Showing posts with label Forex Market. Show all posts
Showing posts with label Forex Market. Show all posts
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Tuesday, September 27, 2011 Labels: Beautiful Cactus Flowers, Cleavage, Deepika Padukone, Father, Festival, Films, Forex Market, Padma Priya, Thys 0 comments
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Friday, September 23, 2011 Labels: Father, Festival, Fonts, Forex Basics, Forex Market, Format, Navel, Navel show, Sex Cleavage, SexCleavage, Sexy, Sexy Swimsuit Pictures 0 comments
FOREX Description
Friday, July 10, 2009 Labels: Forex Basics, Forex Market, Forex Terms, Fundamental analysis, What is Forex 0 commentsFOREX (Foreign Exchange Market) is a global currency market based on the exchange of one country's currency for another at a rate agreed on on a certain date.
FOREX has no physical location. It is an enormous network of currency dealers who are interconnected by means of telecommunication services, concentrated in all major world financial centers and working 24 hours a day as a single apparatus. The main participants in the currency market are commercial banks, currency exchanges, central banks, export trading companies, investment funds, broker companies and individuals
At the present moment, the main currencies that comprise the bulk of all FOREX transactions are the US dollar (USD), the euro (EUR), the Japanese yen (JPY), the Swiss frank (CHF) and the British pound sterling (GBP). The world daily conversion transactions volume is about US$2,000,000,000,000. The London market has about 30% of the turnover, US markets have 60%, German ones have 10% of it. The US dollar is used in 70% of transactions. Electronic brokers' share is now 85% of the FOREX market volume.
The daily transactions volume of major international banks (Deutsche Bank, Barclays Bank, Union Bank of Switzerland, CityBank, Chase Manhattan Bank, Standard Chartered Bank) reaches billions of dollars. Currency purchase and sale operations that are actually carried out on the second working day after the deal was made are called spot operations or current conversion operations.
Typical interbank trade transactions volume averages out at $10,000,000, but thanks to the margin trading system the market is also accessible to entities with limited funds. Brokers who render margin trading services require a security deposit and let the client carry out purchase and sale operations totaling 100 to 200 times as much as the paid-in deposit sum.
What is meant by Forex?
Labels: Forex Basics, Forex Market, Forex Terms, Fundamental analysis, What is Forex 0 commentsThe largest financial market in the world, Foreign Exchange market, Forex or FX market, all the terms are used to describe the business of trading of the world's various currencies, with more than $2 trillion changing hands every day. Being an international foreign exchange market, Forex is a market where money is sold and bought freely. FOREX was launched in the 1970s, to become the biggest liquid financial market today, dealing in more than hundred times the daily trading on the New York Stock Exchange.
FOREX is a perfect market to invest in, as it is free from any external control and free competition. Mostly, all Forex trading are tentative and unlike the stock market trading, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. The trading takes place between the two dealers, either over the telephone or through Internet, all over the world. The major trading centers are the ones at Sydney, London, Frankfurt, Tokyo and New York, making Forex a 24-hour market.
Forex Trading requires the employing fundamental as well as technical analyses. These analysis help a trader to foresee and determine the development in the price trends of currencies, based on which, he attempts to predict market changes and make profits. Fundamental analysis can be said to use techniques to analyze the value of a state’s currency with the help of its economic indicators, quality markets and political events and associations. Political stability also influences the exchange rate at Forex. Its not just that Forex Trading is intutive, rather its technical
While Technical analysis engages the study of patterns of price trends and movements, making it easier for the trader to predict the path of the future developments in the Forex market. The primary data for a technical analysis are values, be it the highest or the lowest values, the price of opening and closing in a definite period of time, and the amount of transactions taking place. Any factor, be it economic, political or psychological, having little or some influence on the value or the price, has already been measured by the market to be included in the price. We offer some very useful Tips for New Forex Traders.
