What are the methods for commercial banks to buy and sell foreign exchange?

In real life and work, you may have heard people mention the phenomenon of buying and selling foreign goods as an agent. So, do you really understand what buying and selling and agency buying and selling of Foreign exchange are? If you are also confused about this, then take a look at the relevant information collected and compiled for you by the editor of the Legal Savior Network below.

The main methods for commercial banks to buy and sell foreign exchange are as follows:

Business Banks' buying and selling of foreign exchange can adjust the surplus and shortfall of foreign exchange held by commercial banks, avoid risks, and obtain additional income. Every commercial bank engaged in foreign exchange transactions holds various amounts of foreign exchange, sometimes too much, sometimes too little. In order to balance the surplus and deficit of foreign exchange held and avoid losses, it is necessary for banks to enter the foreign exchange market, sell excess foreign exchange and make up for the shortage of foreign exchange. Obtain extra income from changes in the foreign exchange rate, that is, by buying and selling foreign exchange, you can obtain the buying and selling price difference when the exchange rate changes, thereby gaining benefits.

(1) Spot foreign exchange transactions refer to foreign exchange transactions that are delivered within two business days after the two parties complete the transaction. This kind of buying and selling does not require signing of a contract. As long as an agreement is reached on the exchange rate, foreign exchange buying and selling can be carried out by wire transfer, telex and draft. This buying and selling method has the advantage of quick and easy transactions. (2) Forward foreign exchange transactions refer to foreign exchange transactions in which receipt, payment and delivery are handled at the agreed exchange rate on the agreed expiration date according to the contract after the foreign exchange transaction is completed. The delivery periods for bank forward foreign exchange transactions include 30 days, 60 days, etc. There are two delivery methods: fixed date delivery and optional delivery. Commercial banks engage in forward foreign exchange transactions, firstly to meet the needs of customers, and secondly to adjust their surplus and deficit of foreign exchange holdings. (3) Arbitrage refers to foreign exchange purchases and sales by commercial banks in different locations, different currencies, and different maturities. The purpose of arbitrage is to earn income by taking advantage of exchange rate or interest rate differences. (4) Foreign exchange futures trading refers to a foreign exchange trading method in which the buyer and seller agree to purchase or sell a certain amount of foreign exchange at a certain time in the future according to established prices and conditions. (5) Options trading refers to the trading activity in which buyers and sellers buy or sell the right to sell or buy a certain currency at a certain time in the future. In options trading, the buyer is completely in the active position, that is, the buyer can purchase or sell a certain currency from the seller according to the contract, or does not need to engage in foreign exchange transactions with the seller. But the seller does not have this option. Options trading has the characteristics of flexibility. Commercial banks engaging in this kind of business can eliminate the adverse consequences of exchange rate changes, avoid losses, and also obtain additional income.

Agency buying and selling of foreign exchange refers to a commercial bank buying and selling foreign exchange on behalf of its customers.Sell ​​foreign exchange. Specifically, when a customer obtains foreign exchange from abroad, he hands the foreign exchange to the bank. The bank collects the foreign exchange according to the foreign exchange quotation of that day, and then pays the equivalent of the domestic currency to the customer. If the customer needs to pay foreign exchange externally, the bank pays the foreign exchange according to the prevailing foreign exchange price. The foreign exchange quotation is quoted, the equivalent value of local currency is received, and then the foreign exchange is paid to the customer. The commercial bank's agent buying and selling of foreign exchange has the following significance: first, it can meet the foreign exchange needs of customers; second, it ensures the smooth progress of international trade activities; third, the bank itself can obtain a certain amount of income.

The above is the relevant information collected by the editor. I hope it can be helpful to you. Generally speaking, buying and selling and agency buying and selling of foreign exchange are generally carried out in commercial banks. If you are still very confused about this, or if you still have any relevant legal questions that need to be answered, you are welcome to go to the Legal Savior Network for further consultation.