Buying the Base
Suppose that a caller wishes to buy the base currency from the market maker. It accepts the quoted offer price by saying that it will purchase USD 100,000 against CHF at a cost of CHF 0.8860 for each USD 1.
By paying for the USD 100,000 in CHF, the caller is selling CHF to the market maker. The market maker is selling the caller USD 100,000 in exchange for CHF. As a consequence, the market maker is purchasing CHF.
Selling the Base
Conversely, the caller might sell the base currency and be paid for it in the variable currency. It accepts the quoted price by saying that it will sell USD 100,000 against CHF at a rate of CHF 0.8857 for each USD 1. This is the bid price of the quote – the price that the market maker will buy USD, the base currency, and pay for it in CHF, the variable currency. By paying for it in CHF, the market maker is selling CHF.

Review Question

A customer of a bank wants to sell EUR 50,000 against NOK spot. At which price will it trade?
  1. 8.2445
  2. 8.2480
  3. 8.2510