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FOREX is a perfect market to invest in, as it is free from any external control and free competition. Mostly, all Forex trading are tentative and unlike the stock market trading, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. The trading takes place between the two dealers, either over the telephone or through Internet, all over the world. The major trading centers are the ones at Sydney, London, Frankfurt, Tokyo and New York, making Forex a 24-hour market.
Forex Trading requires the employing fundamental as well as technical analyses. These analysis help a trader to foresee and determine the development in the price trends of currencies, based on which, he attempts to predict market changes and make profits. Fundamental analysis can be said to use techniques to analyze the value of a state’s currency with the help of its economic indicators, quality markets and political events and associations. Political stability also influences the exchange rate at Forex. Its not just that Forex Trading is intutive, rather its technical
While Technical analysis engages the study of patterns of price trends and movements, making it easier for the trader to predict the path of the future developments in the Forex market. The primary data for a technical analysis are values, be it the highest or the lowest values, the price of opening and closing in a definite period of time, and the amount of transactions taking place. Any factor, be it economic, political or psychological, having little or some influence on the value or the price, has already been measured by the market to be included in the price. We offer some very useful Tips for New Forex Traders.
How to trade in Forex
Labels: Forex Basics, Forex Market, Forex Terms, Fundamental analysis, What is Forex 0 commentsPoint---1:
The point---1 defines certain concepts and terms of Forex Trading-
Quotes are a vital part of the foreign exchange trading, as Forex trading is done in terms of quotes. Therefore, comprehending these quotes is the first important step.
Firstly, in a Forex quote, the currency listed first is known as the Base currency. For example, we have EUR/USD. Here, EUR is the Base currency. Secondly, the base currency has always the value 1. In other words, the rate of other currency is calculated against 1 pt of the Base currency. For example, we have EUR/USD where EUR is the Base currency. Then 1 EUR = 1.2323 USD or the value of one currency against the other in the pair. Thirdly, when dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%.
Also used while trading through quotes, are two significant terms known as Bid and Ask. These two terms are responsible for making trading quote, a two-sided quote. Bid can be defined as ''The price at which the base currency is sold concurrently buying the counter currency. Ask can be defined as “The price at which the base currency can be bought concurrently selling the counter currency''
Point----2:
Point--- 2 illustrates the other key features of Forex trading which are namely, the leverage and the Margin. These two are immensely important in attracting the interest of the traders as they enhance the trading power of the investors.
The leverage is the ratio of the deposited amount to the amount that can be traded. Leverage enables the investors to deposit a small amount of money but still trade for a much larger amount. This way, investors can trade easily, utilizing less money to deal.
Margin, therefore, is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
A detailed Example below illustrates exactly how Forex trading is done-Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 Euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise. As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900. You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600. Return on Investment = $600
Always learn a lesson from the Forex Indicators, keep a watch, think long term and then take a step.
Point---3:
MarketForex does e-trading using high end MarketForex softwares. Easily accessible and user friendly, they have a simple operating process. For instance, the currency pair to be bought or sold can simply be dealt with, by clicking on the sell or the buy key, placed in front of that currency.After the deal to be done is selected, a quote is then displayed by the software, making it easier for the user to keep track of the records. Also, MarketForex software provides some attractive powerful features such as account details of the holder, like balance, leverage and margins, along with stop/limit orders.The trader also has the option of selecting various other currency pairs for trading purposes. Before investing always analyse the forex market with various types of forex analysis.
Basic Definitions In Trading Forex
Labels: Forex Basics, Forex Market, Forex Terms, French Kiss, Fundamental analysis, What is Forex 0 commentsThe currency Rate is the price of the currency of a country quoted in that of another at purchase and sale operations. This price can be set based on the ratio of demand and supply of a certain currency in the free market situation or be strictly regulated by a government's decision or its main financial body, which will usually be the central bank.
The rate, quote or price of a currency is determined by the market itself and is expressed in the following way: the direct quote is the amount of the national currency per unit of the foreign one, while the reverse quote is the amount of the foreign currency per unit of the local one.
