CHAPTER 2
The Money and Foreign-Exchange Markets
The Danish money market is the market for krone-denominated interbank loan agreements and interest-rate derivatives with maturity of up to one year. The daily turnover of loans in the Danish money market is around kr. 60 billion, while the trading volume in interest-rate derivatives is approximately kr. 25 billion per day.
The money market is closely related to Danmarks Nationalbank's monetary-policy instruments. In principle, Danmarks Nationalbank only provides liquidity to the banks and mortgage-credit institutes – the monetary-policy counterparties – once a week. During the week the counterparties must therefore trade liquidity among themselves on market terms via the money market.
Danmarks Nationalbank's interest rates guide the short-term money-market interest rates in Denmark. A well-functioning money market is important for ensuring a clear transmission from Danmarks Nationalbank's monetary-policy interest rates to the short-term market rates. The interest rates in the money market are the basis for the interest rates which the banks offer their customers for deposits or lending.
The Danish foreign-exchange market is the market for purchase and sale of foreign exchange against Danish kroner. The total daily turnover in the Danish foreign-exchange market is around kr. 65 billion.
The foreign-exchange market is central to the monetary and foreign-exchange policy since this is the market where the krone rate is formed and Danmarks Nationalbank intervenes by buying and selling foreign exchange.
2.1 The danish money market
The Danish money market is the market for interbank loan agreements and interest-rate derivatives denominated in kroner with a maturity of up to one year.[1] In practice the definition of the money market is often less clear-cut, however. For instance, institutional investors and mortgage-credit institutes also trade in the money market. In addition there is the special-term market where in particular major business enterprises and institutional investors can borrow from and place liquidity with banks on money-market terms.
|
The Danish money market is the market for interbank loan agreements and interest-rate derivatives denominated in kroner with a maturity of up to one year. A well-functioning money market is important for ensuring a clear transmission from Danmarks Nationalbank's monetary-policy interest rates to the short-term market rates. |
The money market serves several different purposes. It is central to the exchange of liquidity between the market participants, and to the management of short-term interest-rate positions. In addition, an efficient money market is a prerequisite for a well-functioning securities market since it creates the basis for short-term financing and placement.
The money market denominated in kroner is closely related to Danmarks Nationalbank's monetary-policy instruments as described in Chapter 1. In principle, Danmarks Nationalbank only supplies liquidity to the monetary-policy counterparties once a week via the regular market operations. During the week the counterparties must therefore trade liquidity among themselves on market terms via the money market, unless Danmarks Nationalbank conducts extraordinary market operations.
Danmarks Nationalbank's interest rates guide the short-term interest rates in the Danish money market. A well-functioning money market is important for ensuring a clear transmission from Danmarks Nationalbank's monetary-policy interest rates to the short-term market rates. The interest rates in the money market are the basis for the interest rates which the banks offer their customers for deposits or lending, cf. Chapters 1 and 3.
2.1.1 Products
A number of different instruments are traded in the money market. These instruments can be roughly divided into two groups according to their initial impact on liquidity positions.
The first group comprises cash market products whereby the conclusion of a contract implies immediate exchange of liquidity, cf. Box 2.1. Cash market products primarily comprise uncollateralised krone-denominated loans (deposits) and krone-denominated loans against collateral in bonds (repos) or foreign exchange (foreign-exchange swaps), as well as krone-denominated bonds with a remaining term to maturity of up to one year, and Danmarks Nationalbank's certificates of deposit.
