Wednesday, July 30, 2008

"yours/mine" in FX spot trading room

Think of USD as a commodity (like silver or oil) and is quoted in commodity markets

----One client----
market-maker: USD/CHF 96/99 ## MM is bidding silver at 1.2196 and offering silver at 1.2199
market-taker1: "Yours" ## market-taker1 hit and sold at bid price. MT1 declaring "silver is now yours"
MM: given at 96 ## "we are given the silver" at 1.2196 CHF
---Another client----
MM: USD/CHF 96/99
MT2: "Mine" ## market-taker2 lifted and bought at offer price. MT2 declaring "the silver is now mine"
MM: 99 paid ## "we are paid 1.2199 CHF" for selling our silver
----
In each case, the last announcement by MM is to his boss and colleagues (NOT to market-taker) so they can feel the buzz.
- If boss hears repeated "given" she knows this silver (base currency) is under heavy selling by clients.
- If boss hears repeated "paid" she knows many customers are buying (paying for) the silver ie base currency.

Whoever giving the quote is the market-maker. Whoever saying "yours" or "mine" is the market-taker, who can be another dealer bank.

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New York (Time Square), NY, United States
http://www.linkedin.com/in/tanbin