Foreign Exchange Market

From Wikipedia

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small speculators) are a small part of this market. They may only participate indirectly through brokers or banks and may be targets of forex scams.

Contents Market size and liquidity Trading characteristics Market participants Banks Commercial Companies Central Banks Investment Management Firms Hedge Funds Retail Forex Brokers Speculation Reference See also External links

Market size and liquidity

The foreign exchange market is unique because of:

• its trading volume,
• the extreme liquidity of the market,
• the large number of, and variety of, traders in the market,
• its geographical dispersion,
• its long trading hours - 24 hours a day (except on weekends).
• the variety of factors that affect exchange rates,

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004

• $600 billion spot
• $1,300 billion in derivatives, ie
  • $200 billion in outright forwards
  • $1,000 billion in forex swaps
  • $100 billion in FX options.

Exchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts. Forex futures volume has grown rapidly in recent years, but only accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).