|
Box 2.1
|
|
|
Deposits are uncollateralised krone-denominated loans with standardised maturities from 1 day up to 12 months. Under normal circumstances the interest rate for deposits is higher than the interest rate for equivalent loans against collateral, e.g. the rate of interest for repo transactions. Repurchase agreements (repos) are collateralised krone-denominated loans with standardised maturities from 1 day up to 6 months. The pledged collateral comprises securities, typically bonds. Repos are also known as sell and buy-back transactions since on the conclusion of the agreement the seller of the bonds (the liquidity recipient) enters into an obligation to buy back the securities at a later date at a price fixed when the agreement is entered into. The repo rate is reflected in the difference between the agreed purchase and sales prices (spot and forward prices). Foreign-exchange swaps (FX swaps) are collateralised krone-denominated loans with standardised maturities from 1 day up to 12 months. In this case the collateral is foreign exchange, typically dollars. A foreign-exchange swap can be seen as a simultaneous spot and forward foreign-exchange contract: when the spot transaction is settled, kroner are exchanged for foreign exchange, and vice versa when the forward contract is settled. The rate of interest on the krone-denominated loan is reflected in the spot and forward exchange rates applied. Krone-denominated bonds with a remaining term to maturity of up to one year are likewise usually regarded as a money-market product. This group includes short-term mortgage-credit bonds issued to finance adjustable-rate loans, as well as the government's Treasury bills.1 Danmarks Nationalbank's certificates of deposit are zero-coupon papers issued by Danmarks Nationalbank as part of its monetary policy, cf. Chapter 1. Certificates of deposit can be traded among the monetary-policy counterparties, but may not be negotiated outside the group of counterparties. Trading in certificates of deposit can be used to exchange krone-denominated liquidity with same-day settlement and no credit risk. |
|
| 1 Treasury bills are issued at monthly auctions held by Danmarks Nationalbank on behalf of the central government. The cut-off rates reflect the current market rates and no monetary-policy significance can be attributed to the cut-off rates. | |
The cash market products are used to raise liquidity or deposit surplus funds. Moreover, certain collateralised transactions may be driven by demand for the underlying asset. For instance, a bank may be interested in extending a krone-denominated loan against collateral in a specific bond, because the bank requires the bond in order to settle a bond sale to another customer.
The second group of products comprises interest-rate derivatives for which liquidity is exchanged only as a result of settlement of interest-rate differences at a fixed time in the future, cf. Box 2.2. The most important interest-rate derivatives in the Danish money market are Forward Rate Agreements (FRAs) and short-term interest-rate swaps. Interest-rate derivatives are used by banks, business enterprises and investors to hedge interest-rate risks and for position taking.
|
Box 2.2
|
|
|
T/N IRS (Tomorrow/Next Interest-Rate Swap) is a short-term interest-rate swap applying the T/N rate as the reference interest rate, cf. Box 2.3. When a T/N interest-rate swap is concluded the parties in principle agree to exchange payment of interest at a fixed rate (the swap rate for the maturity in question) for payment of interest at a floating day-to-day rate (the T/N rate). The interest payments are calculated on the basis of a fictive principal. The agreement can be concluded for standardised maturities between 1 and 12 months. On expiry of the swap, the parties' gains and losses are settled via the exchange of net amounts. The term "CITA swap" is often used synonymously with "T/N IRS" (CITA is an abbreviation of Copenhagen Interest T/n Average). Via interest-rate swaps a bank with a floating-rate deposit may "swap" floating-rate payments for fixed-rate payments. Considering the deposit and the interest-rate swap as one, this is equivalent to the bank having restructured its interest-rate exposure from a floating-rate deposit to a fixed-rate deposit. FRAs (Forward-Rate Agreements) are agreements to pay interest on a fictive principal at an agreed rate for an agreed future period. At the beginning of the future period, difference settlement takes place of an amount equivalent to the difference between the agreed reference interest rate (CIBOR) and the agreed FRA rate on the fictive principal. No payments are exchanged on the conclusion of the actual contract. Standardised FRAs run for three or six months. If a bank wishes to be certain of achieving financing at the current FRA rate in a future period, the bank can purchase a FRA now and raise a loan at the market rate (CIBOR) in the future period. If CIBOR in the future period exceeds the agreed FRA rate, the bank will – via the FRA – receive an amount to compensate for the difference. |
|
