How to Choose a FOREX Provider Middle East Money Summit Dubai October 2008 Betsy Waters dbFX Global Director Deutsche Bank

2 What is FOREX ? FOREX or FX or Foreign Exchange trading is buying one currency and selling another currency with the intention of making a financial gain or return How can you invest in Forex Indirect Investing in Forex Local equities in companies with international business Non local equities Bonds Direct Investing in Forex Non Local Bank Accounts Exchange Traded Funds (ETF) FX online margin Trading Self Directed Traders Managed Accounts

3 How Big is the FX Market The Global FX Market has over 3 Trillion USD in volume daily FX is a growing asset class

4 US Equity Market US Bond Market Global FOREX Market 24 / 5.5 FX Compared to Other Markets

5 The Three Most Popular Trading Strategies in FX CARRYVALUATIONMOMENTUM

6 What are the steps to take to choose an Forex provider We will develop a step by step guide How to decide who to trade with

7 Questions to ask yourself How much are you investing ? What is your trading style ? What level of risk or leverage are you comfortable with ? What are the different regulatory environments and how does that effect you ? A look at the terms regarding how the Forex provider manage their currency risk

8 What is your trading style ? QuestionsConsiderations How much are you investing ?What % of your investable assets How much are you depositing? Interest paid on balances Credit rating of your counterparty How do you make your trading decisions ? Fundamental: What is the research offering, Macro ? Technical : Charting capabilities Can you trade from charts Can you track open positions from the charts What is the time frame of your trades ?Minutes, Hours, Days, Months Do you open trades from the trade platform or by leaving orders? Order Functionality Do you link orders to open trades ?Order Functionality of orders linked to positions How comfortable are you with risk ?Leverage desired Tools – Forex Broker Guide

9 Leverage and what it means to you Forex Brokers routinely offer leverage as high as 200 to 1. Define your risk tolerance Use leverage to match your risk tolerance Currently the Forex market can move 1% in one day How much leverage are you comfortable with ?

10 Regulatory Environments Not all Forex Providers are regulated Not all regulators have the same rules Web site USA NFA – National Futures Association UK FSA - Financial Services Authority EuropeMIFID guidelineListed on FSA site

11 UK Regulatory Environment FSA – Financial Services Authority Conduct of Business Rules (COB) MiFID – New COB rules – dbFX –is a Non deliverable, daily cash settled, –Contract for Difference (CFD) – CFD is a regulated investment so MiFID applies to dbFX. MiFID: Markets In Financial Instruments Directive Financial Promotions Classification Appropriateness and Suitability Test Best Execution Complaints Handling Inducements

12 Treating Clients Fairly (TCF) TCF is an initiative from the FSA which aims to deliver six improved outcomes for retail consumers. – Corporate Culture – Identified Consumer Group – Clear Information – Advise is Suitable – Products that Perform – Unreasonable post –sale barriers

13 US Regulatory Environment CFTC - Commodity Futures Trading Commission (a US Government Regulator) NFA - National Futures Association (a Self-Regulatory Organization) Registration – Firms conducting Off-Exchange FX can register as "Futures Commission Merchants" ("FCMs") since 2001 SRO Status – NFA designates FCMs engaged in OTC FX as "Forex Dealer Members" Capital Requirements – – FDMs currently required to have US $5M, going to $20M Brokers/Trading Advisers Safety of Client Funds Required Disclosures

14 Dealing with a Forex Provider Terms you may encounter: – Broker: no dealing desk – Broker: dealing desk – Bank Let’s take the mystery out of these terms and look at what they really mean

15 What does “no dealing desk” mean Bank Liquidity Provider TraderForex Broker 1.Finds the best price 2.Request a Trade 1.Determines best price 2.Adds Markup to Price 3.Send Price to client Trade Accept Message Price Display Request a Trade Accepts the Trade Trade Accept Message 1.Trade is booked 2.Collateral account debit or credited Price from Bank B Price from Bank C Price from Bank A Decides to make a trade

16 What does “dealing desk” mean Price from Bank B Price from Bank C Price from Bank A 1.Determines best price 2.Adds Markup to Price 3.Send Price to client Price Display Request a Trade Dealing Desk will 1.Accepts the client trade 2.Decided to offset the trade or not with a bank 3.Offset trades with banks Trade Accept Message 1.Trade is booked 2.Collateral account debit or credited Request a Trade from a bank Accepts the Trade Bank Liquidity Provider TraderForex Provider Decides to make a trade

17 What does dealing with a Bank mean Price from Bank Price Display Request a Trade Bank will 1.Accepts the client trade 2.Manage the currency Risk Trade Accept Message 1.Trade is booked 2.Collateral account debit or credited BankTrader Decides to make a trade

18 Now you have a short list of providers Before you start trading Open a demo Use a demo from the broker you will trade with

19 Now you have a process to choose a Forex Provider You have the questions to ask yourself about – Your investment levels – Your trading style – Your risk tolerance You understand the different regulatory environments and how they affect you We have taken the mystery out of the words used regarding how the providers manage their currency risk.

20 Deutsche Bank FX Deutsche Bank is recognized as the world leader in FX Trading – Market share is over 20% of the global market, Deutsch Bank is the #1 FX Bank voted by Euromoney Magazine for the last four years – Constant innovation to provide the best market information and market access to our clients – Award winning market research in FX and Global Markets

21 dbFX for Your Online FX Trading What do you get ? Funds deposited with Deutsche Bank Trading directly with Deutsche Bank Access to Deutsche Bank Research 24 hour sales and support via phone, or instant messenger Leverage of up to 1% or 100 times Easy to use Trading Platform – Real time charts – Trade from charts – Risk Management tools

22 How to get started Go to Sign up for a demo and PRACTICE Applications are on-line or from our sales team Accounts are funded with cash Fund with as little as $5,000 USD or or the equivalent in GBP, EUR or JPY.