Contents Introduction Chapter I. Theoretical foundations of currency regulation

Main types of currency transactions: “Spot Exchange”, “Forward”, “Swap”, and “Arbitration”

The Foreign Exchange Transactions refers to the sale and purchase of foreign currencies. Simply, the foreign exchange transaction is an agreement of exchange of currencies of one country for another at an agreed exchange rate on a definite date.
To buy foreign goods or services, or to invest in other countries, individuals, companies, and other organizations will usually need to exchange their domestic currency for the foreign currency of the country with which they are doing business. Some exporters do, however, accept foreign currencies, especially the United States dollar, which is widely used in the import-export business. For instance, Saudi Arabia accepts payments in U.S. dollars (USD) for its oil, so when Canadians buy their oil, they transact the business in the USD that they receive from trading with the United States, even though the United States is not involved in the oil purchase at all.
The foreign exchange rate is simply the price of one currency in terms of another, or how much one currency can be exchanged for another, in the same way that the price of a good is determined by how much money can be exchanged for it.
The foreign exchange market – otherwise known as the FX market — consists of financial institutions, mostly banks, that stand ready to exchange one currency for another. Banks often negotiate exchange rates among themselves, but forex dealers that market their services to the public generally post bid/ask prices on the currency pairs in which they make a market.
Most FX transactions take place in the United Kingdom, United States, and Japan with most of the rest of the market centered in Hong Kong, Singapore, Australia, Switzerland, France, and Germany.


There are some commonly used types of foreign exchange transactions:


Figure 1.1