The most frequently used reference interest rates in the Danish money market are the CIBOR and the T/N rates, cf. Box 2.3. They play an important role for the money market since they are used in loan agreements and in settlement of interest-rate derivatives. Both reference interest rates are calculated and published daily by Danmarks Nationalbank on the basis of reports from a number of banks.[2]
|
Box 2.3
|
|
|
Reference interest rates The T/N (Tomorrow/Next) rate is a day-to-day reference interest rate for a loan taking effect on the 1st banking day after the trade date and expiring on the 2nd banking day after the trade date. The T/N rate is fixed on the basis of reports to Danmarks Nationalbank by currently 13 large participants in the Danish money market. The reporting participants provide information on the previous banking day's uncollateralised krone-denominated interbank lending in the T/N segment, and the average interest rate on the loans. On the basis of these reports Danmarks Nationalbank calculates a turnover-weighted T/N rate, which is published at noon on the reporting day. The T/N rate is published at Danmarks Nationalbank's website under "Market info", "Money-market rates". This rate has been selected as the day-to-day reference rate in the Danish money market because the major part of the market for uncollateralised day-to-day interbank lending is on a T/N basis. CIBOR corresponds to EURIBOR (Euro InterBank Offered Rate) on the money market in the euro area. The day-to-day interest rate in the euro area is EONIA (Euro OverNight Index Average), which is a rate of interest on euro-denominated lending commencing on the day that the contract is concluded, and expiring on the following banking day. Market conventions |
|
2.1.2 Market structure
In principle trading in the money market is not limited to any fixed times. However, money-market transactions are normally made between 7.00 a.m. and 3.30 p.m. on banking days, when the banks can exchange liquidity via their current accounts with Danmarks Nationalbank. A transaction with liquidity effect on the same day must take place within this timeframe. When liquidity is transferred between two banks, an amount is withdrawn from the current account of the bank providing the liquidity. This amount is then placed on the current account of the bank receiving the liquidity.
Trading in the money market takes place via brokers or directly among the participants.
Money-market brokers are intermediaries who do not themselves take positions, but solely establish contact between agents supplying and demanding money-market products. On an anonymous basis, the brokers continuously state the best bid and offer prices in the individual products for standardised maturities on the basis of rates provided by the individual banks. Prices are stated electronically and by telephone. Only a small proportion of trading in the Danish money market takes place via brokers. The majority of the broker-based transactions are handled via the only remaining local money-market broker. In addition, several participants use foreign brokers based in e.g. London and Frankfurt.
The majority of the trading in the money market is conducted via direct telephone contact between the counterparties. This eliminates brokerage costs, and also enables trading in non-standardised maturities and contract sizes.
A number of banks have concluded mutual agreements on market making in the various segments of the money market. Market makers continuously set binding two-way prices vis-à-vis each other for fixed amounts in a number of specified products. Market making contributes to ensuring a certain level of liquidity in the money market. The market-maker agreements in the Danish money market are described in more detail in Box 2.4.
|
Box 2.4
|
|
|
The market-making agreements in the Danish money market comprise around 10 banks. The banks participate in the agreements to varying extents. Under the market-maker agreements, the participating banks are obliged to continuously state binding two-way (bid and offer) prices for fixed amounts vis-à-vis the other market makers. A maximum bid/offer spread has been fixed for each product and each maturity comprised by the agreements. Prices are stated by telephone or via money-market brokers. The agreements operate with several "models" with varying bid/offer spreads, depending on the market conditions. Under normal circumstances the spread is typically 5-10 basis points, increasing to 25-30 basis points in turbulent market conditions. The participants agree among themselves when to change from one model to another. The market-maker agreements comprise repo transactions, FRAs, T/N IRSs, and Treasury bills, whereas deposits are not included. Concerning market making in foreign-exchange swaps see Box 2.9. |
|
2.1.3 Trading volume
Danmarks Nationalbank regularly compiles statistics from 13 banks on their money-market trading volume in deposits, repos and foreign-exchange swaps, cf. Damm and Pedersen (1997). The statistics are estimated to cover most of the turnover in these products. Box 2.5 provides a brief description of the statistics.
