Technology driven Forex Market
| 18 May 2009
The Foreign Exchange Market Today
The Foreign Exchange market better known as the Forex market is considered to be the single largest financial market in terms of volume transactions composing of the European, Asian and the US markets. Its’ volume thus far exceeds any other markets combined.
Even the New York Stock exchange and the New York Mercantile exchange can not surpass the amount of transactions made by the interbank foreign exchange trading. The markets single trading volume accounts for over 3.5 trillion US dollars daily.
And the biggest trading volume is the European session where it meets Asia and the US trading markets. The Foreign Exchange Market operates as a basic supply and demand model for the worlds’ major currencies as a free market place where institutional banks, corporations, hedge funds, traders and investor / clients meet to buy / sell, hedge, and speculate currencies traded worldwide. Economist as well as analysts and professional traders do regard the Foreign exchange market as the most efficient and free marketplace in the world. A free flowing of price movements are traded every single day, close to 24 hours of continuous daily trades until Friday at the end of business in the US market. And then starts at the beginning week of Sunday in Asia.
The liquidity that it creates and how it best serves all the active participants without the influence of manipulation from external forces and even by government entities makes it the first choice for any alternative form of speculative investment by most investors. The market has no central or physical exchange location such as a pit like the trading in New York and in Chicago. Although, the market exists through the electronically linked network of contributory banks, financial institutions, broker / dealers and where market makers, sophisticated investors, market participants trade the currencies with a newer technology process of electronic trading making it more acceptable and accessible for most independent traders and investor. However, the Reuters dealing system has been considered to be the mother of all foreign exchange transactions ever since the interbank market started.
As early as 1979; the maor participants of the Foreign Exchange Market were limited to the big financial institutions, multinational corporations with overseas financial exposure and internatinal banks dealing with exporters / importers of various goods and services. Meanwhile wealthy investors who has substantial foreign interests have manage to have access to this invaluable market where most transactions were only serviced by bigger banks. The priviledges that these clients enjoy are more price competitive than dealing with the local markets.
Until the middle part of the 90s' where a lot more hedge funds and money managers were paying attention to the liquidity that the foreign exchange market has provided for smaller institutional investments. With the newer technology providing support for online / computer related trading; the boom of local and overseas broker / dealers have mushroomed to a global proportion offering foreign exchange related services. The expotential growth of this Forex market not only tripled in size but grew to the biggest foreign exchange market surpassing trading volumes of major exchanges worldwide and is till growing.
Now even the smallest individual investor through the services provided by the member broker / dealers can invest and trade the Forex market with ease. Some smaller shops / brokers have opened and folded due to the strictest requirements the NFA, CFTC and FSA have imposed. It is important that every would be investor of this market should be able to do research and due diligence before getting involved with it. Although the Foreign Exchange market does provide not only the liquidity of the market but a way for major participants to hedge and so protect their financial investments by using the Forex market for these purposes.
