Need Pair Selection Methodology

[longandshort]

Thanks for confirming. But here's another question: how does trader of big bank know that he can fulfil corp's order, in 20 seconds? Big bank picks it up from its own reserves? If so, what if there's not enough? And I assume this whole process happens because corp has a direct route to big bank right? As in, they have literally an account with them?

Yes you only trade with people that have accounts with you. Bank trader has to consider their existing reserves, how much they can get in interdealer and swap markets, where they can source liquidity from etc. they may need to temporarily be short the underlying currency, etc.

Note: in real life bank traders are not really taking risk in spot (outright long or short a currency). They are mainly long positive carry and and short negative carry to generate some carry spread, while being hedged outright delta.

How would big bank trader see this and where? Especially as you say it's "at the corp treasury team"? You referring to big bank trader having access to corp account and balances and movements of resources in/out of their account?


What do you mean by "name" here? The currency pair in question (dollar-nookie)?

Thanks

Corporates, institutional investors, and speculators all trade through a broker. So the broker can see information on flow in aggregate. Imagine you’re a car dealer and you’re noticing a lot of bids on a certain make and model.. you can share that information with a buyer/seller who is also interested in that make and model.


Dollar-Nokkie is trading lingo for usd to Norwegian krone.

 

[JonLivingston]

outcall

You lost me at outcall. What's outcall? The call I big bank trader make to serve the corp request?

 

[JonLivingston]

Yes you only trade with people that have accounts with you

How do big corp Y or big corp X decide which big bank to open an account to?

Do they open one on multiple big banks? That would make sense from an opportunities standpoint for big corp. Right?

 

[JonLivingston]

So the broker can see information on flow in aggregate.

But big bank is also the broker here, or have I missed something?

 

[longandshort]

But big bank is also the broker here, or have I missed something?

Yes big bank = broker

 

[longandshort]

How do big corp Y or big corp X decide which big bank to open an account to?

Do they open one on multiple big banks? That would make sense from an opportunities standpoint for big corp. Right?

Yeah you’ll typically have at least 3 broker relationships (sometimes this is mandated by board of directors), though a primary bank with whoever hands your corp bank accounting needs (called treasury services).

 

[JonLivingston]

Yeah you’ll typically have at least 3 broker relationships (sometimes this is mandated by board of directors), though a primary bank with whoever hands your corp bank accounting needs (called treasury services).

What's a typical set of criteria big corps use to choose one big bank over the other?

What's an example of "treasury needs" beyond the "can I get some nookies for our new warehouse we're buying over there please"?

 

[longandshort]

What's a typical set of criteria big corps use to choose one big bank over the other?

What's an example of "treasury needs" beyond the "can I get some nookies for our new warehouse we're buying over there please"?

Haha the nookie thing is just trader lingo for usd/krone. And you’d always say “dollar - nokkie”.

Corporates choose banks for a variety of reasons. Bank offerings are relatively the same within each tier of bank (regionals, nationals, money center/int’l). Relationships are usually a big driver. Think about all of the bank accounts a corporation will need and services around those accounts (payroll, processing, lines of credit, credit facilities, etc.).

 

[tomorton]

skinny, start with the favourite strategy and one major. The majors are highly correlated and there are basically only two strategies so the task is not too intimidating.

You will never need 30 markets on your watch-list because you will never be able to wring the maximum profit from 29 markets so that you need and extra one to achieve your financial goals. So the reward is small and diminishing. The risk however grows logarithmically as each market is added and as work-load increases.