|
Box 2.5
|
|
|
Danmarks Nationalbank's statistics for turnover in cash market products comprise deposits, repos and foreign-exchange swaps. The statistics are based on monthly data from the currently 13 banks in Denmark that also report data for calculation of the T/N rate, cf. Box 2.3. The banks only report their lending of krone-denominated liquidity, but not the liquidity received. The statistics are broken down as lending to resident and non-resident banks and as the maturities 1-6 days, 7-33 days, and more than 33 days. The statistics are found to cover most of the turnover in deposits, repos and foreign-exchange swaps in the Danish money market. Money-market lending by other banks in Denmark is relatively limited, which also applies to krone-denominated lending from banks abroad to banks in Denmark. The trading volume in cash market products denominated in Danish kroner among banks abroad is also found to be insignificant. The trading-volume statistics are published on a quarterly basis and can befound among the statistical publications at Danmarks Nationalbank's website www.nationalbanken.dk, under "Statistics". |
|
In 2002 the total trading volume in cash market products in the money market averaged around kr. 60 billion per banking day. The large volume especially reflects that the transactions are often very short-term, in many cases only one day. Foreign-exchange swaps account for around half of the trading volume, while the remainder is more or less equally divided between repos and deposits, cf. Chart 2.1. The trading volume in Danmarks Nationalbank's certificates of deposit in the money market has been relatively modest.
The money-market trading volume in short-term bonds is moderate compared to the other cash market products. According to the trading-volume statistics of the Copenhagen Stock Exchange[3] Treasury bills, for example, are not generally traded actively after issue. The total trading volume in short-term mortgage-credit bonds is normally also significantly below the turnover in the other cash market products.
Little information is available on the trading volume in interest-rate derivatives in the Danish money market. The only official statistics derive from the regular survey of the foreign-exchange and derivatives market, which is coordinated by the Bank for International Settlements, BIS, cf. Christoffersen and Seneca (2001). This survey is conducted every three years, most recently in April 2001, and comprises products traded between counterparties outside the exchanges.[4] Danmarks Nationalbank conducts the Danish part of the survey, which involves 11 banks that overall are found to handle 99 per cent of the turnover in the Danish foreign-exchange and derivatives market. In April 2001 the average daily turnover in FRAs and interest-rate swaps was around kr. 25 billion, cf. Chart 2.2.
2.2 The foreign-exchange market
The Danish foreign-exchange market is the market for purchase and sale of foreign exchange against Danish kroner.[5] All transactions involving transfer of a position in Danish kroner against foreign currency from one market participant to another are part of the Danish foreign-exchange market. The market is not geographically delineated. Purchase and sale of foreign exchange against Danish kroner between non-residents thus also forms part of the Danish foreign-exchange market.
The foreign-exchange market is central to the monetary and foreign-exchange policy since the krone rate is formed in this market. The need for a foreign-exchange market to hedge exchange-rate risks and conversions between kroner and foreign exchange derives mainly from capital movements and foreign trade.
Since 1988 all payments to and from Denmark have been fully liberalised. This means that today there are no restrictions on transactions with abroad, including loans from and deposits with foreign banks, as well as portfolio investments and direct investments.[6]
|
The Danish foreign-exchange market is the market for purchase and sale of foreign exchange against Danish kroner, regardless of whether the trade takes place in Denmark or abroad. The foreign-exchange market is central to the monetary and foreign-exchange policy since this is the market where the krone rate is formed and Danmarks Nationalbank intervenes by purchasing and selling foreign exchange. |
Danmarks Nationalbank's key function in the foreign-exchange market is the purchase and sale of foreign exchange in connection with intervention to stabilise the krone vis-à-vis the euro. As banker to the central government Danmarks Nationalbank also handles e.g. payments related to the servicing of the central government's external debt denominated in foreign exchange, cf. Chapter 1.
In principle, the market for purchase and sale of foreign exchange against kroner comprises a wide range of transactions and participants. This publication solely considers the professional foreign-exchange market, i.e. large transactions between Danish foreign-exchange dealers (banks), Danish customers (typically large business enterprises and investors), foreign customers and foreign-exchange dealers, and Danmarks Nationalbank.
