Online Forex

The foreign exchange market Currency Forex or FX market is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1971s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1972.
The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2008 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 44% between 2007 and 2009. Today, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

Market size and liquidity:

The foreign exchange market is unique because of
· its trading volumes,
· the extreme liquidity of the market,
· its geographical dispersion,
· its long trading hours: 24 hours a day except on weekends (from 24:00 UTC on Sunday until 22:00 UTC Friday),
· the variety of factors that affect exchange rates.
· the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
· the use of leverage
Main foreign exchange market turnover, measured in billions of USD.
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this. This approximately $3.21 trillion in main foreign exchange market turnover was broken down as follows:
· $1.005 trillion in spot transactions
· $362 billion in outright forwards
· $1.714 trillion in foreign exchange swaps
· $120 billion estimated gaps in reporting
Of the $2.98 trillion daily global turnover, trading in London accounted for around $2.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. All these developed countries already have fully convertible capital accounts. Most emerging countries do not permit FX derivative products on their exchanges in view of prevalent controls on the capital accounts. However, a few select emerging countries (e.g., Korea, South Africa, India have already successfully experimented with the currency futures exchanges, despite having some controls on the capital account. FX futures volume has grown rapidly in recent years, and accounts for about 8% of the total foreign exchange market volume, according to The Wall Street Journal Europe In second and third places respectively, trading in New York accounted for 16.8%, and Tokyo accounted for 7.0%. In addition to "traditional" turnover, $2.1 trillion was traded in derivatives. Exchange-traded FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts. Several other developed countries also permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges.