I heard tale of a massive thing ($20 billion has been the amount I heard) that utilized forex hedge funds to perform fundamental currency exchange (EUR to USD and vice versa without attempting to exchange it) when required. I am left scratching my head. Can someone who has been in the industry as a huge player (calling you brokers or bank employees) help answer several questions?
1) Why would anyone take this route rather than functioning together with their bank? Some reasons I've thought of could be that funds may get better rates by having the capability to store the trade or funds offer solitude etc..
2) Hedge Funds typically require that funds be deposited with them along with the pulled from them. This means that pass the funds bank out and in. Does anyone know how they manage this? Do funds keep bank accounts in different currencies to manage deposits and withdrawals before the money goes to the broker? Or do prime brokers have the ability to take the money directly from the client bypassing the fund's bank and also also the need to apply exchange rates until you're ready to?
3) Just how do amounts like this get handled? I realize the forex market is liquid but can this much be rid without matter? What exactly does it take and what sorts of brokers can manage it? That's a large amount of money (to me anyhow). Brokers never talk about account maximums.
4) What kind of commission would be fair about some thing like this? Or rather what would the transaction that is fom be expected by this participant both in terms of commission and slippage? Typically hedge funds earn money but I imagine a deal like that woule be short term, not involve profit per se.
To put this all another way, in case you're a hedge fund what do you have to have in place as infrastructure and then how can it work mechanically to deal with a $20bio currency exchange?