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    1. Communicative situations

  1. Discuss with your friends:

  • What are the objective and methods of Exchange Control?

  • What is “convertibility” as applied to a currency?

  1. Prepare a short talk on the following:

    • The major participants of the foreign exchange markets.

    • Instruments and transactions made in the currency markets (spot trading, futures and forward contracts, swaps, options).

    • Ukraine’s efforts to fight money laundering.

  1. Make several short paragraphs on the following:

  1. The composition of the exchange market.

  2. The structure of the global financial market.

READ AND DISCUSS

1.a) Supply the prepositions where necessary.

b) Write down 3-5 questions about the text.

c) Describe the components of the global financial markets.

Global Financial Markets

The global market for finance encompasses a complex web of financial instruments and institutions. Its structure and functioning are affected in fundamental ways … the macroeconomic environment

(in particular, patterns of interest rates and exchange rates), the regulatory and technological environment, and fundamentals driving the real sector of the international economy.

The cash and derivative instruments that compose global financial markets rest … four cornerstones: 1)foreign exchange market, 2) the Eurocurrency market, 3) the market of intermediated credit facilities and debt instruments and 4) the equities market.

Foreign exchange (Forex) market stands … the core of the global financial market. It encompasses spot as well as forward interbank and customer transactions, as well as Forex futures and options, traded ... various organized exchanges around the world.

Motivations for Forex transactions range … short-term positioning (speculating) to hedging ... commercial or investment transactions via outright forwards, forex swaps, futures or options.

Forex Market is a structure upon which most other segments … the global financial markets are built.

A second cornerstone is the Eurocurrency Market. Eurocurrency financial items are claims that are created in one country but denominated ... the currency of another. The Eurocurrency system comprises the markets within which these claims are created and traded. This activity originated ... Europe but now takes place … the world. Three broad classes of financial items are involved:

1) bank deposits and credits, for example, dollar deposits held ... European banks;

2) primary securities in the form of Eurobonds and Euronotes; and 3) derivative securities such as foreign currency options or futures on Eurodollar uistruments.

Initially, Eurocurrency financial items were denominated pritnarily ... dollars. Today, there are many currencies of denomination, with the Deutchemark and Yen playing an increasingly important role. As in the foreign exchange market, the core of this market consists ... major dealing banks that consistently quote bid and offered prices in active interbank trading. The Bank of England samples these interest rates daily for a group of reference banks and publishes an average of the two sides of title market as the London interbank bid (LIBID) and offered (LIBOR) rates. LIBOR has become the most important floating-rate pricing benchmark for loans and debt instruments … the global financial markets.

International lending and issuance of debt securities represents the third major segment of the global financial market.

Perhaps the most long-standing form of international lending involves trade financing, whereby a foreign buyer agrees to pay ... imported merchandise after a period of time.

A corporation or government requiring general international bank financing can borrow ... foreign-based financial intermediaries under a variety of structures ranging from revolving credit facilities, term loans and project financing, to various kinds of secured credits.

An alternative ... bank financing available ... many corporate and governmental borrowers is to issue debt securities (like commercial paper or government bills).

The fourth cornerstone of the global financial market involves equities, that is, common preferred shares. Corporations seeking to raise equity capital may issue shares in the domestic market through the uriderwriting channels and simultaneously distribute them ... foreign investors.

Words you may need:

web – павутиння, сплетення

regulatory environment – правове поле

fundamentals – основи

drive – приводити в рух

derivative instruments – похідні інструменти

Eurocurrency market – євровалютний ринок

credit facilities – кредити, джерела кредитування

core – серцевина, ядро

positioning – встановлення позиції

hedging – хеджування

claim – вимога

primary securities – первинні цінні папери

Euronote – євро нота (1-6-місячний вексель)

sample – відбирати (зразки)

reference banks банки – банки, чиї процентні ставки використовуються при розрахунку ЛІБОР та інших ставок-орієнтирів

London interbank bid rate (LIBID) – ставка покупця на лондонському міжбанківському ринку депозитів (ЛІБІД)

London interbank offered rate (LIBOR) – ставка продавця (пропозиції) на лондонському міжбанківському ринку депозитів (ЛІБОР)

debt security – цінний папір, що являє собою боргове свідоцтво

long-standing – давній

trade financing – фінансування торгівлі

merchandise – товари

foreign-based – той, що розміщений за кордоном

revolving credit facilities – револьверний кредит

term loan – термінова позика

project financing – фінансування проектів

secured credit – ломбардний кредит (кредит під забезпечення цінними паперами, що швидко реалізуються)

commercial paper – „комерційні папери”, векселя