise of several prominent banking partnerships such
as those created by the Rothschilds, the Barings and the Browns.
◦ Earlier government used to issue bonds for various developmental project  but
public doesn’t trust government on a greater extent as government when unable to
pay the debt , try to renegotiate the terms or make default in its payment .
◦ Investment banking begin with Philadelphia financier Jay Cook. In 1861 he
established first  American  investment bank to help federal government war
effects.US government became its first client.
◦ Investment bank serve as a middlemen for clients and investors and  takes all risk.
◦ Talking about India SBI ventured into this business by starting MB bureau in
1972 followed but ICICI securities (first investment bank to offer merchant banking
services).
◦ The Reserve Bank of India (RBI) regulates investment banks. However, it is the
Securities and Exchange Board of India (SEBI) that governs the financial part of
investment banking in India.
GOVERNMENT , MNC'S      BROKER (Investment Bank )    INVESTOR    
 Classification of investment bank
◦ BULGE BRACKET BANK
Bulge bracket bank consists of world's largest investment bank that provide every possible services to its
clients that mainly consists of government , large corporation , and institution. They provide both advisory
and underwriting services, as well as equity research, sales & trading services. EXAMPLE – BOA , JP
Morgan etc.
◦ ELITE BOUTIQUE BANK
These bank mainly focus on investment banking and primarily do M&A and restructuring functions. These
bank do very little financing or lending.  EXAMPLE – Evercore , Lazard etc. 
◦ MIDDLE MARKET BANKS
Middle market investment banks are financial institutions , mostly deal with mid-market firms, specifically
for raising debt or equity capital, as well as mergers and acquisitions .Deals or transactions with mid-market
firms generally range from $10 million to $500 million. They have strong local presence.
◦ REGIONAL BOUTIQUE BANK
regional investment banks typically focus on a certain area or region .Most regional investment will focus on
capital raising or mergers and acquisition  but the large regional banks will provide a full services including
equity and debt capital markets, leverage finance and restructuring services. EXAMPLE – Rothschild ,
Hulihan Lokey etc.
 FUNCTIONS
◦ MERGER AND ACCQUISITION ADVISING
Handling mergers and acquisitions is a major function of investment bankers. M&A company hires a bank for mergers and
acquisitions .Then investment bank valuate the worth of the acquisition with the fair price. For this these bank charge fees .
◦ RAISING CAPITAL
Helps in raising capital for government and other big entities  by launching IPOs and finding suitable investors. Investment
bank earn profit by taking % share of profit. This is called underwriting commission. Investment bank serve as an advisor to
many companies and assist them to raise capital in best possible way
◦ SERVE AS AN ADVISOR 
 Investment banks advise clients on required actions based on their want or need; this may include financial structuring, raising
funds, buying/selling/merging companies, buying assets/financial products, financial risk management, etc. Investment banks
regularly advise their clients on all aspects of financing.
◦ ASSET MANAGEMENT 
Companies such as JP Morgan and Sach use their asset management division to handle pension fund, insurance companies and
charity accounts.
◦ FINANCING
Investment banks provide loans to their clients. In certain cases, the bank may buy a corporate client’s shares or assist the client
in looking for any other party who may be interested to invest in the client’s business.
ROLES
◦ FRONT OFFICE 
Main work is revenue generating by helping clients with mergers and acquisitions,
managing clients’ investments, and merchant banking. The main roles are divided into
Trading, Sales and Research.
◦ MIDDLE OFFICE 
people in the middle office keep tabs on the front office transactions.
Due diligence , risk management and compliance is their main area.
◦ BACK OFFICE 
Consisting of support roles such as IT, another major part of the back office is operations,
which involves checking the numbers of trades – making certain that everything runs
smoothly and no mistakes are made.
 HOW DO THESE
BANK MAKE
MONEY??
Fees -Investment banks charge fees to their clients for the
services provided

Interest- This income comes from the loans given out

Investments- The profits earned on investments made by the

bank in companies, mutual funds, etc.

Dividends- This comes from the bank’s investments in shares,

etc.