Direct Quote:
GBP = 1.7400 USD (i.e., one British pound sterling is sold for 1.74 US dollars.)
Designation:
GBP/USD = 1.7400
EUR/USD = 1.2300
Reverse Quote:
USD = 109.50 JPY (i.e., one US dollar is sold for 109.5 Japanese yen.)
Designation:
USD/JPY = 109.59
USD/CHF = 1.2550
Cross rates are the ratio between two currencies that is calculated from their rate to a third currency. In the world market dealings, US dollar cross rates are often used as the dollar is not only the main reserve currency but also the transaction currency in most currency operations.
Example: EUR/CHF = ( USD/CHF ) * ( EUR/USD )
A quote offered to the client looks like this: USD/CHF = 1.2550/54. This means that a trader can buy US dollars for Swiss franks at the rate of 1.2554 ( ask or offer price) and sell US dollars for Swiss franks at the rate of 1.2550 ( bid price).
Pip or point is the smallest unit of price. For example, the change of price from 1.4150 to 1.4156 is a six pips.
Spread is the difference between the bid and offer (ask) prices: 1.4160 - 1.4150 = 10 pips. A standard bank spread is 3 to 5 pips.
Lot, trade in the FOREX market is carried out using lots. When opening a position, you can choose the desired number of lots between 1 and 10. One lot is equal to US$100,000. The collateral for each lot will be different, ranging from US$500 to 2,000 depending on the chosen leverage
Leverage is a financial tool which enables crediting of speculative operations at a small collateral.
FOREX Participants
Labels: Forex Basics, Forex Market, Forex Terms, French Kiss, Fundamental analysis, What is Forex 0 commentsFOREX participants are first of all large commercial banks that are used by exporters, importers, investment institutions, insurance and pension funds, hedgers and private investors to carry out main operations. These banks also carry out operations for their profit using their own assets. Hence, the turnover of large banks reaches billions of dollars, and the main income of some banks is even made up solely of speculative currency transactions. Besides banks, broker companies acting as intermediaries between many banks and investment funds are active participants in the market. Commercial banks and broker companies not only carry out currency purchase-and-sale operations at the prices that other active participants offer, but also bid their own prices. In this way, they actively influence the price formation process in the market and they are therefore called market makers.
Unlike active market participants, passive ones cannot bid their quotes and purchase and sell at the prices offered by active market participants. Passive market participants usually have the following as their object: paying import and export contracts, foreign industrial investments, opening affiliates abroad or creating joint ventures, tourism, speculating on rates difference, hedging currency risks, etc. Speculative deals in the FOREX market comprise 80% of its daily turnover.
As a rule, central banks enter the FOREX market with purposes different from making profits; they check the stability of the existing national currency exchange rate or correct it, since the latter is crucial for the country's economical situation. Although profits are not the main goal of the banks, they are not interested in detrimental operations either. Thus, the interventions by central banks are usually concealed and carried out via several commercial banks simultaneously. Central banks of different countries can also act together as a team to intervene.
