It can all happen very quickly. Several conversations can be handled simultaneously on the dealing systems, and it is possible to complete a number of deals within a few minutes. When he hears the quotes, Mike will either buy, sell, or pass—there is no negotiation of the rate between the two traders.


If Mike wants to buy $10 million at the rate of CHF 1.4590 per dollar (i.e., accept Hans’ offer price), Mike will say “Mine” or “I buy” or some similar phrase. Hans will respond by saying something like “Done I sell you ten dollars at 1.4590.” Mike might finish up with “Agreed—so long.” Each trader then completes a “ticket”with the name and amount of the base currency, whether bought or sold, the name and city of the counter party, the term currency name and amount, and other relevant information.
The two tickets, formerly written on paper but now usually produced electronically, are promptly transmitted to the two “back offices” for confirmation and payment.For the two traders, it is one more deal completed, one of 200-300 each might complete that day.But each completed deal will affect the dealer’s own limits, his bank’s currency exposure, and perhaps his approach and quotes on the next deal.


The spread between the bid and offer price in this example is 5 basis points in CHF per dollar, or about three one-hundredths of one percent of the dollar value. The size of the spread will, other things being equal, tend to be comparable among currencies on a percentage basis, but larger in absolute numbers the lower the value of the currency unit—i.e., the spread in the dollar-lira rate will tend to be wider in absolute number (of lire) than the spread in dollar-swissie, since the dollar sells for a larger absolute number of lire than of Swiss francs.

The width of the spread can also be affected by a large number of other factors the amount of liquidity in the market, the size of the transaction,the number of players,the time of day, the volatility of market conditions,the trader’s own position in that currency, and so forth. In the United States, spreads tend to be narrowest in the New York morning-Europe afternoon period, when the biggest markets are open and activity is heaviest, and widest in the late New York afternoon, when European and most large Asian markets are closed.