Trading-  The money made from buying and selling securities

 THE ROLE OF
CENTRAL BANKS IN
THE FOREX
MARKET
Central banks are mainly responsible for the
protection of the financial strength and stability of
the country's Balance of payments, Internal money
supply, Interest rate, and inflation. Reserve bank
of India intervenes in the foreign exchange market
to protect disequilibrium in the price of foreign
exchange conversion. 
Introduction

 Reserve bank of India – Central bank of India 

 Established in  - 1 April 1935
 Governor –  Shaktikanta  Das
 Headquarters – Mumbai, Maharashtra
 Major functions – Supervision on commercial banks & Issue of currency
◦ (To regulate the issue of bank notes and keeping of reserves with a view to
securing monetary stability In India and generally to operate the currency and
credit system of the country to its advantage. 
The Reserve Bank of India (RBI) is India's central financial institution with
responsibility of monetary policy. This institution has played an important role in
developing India's trading economy.

Prior to 1993, the Indian Rupee had a fixed value imposed by the Reserve Bank of
India. This meant that the currency only maintained a certain exchange rate, despite
shifting market conditions.

However, in 1993, the RBI changed the previous legislation to allow for an
exchange rate determined by the market. Since then, the Rupee's value has
fluctuated drastically in relation to other currencies.
 What role do central banks play?
Regulating the market
◦ Central banks regulate economic activity by setting interest rates, which are commonly
referred to as the key interest rate.
◦ This is the rate of interest imposed by central banks. It is the tool used to refinance banks
with liquidity, and it is the primary measure of an economy's credit cost. When the key rate
is low, it implies that the cost of credit is low, which promotes growth
Managing foreign currency reserves
◦ Another role of the central bank is the managing of foreign exchange reserves.
◦ Depending on their reserves, central banks may look to purchase or sell foreign currency in
order to affect the value of the local currency.
◦ In this manner, they  maintain control over the price of their currency in order to avoid
under- or overvaluation.
Controlling the supply of money in circulation
◦ To manage the money supply in the economy, a central bank may issue or reduce liquidity
in the domestic currency.
 Commercial banks:
commercial banks are the major participants to operate foreign exchange markets at two levels, the
retail-level market and the wholesale level market.

◦ Retail market : It is the market in which clients like tourists or travelers exchange one currency
for another currency.

◦ Wholesale markets : It is the market where various banks Central banks investment banks etc
deal with each other to exchange various currencies.
◦ The primary participants in the foreign exchange market are big commercial banks,
which create the market in cores. 
◦ Around the world, more than 100 banks actively "create the market" in foreign
exchange. These banks assist their retail clients, or bank customers, in conducting
overseas trade or making international investments in financial assets that involve
the use of foreign currency. 
◦ These banks operate on two levels in the foreign exchange market. They work with
businesses, exporters, and other customers at the retail level.
◦  Banks maintain an inert bank market in foreign exchange at the wholesale level,
either directly or through specialised foreign exchange brokers.
  

 
MAJOR CENTRAL BANKS

◦ Federal Reserve Bank (United States)

◦ European Central Bank (European Union)

◦ Bank of England 

◦ Bank of Japan
 BROKERS 
◦ A Broker or a Forex Broker is a financial service provider that lets people buy and
◦  sell currencies. In other words , he works as a middleman between the participants of forex market.
◦ The countries which are presented in the G10 primarily have pairs of currencies for the foreign exchange
traders online. 
◦ For large institution forex traders works as an speculator or investor .
◦ There are number of choices for the interested investors in the forex traders online.

   Role Of Broker in Forex market :

Broker gives people access to the major currency pairs as in order to trade people  need access to currency pairs.
Major pairs like :
◦         EUR/USD
◦         GBP/USD
◦         USD/JPY
◦         USD/CHF
• After getting the access these people can start buying and selling currency pairs.

FOR EXAMPLE :
Ram wants to buy British pound with U.S Dollar for which he will require the
purchase of the GBP/USD pair. Once he gets it , he can start trying to make profit by
closing the pair when the exchange rate changes in his favour.
◦ Brokers help clients to get a better rate on the currency trade by making different
quotes available , offered by the dealers.
◦ He compares the rates offered and provides the best rate to the clients i.e., “Highest
bid prices quoted by the different dealers when the client wants to sell and
lowest ask price quoted when the clients wants to buy ’’.
 INDIVIDUALS 
Individuals are normal people who find forex market a great opportunity to earn
good amount of profit by investing free funds in forex market.

HOW INDIVIDUALS CAN TRADE IN FOREIGN CURRENCIES 

Currencies are always traded in pair (like , EUR/USD , GBP/USD) .
◦  To start trading in these foreign currencies individuals have to start by opening
a currency trading account with a forex broker. 
◦ Then complete the KYC process to make the account functional.
◦ The broker will ask you to deposit the required margin to start trading.
THANK
YOU