FOREX CURRENCY TRADING
Labels: Forex Basics, Forex Market, Forex Terms, French Kiss, Fundamental analysis, What is Forex 0 commentsFX, Forex or Foreign Exchange, is all about exchange of currencies from one hand to another at an ongoing price in the market. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. Earlier, not many traders were clear about the Forex trading and that Forex is just short for "foreign exchange", as it did not get much publicity through media. Foreign Exchange market is the biggest financial market in the world, with a potential of fast and great gains and a sizable number of investors. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors. About a decade ago, currency trading was only limited to large banks and financial firms because they were the only ones to have access to the tools and methods required to trade Forex market. However recently, due to up and coming efficient online platforms, technology has advanced to the point of being accessible to any and every individual trader who wishes to trade or invest in Forex. Marketforex.net being one of finest online trading platforms is easily accessible by all who are interested in investing in Forex
Although trading in the Forex market is done for almost all the foreign currencies, there are still, some foreign currency pairs which are considered as “Major” currency pairs as compared to the others. This is because these currency pairs are some of the most traded and most in demand currencies in the Forex trading market. These pairs dominate the percentage of trades and are as follows:
Euro/ U.S. Dollar US Dollar/ Japanese Yen US Dollar/ Swiss Franc US Dollar/ British Pound The FOREX trading market offers its investors with exclusive and lucrative investing opportunities. Other factors like 24 hours open market, high leverage, commission-free trading and easy accessibility through various means of communications has helped Forex to become one of the most popularly invested financial markets. With a daily volume of about $1.2 trillion money changing hands everyday, the magnitude of Forex market is definitely one of the highest as compared to the Equities and the Futures market. So, you should educate yourself comprehensively and take advantage of this giant investment vehicle. Marketforex.net provides all the new as well as experienced traders with the opportunity to trade Forex more easily and more advantageously. We offer our clients with quicker results, better deals, higher leverage and superior customer support, thus offering them efficient and genuine Forex trading services through an advanced online trading platform
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Although trading in the Forex market is done for almost all the foreign currencies, there are still, some foreign currency pairs which are considered as “Major” currency pairs as compared to the others. This is because these currency pairs are some of the most traded and most in demand currencies in the Forex trading market. These pairs dominate the percentage of trades and are as follows:
Euro/ U.S. Dollar US Dollar/ Japanese Yen US Dollar/ Swiss Franc US Dollar/ British Pound The FOREX trading market offers its investors with exclusive and lucrative investing opportunities. Other factors like 24 hours open market, high leverage, commission-free trading and easy accessibility through various means of communications has helped Forex to become one of the most popularly invested financial markets. With a daily volume of about $1.2 trillion money changing hands everyday, the magnitude of Forex market is definitely one of the highest as compared to the Equities and the Futures market. So, you should educate yourself comprehensively and take advantage of this giant investment vehicle. Marketforex.net provides all the new as well as experienced traders with the opportunity to trade Forex more easily and more advantageously. We offer our clients with quicker results, better deals, higher leverage and superior customer support, thus offering them efficient and genuine Forex trading services through an advanced online trading platform
How to earn in Forex
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsForex, where the commodity to be traded is currency, and not stocks and shares, is a trading market which gives its investors, returns in the form of the relative value of one currency exchanged against another. Forex trading is therefore, always dealt in currency pairs with the major currency pairs being Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY), to name a few. And it is with concurrent buying and selling of currencies that the trader hopes to make a profit on favorable exchange rate fluctuations. Exchange rates are always fluctuating, going down as well as up, within seconds and the whole art of trading lies in perfectly foreseeing the trend of the variation between two currencies.
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Why to choose MarketForex?
Labels: Forex Basics, Forex Market, Forex Terms, French Kiss, Fundamental analysis, What is Forex 0 commentsMarketForex was set up by trading professionals and expert software developers with the main aim of discovering and comprehending the needs and requirements of its traders and investors, since the very beginning of their trading deal. Providing you with secure, user friendly Forex trading software, MarketForex offers the best currency trading technology with reliable and steady customer feedback services.
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Currencies
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsEuro/US Dollar EUR/USD .0001 = $10 .0001 = $1
US Dollar/Yen USD/JPY .01 = $8 .01 = $0.8
US Dollar/Swiss Fr USD/CHF .0001 = $7 .0001 = $0.7
British Pnd/USD GBP/USD .0001 = $10 .0001 = $1
Euro/Yen EUR/JPY .01 = $8 .01 = $0.8
Euro/British Pound EUR/GBP .0001 = $16 .0001 = $1.60
Euro/Swiss Franc EUR/CHF .0001 = $7 .0001 = $0.7
Euro/Swedish Krona EUR/SEK .0001 = $1.40 Not Offered
USD/Swedish Krona USD/SEK .0001 = $1.40 Not Offered
British Pound/Cdn DollarGBP/CAD Not Offered .0001 = $0.9
British Pound/Yen GBP/JPY .01 = $8 .01 = $0.8
British Pnd/Swiss Fr GBP/CHF .0001 = $7 .0001 = $0.7
Brt Pnd/New Zealand DlrGBP/NZD not Offered .0001 = $0.7
2BFOREX
Labels: Forex Basics, Forex Market, Forex Terms, Fundamental analysis, What is Forex 0 comments
2BFOREX will provide you with the best and friendliest possible trading experience. We apply a fresh, personalized service to the online trader; we appreciate the unique requirements of the retail trader.