2.2.1 Products
Trading in the Danish foreign-exchange market primarily comprises spot transactions, forward contracts and foreign-exchange swaps. Foreign-exchange options are also traded. The products in the Danish foreign-exchange market are described in more detail in Box 2.6.
|
Box 2.6
|
|
|
The products in the Danish foreign-exchange market all involve the exchange of payments in foreign currency against Danish kroner. Spot transactions are foreign-exchange transactions (purchase and sale of foreign currency against Danish kroner) for settlement not later than two banking days after the conclusion of the contract. Forward contracts are foreign-exchange transactions for settlement later than two banking days after the conclusion of the contract. FX swaps are foreign-exchange swaps comprising a spot transaction combined with an opposite forward contract. As stated in Section 2.1, foreign-exchange swaps with "one leg in Danish kroner" are to a far greater degree a money-market product than a foreign-exchange-market product. Currency swaps involve ongoing exchange of interest payments and an exchange of principals in different currencies at the beginning and end of the contract term. A currency swap can thus be seen as an exchange of loans in different currencies. Foreign-exchange options are transactions giving one of the parties the right, but not the obligation, at a fixed time in the future to purchase or sell an amount in one currency against an amount in another currency at an agreed rate. |
|
A spot transaction is the simplest product. It is used for simple conversion between kroner and foreign exchange. For example, an export company with revenue in dollars and expenditure in kroner may wish to sell its dollar revenues in return for Danish kroner.
Forward contracts may be used by companies to hedge the exchange-rate risk associated with their transactions. If an export company knows that it will receive dollars in six months' time, it can sell this future dollar revenue forward in order to fix the revenue's value in kroner in advance. The company can thus immunise itself against exchange-rate fluctuations. Likewise, non-residents holding krone-denominated bonds can hedge their position by forward sale of their future krone-denominated payments from the bonds.
Foreign-exchange options can also be used to hedge the exchange-rate risk. An export company which will receive dollars in e.g. six months' time can buy an option giving the right, but not the obligation, to sell the dollars for kroner at a specific exchange rate in six months' time. The company is thus guaranteed a minimum exchange rate for its revenue denominated in dollars. The company pays a premium for the option that depends on several factors, primarily maturity, exchange-rate volatility and the required minimum exchange rate.
2.2.2 Market structure
In broad terms, the participants in the Danish foreign-exchange market can be divided into customers, foreign-exchange dealers and brokers.
Customers are typically private companies that need to purchase and sell foreign exchange in connection with payments to and from abroad, or investors who purchase and sell foreign securities. In addition, municipalities and public enterprises may also have substantial foreign-exchange payments to and from abroad.
Foreign-exchange dealers are banks that purchase and sell foreign exchange for their customers, to hedge their own positions, or in connection with currency arbitrage (e.g. simultaneous purchase and sale of kroner against euro in order to exploit minor price differences to achieve a risk-free gain).
In addition to the direct participants in the foreign-exchange market there are also brokers that act as intermediaries between buyers and sellers without actually being a party to the contract themselves. In the Danish foreign-exchange market there is one local foreign-exchange broker, but only part of the trading volume in the foreign-exchange market passes through this broker. The remainder is transacted directly between the participants. Foreign-exchange practices and conventions are described in Box 2.7.
