The volumes traded on the international foreign exchange market are huge, exceeding $4 trillion daily, far surpassing those of all other portions of the international capital market. Yet there is surprisingly little written to help professionals who want to learn about foreign exchange and to gain proficiency in the mechanics of trading in this important market. Even less has been written to explain the mechanics of foreign exchange operations, how money flows, and how the settlement process works.

Traders, operations personnel, hedge fund managers, investment bankers, financial managers, attorneys, and financial regulators will all find this volume indispensable for understanding what happens behind the scenes between the execution of a trade and its settlement.

David DeRosa, a veteran of financial markets, explains how the foreign exchange market conducts trading and operations. He addresses the practical considerations of how market participants contract with one another to do trading and operations, conduct margin and credit, and undertake foreign exchange prime brokerage services.

DeRosa's work is immensely practical. Understanding the operations process helps control costs, minimize errors, and to some extent preclude fraud. DeRosa's explanation of operational conventions and their development also reveals the story of how the foreign exchange market grew and developed over the last four decades: a largely ignored but important corner of financial history.

Foreign Exchange Operations walks the reader through all practical aspects of foreign exchange operations, from trade execution to documentation to trade confirmation. It focuses on the processes by which foreign exchange trades are settled using real time gross settlement systems. The later chapters focus on the legal and financial superstructure of the market, including master agreements, margin and collateral practices, and foreign exchange prime brokerage. DeRosa provides concrete examples to illustrate market practice, including more than 100 exhibits that contain real-world examples of trades, confirmations, settlement instructions, and other key documents.

Some of the main topics include:

• The structure of the foreign exchange market
• Quotation and trading conventions
• Currencies, exchange rates, and exchange rate controls
• Foreign exchange deals, including spot, forward, and non-deliverable forwards
• Foreign currency options, both vanilla and exotic options
• How foreign exchange trades are executed and confirmed
• Trade settlements, including payment systems, DTNS, RTGS, and CLS Bank
• Master agreements-the primary contracts that bind counterparties
• Uses of credit, margin, and collateral in foreign exchange trading
• Foreign exchange prime brokerage