2BFOREX provide you with:
Intuitive On-Chart trading. Watch the market evolve. Move your cursor to your chosen position. It's that easy.
24/7 account access
Powerful trading tools
System stability
No software or application downloads - trade anywhere, anytime.
Start trading from as low as $100
Instant secure credit card deposits
One-on-one training
Exclusive trading offers
Over-100 tradable currency pairs
Full margin usage - no margin calls
Immediate profit withdrawal
Advanced tools & research
Negative balance protection
Exceptional No-Risk Trading account - take profit, never lose.
Live support
Fundamental analysis
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsFundamental analysis is one of two popular approaches to Forex market analysis and describes methods of present and future evaluation determined by social, economic, and political variables. This approach is used to forecast long-term Forex market movement in the Forex market.Using fundamental analysis strategies requires a basic understanding of supply and demand, meaning - the commodity being exchanged in a particular currency. As the currency value of depends on its own country's economic stability, global or local economic changes can impact currency rates. Fundamental analysis itself is broken down into two broad subcategories: Capital Flows and Trade Flows.Capital Flows: a country's financial position, with other countries of the world, which is made up of its current account and capital account (or capital movement) over a given time frame.Trade Flows: the quantity or value of a country's bilateral trade with another country, and the subsequent impact that these flows can have on the value of a currency. In the Forex market, it means that importers are required to sell currency used to purchase goods and services being exported. This fundamental analysis feature is key and frequently provides insights into movements in a currency's price.
Read full post >>Does 2BFOREX use Margin Calls?
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsWe do not use Margin Calls.The Term Margin Call refers to a closure of all open positions by the broker when the level of minimum margin security is breached. The customary minimum level of margin ranges between 1% to 2% on weekdays, and increases to 3% to 4% over the weekends and holidays. Please note that as a result, positions may be closed despite a positive free balance in your account.The 2bForex philosophy is to allow investors to make full use of their free balance as a margin for their open positions, which means that positions will remain open as long as you have a positive free balance in your account.
Do you charge rolling fees for rolling-over the open positions?
2BFOREX does not charge any commission or fees for rolling-over positions. In addition, you, as an investor may gain from the rollover process. During the rollover process (which is similar to automatic Forward every two business days), traders will either earn or pay away points depending on the interest rate differential between the two currencies.
How can I fund my account?
2BFOREX provides two convenient means for depositing funds: online, using your credit card or via a bank wire transfer.
What is a Pip?
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsA pip is the smallest measure of Price move used in Forex trading, and is normally the last digit of the exchange rate (in most cases, the fourth digit after the decimal point).
What are the Forex Market trading hours?
Weekly activity begins on Sunday at 22:00 hrs GMT and continues 24 hours a day until Friday, 21:00 hrs GMT.
Market activity hours may vary due to public holidays and seasonal time adjustments.
What is the validity of a transaction and what is an Automatic Rollover?
The option of automatic rollover allows investors to leave positions open for a self-determined period.
When a new position (spot or forward) opens, it has a default expiry (value) date.
At the end of the value date (server time), an automatic process rollovers all relevant open positions to the next spot value date (2 additional business days). All rollovers are performed at competitive rollover rates depending on which currency pairs are involved. During the rollover process, traders will either earn or pay away points depending on the interest rate differential between the two currencies.
The status of the automatic rollover can be modified on the AR field.
What is the required minimum deposit for online trading?
