Forex Dealing Room Operations
How a forex deal moves from quote to settlement, and the FEDAI rules at each step.
A bank's dealing room is where its customer forex flows meet the interbank market. Branches buy and sell currency with exporters, importers and remitters all day; the dealers cover those positions with other banks, and the back office makes sure every deal is confirmed, settled and accounted for.
The rules for how this works come from three places: RBI's directions on interbank dealing, FEDAI's rules on hours, intermediaries and settlement, and the FX Global Code that FEDAI has adopted as its code of conduct.
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Front, Mid and Back Office
The split exists so that the person who takes risk is never the person who checks or settles it.
Front office (dealers)
What it does
Quotes rates, executes deals with customers and banks, manages positions within limits
What it must not do
Confirm its own deals, settle payments or value its own positions
Mid office (risk)
What it does
Monitors limits, marks positions to market independently, reports breaches and P&L to management
What it must not do
Take trading positions or earn revenue from them
Back office (operations)
What it does
Confirms deals, settles funds through nostro accounts, reconciles, accounts and reports
What it must not do
Initiate or alter deals
| Office | What it does | What it must not do |
|---|---|---|
| Front office (dealers) | Quotes rates, executes deals with customers and banks, manages positions within limits | Confirm its own deals, settle payments or value its own positions |
| Mid office (risk) | Monitors limits, marks positions to market independently, reports breaches and P&L to management | Take trading positions or earn revenue from them |
| Back office (operations) | Confirms deals, settles funds through nostro accounts, reconciles, accounts and reports | Initiate or alter deals |
Market Hours Under FEDAI Rule 1
- check_circleNormal market hours for onshore deliverable foreign currency/INR deals, interbank and customer, are 9 a.m. to 5 p.m. IST on working days.
- check_circleADs may deal with customers and other banks beyond these hours on working business days, but must keep within the net overnight open position limit at all times, including between end of day and 9 a.m. the next working day.
- check_circleDeals for individuals (including joint accounts and proprietary firms), including value-cash deals, can be done on Saturdays, Sundays and holidays as per the bank's internal policy.
- check_circleThe spot date rolls over at 12 midnight IST.
- check_circleFor other forex business, Saturday is not a working business day.
The Life of an Interbank Deal
- 1
Quote and execute
The dealer deals directly with another bank, through a FEDAI-accredited voice broker, or on an electronic trading platform authorised by RBI.
- 2
Capture
The deal is entered into the system at once. Deals done after the back office has closed for the day are marked as late deals and still go into that day's position.
- 3
Confirm
The back office confirms the deal with the counterparty as soon as practicable. Every contract, confirmation and advice carries the clause that it is subject to the rules and regulations of FEDAI.
- 4
Settle
Funds move through nostro accounts on the value date. Interbank forwards settle through CCIL's guaranteed forex forward segment, which FEDAI requires member banks dealing in forwards to join.
- 5
Reconcile and report
Nostro statements are reconciled against expected flows, and positions and deals are reported to RBI and the trade repository as prescribed.
Market hours, late deals and broker rules. No signup.
Rules on Brokers, Platforms and Late Payment
- Exchange brokers (voice)
- Accredited by FEDAI. A broker acts only on a dealer's instructions, cannot deal on its own account or hold a position, and no contract is made with a broker as principal.
- Electronic trading platforms
- Multi-bank portals and order-matching systems need RBI authorisation. FEDAI stopped accrediting them from 5 October 2018.
- Brokerage
- Dealers do not pass brokerage bills for payment or nominate brokers, and no AD pays brokerage or fees to another bank's employees.
- Late delivery of funds
- The seller bank pays interest for each day of delay at 2% over the overnight benchmark of the currency (for INR, FBIL MIBOR). The buyer bank should claim within 15 working business days of the due date.
Late Deals and After-Hours Dealing
Under the FEDAI Addendum, a late deal slip goes immediately to an official unconnected with the dealer. No dealer handles deals after normal hours unless bank management has authorised it, and records such as electronic messages and rate charts are kept for those deals. Deals concluded through brokers outside normal hours are confirmed immediately by both sides.
How CCFE Tests This
Questions here are rule recall: market hours, who receives a late deal slip, which body accredits brokers versus platforms, and the interest rate and claim window for delayed settlement. The trap is choosing the plausible-sounding person (the chief dealer, the broker) instead of the rule's answer: someone unconnected with dealing. Read the options for who is independent of the trade.
FAQs
What are forex market hours in India?expand_more
Under FEDAI Rule 1, normal market hours for onshore foreign currency/INR deals are 9 a.m. to 5 p.m. IST on working days. Banks may deal beyond these hours but must keep within their overnight open position limit throughout.
What is the difference between front office and back office in a bank's treasury?expand_more
The front office (dealers) executes deals and runs positions; the back office confirms, settles and accounts for them. The mid office monitors risk and limits independently of both.
What is a late deal in forex dealing?expand_more
A deal concluded after the back office has closed recording for the day. It is marked as late, included in that day's position, and the slip goes immediately to an official unconnected with the dealer.
Who accredits forex brokers in India?expand_more
FEDAI accredits voice exchange brokers. Electronic trading platforms need authorisation from RBI.
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