Forex : By Bestgamespro.com
Foreign exchange market
Forex : The (currency or forex or FX) market exists wherever one currency is traded for another. It
is by far the largest financial market in the world, and includes trading between large banks,
central banks, currency speculators, multinational corporations, governments, and other financial
markets and institutions. The average daily trade in the global forex markets currently exceeds
US$1.9 trillion. Retail traders (individuals) are a small fraction of this market and may only
participate indirectly through brokers or banks.
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 market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).
Average daily global turnover in traditional market transactions totaled $2.7 trillion in April 2006 according to IFSL estimates
based on semi-annual London, New York, Tokyo and Singapore Committee data. Overall turnover, including non-traditional derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This
was more than ten times the size of the combined daily turnover on all the worlds equity markets.
trading increased by 38% between April 2005 and April 2006 and has more than doubled
since 2001. This is largely due to the growing importance of as an asset class and an increase in fund management assets, particularly
of hedge funds and pension funds. The diverse selection of execution venues such as internet
trading platforms has also made it easier for retail traders to trade in the market. 
Because is an OTC market where brokers/dealers negotiate directly with one another, there is no
central exchange or clearing house. The biggest geographic trading centre is the UK, primarily
London, which according to IFSL estimates has increased its share of global turnover in
traditional transactions from 31.3% in April 2004 to 32.4% in April 2006.
The ten most active traders account for almost 73% of trading volume, according to The Wall
Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the
market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between
the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a
market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively
traded pairs of currencies, usually only 0-3 pips. For example, the bid/ask quote of EUR/USD
might be 1.2200/1.2203. Minimum trading size for most deals is usually $100,000.
These spreads might not apply to retail customers at banks, which will routinely mark up the
difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or
travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3
pips wide (i.e. 0.0003). Competition has greatly increased with pip spreads shrinking on the
major pairs to as little as 1 to 2 pips.
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