To start a new transaction and trade online, you need a minimum deposit of US$100. Minimum transaction size for a new account is US$5,000 (or the equivalent) with up to 400:1 leverage (default leverage may increase according to demand).
Forex market analysis
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsThe second popular approach to Forex market analysis, based on market action through chart study, moving averages, volume, open interest, formations and other technical indicators. Similar to their equals in the equity markets, technical Forex analysts analyze price trends, the only key difference being the time frame: Forex markets are open 24/7. As a result, some forms of technical analysis that depend on time must be modified to work within the 24/7 Forex market timeframe. These are some of the most frequently used trend forecasting technical analysis forms Forex applications:
• Elliott Waves
• Fibonacci Studies
• Parabolic SAR
• Pivot Points
Many technical analysts combine technical studies for more accurate predictions. (The most common is the combination of the Fibonacci studies and the Elliott Waves.) Others analysts create trading systems to continually locate similar buying and selling conditions.
What is the PPM?
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsAs a matter of practice, forex funds generally provide investors with a PPM before an investment is made. As with any other offering solely to accredited investors, there are no specific disclosure requirements that pertain to the PPM under Section 4(2) or Rule 506.Certain basic information about the forex fund’s adviser and thehedge fund is disclosed.The information disclosed in PPMs varies from adviser to adviser, however, and often is general in scope. PPMs discuss in broad terms the fund’s trading strategies and practices. They also typically disclose the forex fund’s traded currency pairs. The PPM may disclose that the adviser has discretion to invest fund assets outside the stated strategy or strategies. PPMs also discusses qualifications and procedures for a prospective investor to become a limited partner, as well as provide information about the hedge fund’s operations. PPMs discuss fund expenses, allocations of gains and losses, tax aspects of investing in the fund and may incorporate the hedge fund’s financial statements. PPMs disclose any lock-up period that new investors must observe, as well as laying out the specifics forwhen investors will be able to redeem some or all of their investmentsout of the forex fund. PPMs also name service providers to the fund. PPMs disclose potential conflicts of interest to investors
Read full post >>Managing Offshore Funds
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsManaging Offshore Hedge Funds: A View from the Beach Many offshore hedge funds engage in a variety of activities within the United States. To the extent an offshore hedge fund becomes engaged in a U.S. trade or business, all of its income and gains effectively connected to such business are subject to U.S. tax. At some point, an offshore hedge fund could cross the line between investing, trading, and banking activities. The tax consequences to an offshore hedge fund are substantial. This article explores the extent to which an offshore hedge fund can engage in diversified or entrepreneurial activities within the U.S. without "landing" for tax purposes, e.g., subjecting a portion of their income to tax on ground that it is effectively connected to a US trade or business.
Taxation of Offshore Hedge Funds Offshore hedge funds generally engage in investment strategies to profit from capital appreciation and daily swings in the price of stocks, securities, or commodities. These profits are generally characterized as gains from the sale of capital assets. Offshore hedge funds are not taxed on (1) interest from US bank deposits or interest entitled to the portfolio interest exception, and (2) capital gains so long as the gains do not arise from the sale or exchange of a direct or indirect interest in real property located in the United States. To the extent an offshore hedge fund becomes engaged in a U.S. trade or business, all of its income and gains effectively connected to such business are subject to U.S. tax without the exceptions referenced above.
Trade or Business The term "trade or business" is not defined in the Internal Revenue Code or in Treasury regulations. Buying and selling stocks or securities may constitute a trade or business, or such activity may fall within the scope of investing, which is not a trade or business. Over the years, the IRS broadened the definition of investing activities and narrowed the definition of "trade or business" in order to limit business expense deductions. Investment expense deductions are subject to limitations. Courts have drawn distinctions between investing, trading and selling goods or services in the United States to determine whether a foreign corporation is so engaged. Foreign investors are not engaged in a trade or business even if they perform services to increase or protect the value of their investments. They are simply viewed as engaged in an activity for the production of income. Foreign traders may be engaged in a trade or business but may qualify for an exception applicable to certain trading activities.