|
Box 2.7
|
|
|
Foreign-exchange transactions predominantly comprise conversions between immediately realisable bank deposits in kroner and foreign exchange. In practice, bid and offer rates for foreign exchange are stated, either directly by telephone, via a broker or via electronic systems such as Reuters Dealing or Electronic Broking Service. The Danish foreign-exchange market is far smaller than both the dollar and euro markets. In practice rates are therefore only quoted vis-à-vis very few large currencies, while rates vis-à-vis smaller currencies are fixed indirectly via cross rates. For instance, when banks fix the rate of GBP vis-à-vis DKK, this rate is calculated on the basis of the EUR cross rates, i.e. EUR/GBP and EUR/DKK.1 Settlement in the foreign-exchange market usually takes place two banking days after the trading day (t+2). One or more closing days in a country will defer settlement of all the trades in which that country's currency are included by another day or more. Transfer of the traded currencies usually takes place via a bank in the home country of the currency in question. For instance, GBP is settled via a bank in the UK. This need not be a British bank, but could also be a UK branch of a foreign bank. All foreign-exchange dealers have a network of correspondent banks holding foreign-exchange accounts in different countries. In practice the parties independently send payment instructions to their respective correspondent banks to transfer the sold amount to the counterparty's account with its correspondent bank. In recent years there has been focus on this type of settlement, which involves certain risks since the parties cannot be certain that the counterparty will send its payment instructions and effect payment. Generally there is a trend in the international foreign-exchange markets towards the use of clearing centres or netting systems whereby such risks can to some extent be reduced. In September 2002 an international settlement system was introduced for foreign-exchange transactions, called CLS (Continuous Linked Settlement). CLS is owned by a number of the world's largest commercial foreign-exchange dealers and is aimed at reducing the settlement risks in connection with international foreign-exchange trading. This is achieved by ensuring that both parties to a foreign-exchange trade pay their part of the transaction to CLS before payments are exchanged. The Danish krone is expected to be included in CLS in the 2nd half of 2003, cf. Appendix 1.A. Settlement risks in connection with foreign-exchange trading are discussed in more detail in ECB (2003) and Danmarks Nationalbank (2003). |
|
| 1 The ISO currency codes used in Box 2.7 are described in Box 2.8. | |
Each banking day Danmarks Nationalbank publishes information on the rate of the Danish krone vis-à-vis a number of other currencies, cf. Box 2.8. The exchange rates are published solely for information purposes. Foreign exchange cannot be purchased from or sold to Danmarks Nationalbank at the published rates. The rates published by Danmarks Nationalbank are applied in many contexts (e.g. in many contracts, for the banks' cash foreign-exchange transactions with customers, etc.) where the parties wish to use an independent source.
|
Box 2.8
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Danmarks Nationalbank's exchange rates are published before 2.45 p.m. on each banking day. They are usually fixed at 2.15 p.m. on the basis of information from a number of central banks. The rates are stated as Danish kroner (DKK) per 100 units of the foreign currency, and information is published on the rate of the krone vis-à-vis the following currencies:
SDR (Special Drawing Rights) are calculated on the basis of a basket of currencies (USD, EUR, GBP and JPY). This basket is defined by the International Monetary Fund (IMF). In addition to the above rates, an index for the so-called effective krone rate is published. The effective krone rate is calculated as a weighted average of the development in the bilateral krone rates vis-à-vis Denmark's most important trading partners. The weights are calculated on the basis of trade in manufactured goods in 1995, cf. Pedersen (1998). An increase in the index reflects a strengthening of the krone vis-à-vis the weighted average of the currencies included in the index. The effective krone rate is described in more detail in Chapter 3. The rates can be seen at Danmarks Nationalbank's website, www.nationalbanken.dk, under "Market info", "Exchange rates". |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A number of banks have entered into agreements to act as market makers in the foreign-exchange market, parallel to the market-maker agreements in the money market. In the foreign-exchange market there are market-maker agreements for spot transactions vis-à-vis the euro and for forward contracts/FX swaps vis-à-vis the dollar. These are the segments withthelargesttradingvolumein the foreign-exchange market. Market makers are subject to an obligation to state binding two-way prices vis-à-vis each other with a fixed maximum bid/offer spread for a certain amount, cf. Box 2.9.