U.S. Inbound Investment : With the intent to encourage foreign investment in U.S. financial markets, and realizing that trading in stocks and securities may constitute a trade or business in certain circumstances, Congress provided two safe harbor exceptions within the scope of Section 864 for offshore hedge funds that were engaged in trading activities in U.S. financial markets. Those safe harbors are the dealer safe harbor and the trading safe harbor. An offshore hedge fund, whether or not a dealer in stocks and securities abroad, may trade in U.S. stocks, securities and commodities (for its own account or for customers) through a resident broker, commission agent, custodian, or other independent agent, provided that it does not maintain an office within the United States through which or by the direction of which the transactions in stocks, securities, or commodities are effected.
Trading Safe Harbor : The trading safe harbor applies to an offshore hedge fund that trades in stocks, securities, and commodities for its own account, even if it (1) maintains its principal office within the United States, and (2) hires employees or exclusive agents in the US who direct its trading activities using their own discretion. The exception covers trading in stocks, securities, and options to buy or sell stocks or securities, including margin transactions and short sales. In 1997, Congress revised Section 864 to clarify that the exception from U.S. tax for offshore hedge funds that actively trade U.S. stocks, securities and commodities for their own account applies notwithstanding the fact that such funds maintain their principal office and perform administrative functions in the United States. This law change did not expand the trading exception to include activities beyond the scope of trading in stocks, securities and commodities.
Offshore Perspective on Trade : No court has defined the term "trade or business" for purposes of Sections 864 with respect to foreign corporations. The determination is made based on the facts and circumstances of each case. However, once an offshore hedge fund has met an exception set forth in Section 864 with respect to its trading activities, all other activities must be vetted to determine whether those activities result in a U.S. trade or business. Notwithstanding the fact that an offshore hedge fund meets the trading safe harbor, the fund may still be considered carrying on a trade or business for other reasons.
U.S. Tax Landings : An offshore hedge fund should not assume that the trading safe harbor always protects trading income or gains. How an offshore hedge fund end up with effectively connected income? Some hedge fund management companies offer U.S. investors partnership interests in domestic partnerships while offering foreign investors and U.S. tax-exempt investors shares in the offshore fund. Offshore hedge funds are most often classified as corporations for U.S. tax purposes. Consider the scenario where a private fund manager has captured the attention of the money manager of offshore hedge fund. The private fund manager is the general partner of a hedge fund named Hot Stuff, LP. Hot Stuff's general partner desires to quickly accommodate the interest of the foreign money manager to put funds under his management (e.g., invest part of the offshore fund into Hot Stuff).A master/feeder arrangement, though in the works, does not yet exist. The offshore fund may invest in the domestic partnership as a type of modified master/feeder structure. The Hot Stuff?s Private Placement Memoranda (PPM) indicates that it is in its first year of operation. The PPM, read fairly against the backdrop of U.S. case law, could tend to suggest that Hot Stuff's proposed trading strategy could give rise to either "trader" or "investor" tax status, e.g., that it is an investment hedge fund as opposed to a trading hedge fund. To date, the offshore hedge fund has traded U.S. financial markets free of U.S. tax by relying on the trading safe harbor. In addition to investing in the offshore hedge fund will continue to directly trade US financial markets.The tax consequences to the offshore fund of an investment in Hot Stuff are risky. Notwithstanding the fact that an offshore hedge fund meets the trading safe harbor, the fund may still be considered carrying on a trade or business for other reasons. In a 1998 field service advice, the IRS advised that a US limited partnership's investment activity was not a trade or business and as such a foreign corporation's distributive share of the partnership income was not taxable in the U.S. as effectively connected income. In that advice, a foreign corporation held an interest in a domestic limited partnership, which primarily invested in stocks. The limited partnership's offering documents indicated that its objective was to invest its committed capital in a diversified portfolio of leveraged equity investments and that it expected s to hold the investments for two to six years. The investments produced interest, dividend, and capital gain income.The field service advice clearly left the door open to concluding that an offshore investor in an actively traded domestic hedge fund structured as a partnership (or a limited liability company electing to be taxed as a partnership) would land in the U.S. for tax purposes by operation of law pursuant to Section 875. In short, an offshore hedge fund that is a partner in a partnership or a beneficiary of a trust that is engaged in a U.S. trade or business is treated and taxed as so engaged. However, an ownership interest in a U.S. investment partnership or an investment trust should not, by itself, cause an offshore investment fund to be engaged in a U.S. trade or business.
Avoiding U.S. Trade or Business Status : How might the offshore fund manager have avoided landing for US tax purposes? Instead of investing directly in Hot Stuff, LP, through purchase of a limited partnership interest, the offshore hedge fund could have loaned funds to Hot Stuff. Domestic hedge funds, such as Hot Stuff, LP, typically trade on margin and borrow funds to leverage investment capacity. With respect to this loan, the interest charge and offsets could have been structured as a type of tracking investment with the goal of establishing a rate of return with an economic yield (net of performance and management fees) equivalent to the yield expected by a typical limited partner in Hot Stuff. The question arises whether this loan would give create a U.S. banking business for the offshore hedge fund? Statistics indicate that more than half of the total receipts of effectively connected income reported by offshore entities arise from the provision of the banking, insurance and other financial services. According to U.S. Treasury Regulations, a banking business includes any one of the following activities: receiving deposits of funds from the public; making personal, mortgage, industrial, or other loans to the public; purchasing, selling, discounting, or negotiating for the public on a regular basis, notes, drafts, checks, bills of exchange, acceptances, or other evidences of indebtedness; issuing letters of credit to the public and negotiating drafts drawn hereunder; providing trust services for the public; and financing foreign exchange transactions for the public. Generally, limited venture capital activities should not cause an offshore hedge fund to be engaged in a U.S. trade or business. According to US Treasury regulations, such activities may include searching for companies in need of financing, negotiating an investment structure with the companies' existing management, occasionally making bridge loans to the companies, participating in the management of the companies, and holding the investments in order to profit from capital appreciation.In the investment proposed above, it would be ideal to structure the interest yield as one qualifying for the portfolio interest exception in situations where a reduced treaty rate is not available to reduce the default statutory withholding taxes rates applicable to outbound interest payments. Foreign partners are subject to US withholding tax on dividend income and non-portfolio interest income. This is especially critical if the offshore hedge fund is not a corporation but rather a partnership.
An offshore hedge fund, structured as a partnership, that only trades for its own account and does not otherwise engage in a U.S. trade or business is not required to file Schedule K-1's on behalf of its foreign partners. However, a foreign partnership that generates effectively connected income must file a complete U.S. partnership return, with Schedule K-1's for all partners, including the foreign partners. Compliance with the withholding regulations applicable to a tiered inbound investment is difficult and detracting to manage. The IRS will not issue a private letter ruling to a foreign corporation determining whether or not it is engaged in a U.S. trade or business. Despite the wealth of U.S. inbound investment, the IRS has issued little guidance in this area, other than to state that each determination will be based on all of the facts and circumstances. Given the magnitude of the consequences, it is important to vet proposed U.S. inbound investments to be certain of the tax consequences.
What are the parts of a forex fund?
Labels: Forex Basics, Forex Market, Forex Terms, What is Forex 0 commentsThe parts of a forex fundinclude the private placement memorandum, the subscription agreement,and the operating agreement for the fund. Forex fund advisers typically provide information to investors during an investor’s initial due diligence review of the fund, although some, more proprietary, informationmay not be provided until after the investor has made a capital commitment to the fund, if at all. Most forex funds provide written information to their investors in the form of a private offering memorandum or private placement memorandum (“PPM”). Thisreflects market practice and the expectations of the sophisticated investors who typically invest in hedge funds.
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