|
Box 2.9
|
|
|
The market-making agreements in the Danish foreign-exchange market involve around 10 different banks. Market makers are subject to an obligation to state binding two-way prices vis-à-vis each other with a fixed maximum bid/offer spread for a certain amount. Spot-market agreements are typically fixed for one year at a time and apply on calm days. On days with turmoil on the foreign-exchange market, market makers typically enter into new, short-term agreements with a larger bid/offer spread. The difference between the maximum bid and offer prices which can be quoted by the market makers is usually kr. 0.05 per 100 euro (5 pips) in the market-maker agreement for euro spot transactions. The amounts to which the banks commit themselves under the agreements vary from bank to bank. During the last few years each bank has typically committed itself for 10-30 million euro. For forward contracts and FX swaps there are only market-maker agreements between the banks for dollar transactions. In periods of volatility in the foreign-exchange market the market participants usually also enter into market-making agreements in foreign-exchange options on dollars. |
|
2.2.3 Trading volume
The only official trading-volume statistics for the foreign-exchange markets derive from the previously described survey of the foreign-exchange and derivatives market which is coordinated by the BIS.
The total average trading volume per banking day in the Danish foreign-exchange market was kr. 66 billion in April 2001. Foreign-exchange swaps (FX swaps) accounted for around 75 per cent of the trading volume, cf. Chart 2.3. FX swaps with one leg in kroner should, however, be seen as a money-market product rather than as a foreign-exchange-market product since the purpose of this type of FX swap is often to raise or lend krone liquidity against collateral in a foreign-exchange amount, cf. section 2.1. The remainder of the trading volume primarily comprises spot transactions and to a lesser degree forward contracts.
2.3 References
Andersen, Torben M., Bent Dalum, Hans Linderoth, Valdemar Smith and Niels Westergård-Nielsen (1999), Beskrivende Økonomi (Descriptive Economics – in Danish only), DJØF Forlag, 6th edition.
Christoffersen, Tina and Martin Seneca (2001), Turnover in the Foreign-Exchange and Derivatives Markets in April 2001, Danmarks Nationalbank, Monetary Review, 4th Quarter.
Damm, Birgitte and Anne Reinhold Pedersen (1997), New Money-Market Statistics, Danmarks Nationalbank, Monetary Review, 3rd Quarter.
Danmarks Nationalbank (2003), CLS and Payment System Stability, Financial Stability.
ECB (2003), CLS – purpose, concept and implications, Monthly Bulletin, January.
Krabbe, Henrik Smed and Lisbeth Stausholm Pedersen (1998), The Danish Foreign-Exchange Market, Danmarks Nationalbank, Monetary Review, 1st Quarter.
Pedersen, Anders Mølgaard and Michael Sand (2002), The Danish Money Market, Danmarks Nationalbank, Monetary Review, 2nd Quarter.
Pedersen, Erik Haller (1998), Revision of the Weights for Calculation of the Nationalbank's Effective Krone Rate Index, Danmarks Nationalbank, Monetary Review, 2nd Quarter.
Wendt, Peter (2002), Den finansielle sektor (The Financial Sector – in Danish only), Handelshøjskolens Forlag, 12th edition.
[1]The development in the Danish money market in recent years is described in more detail in Pedersen and Sand (2002). For more general descriptions of the Danish money and financial market and its institutions, see Andersen et al. (1999) and Wendt (2002).
[2]CIBOR and the T/N interest rate are market-determined reference interest rates. No monetary-policy significance can be attributed to them, even though they are calculated and published by Danmarks Nationalbank.
[3]The statistics from the Copenhagen Stock Exchange also include trading outside the money market. These figures are therefore not included in Chart 2.1. The statistics are available on the website of the Copenhagen Stock Exchange (www.xcse.dk).
[4]Short-term interest-rate derivatives are no longer traded on the Copenhagen Stock Exchange. Trading in CIBOR futures, which was introduced in 1993, has ceased due to low trading volumes.
[5]The Danish foreign-exchange market is described in more detail in Krabbe and Pedersen (1998).
[6]There is, however, still a reporting obligation vis-à-vis Danmarks Nationalbank for residents' payments to and from abroad where such payments exceed kr. 250,000. The information reported is used by Danmarks Nationalbank to compile monthly statistics for financial payments to and from abroad. The information is applied to the compilation of Denmark's balance of payments which is prepared and published by Statistics Denmark.