DEVELOPMENT OF FOREX
The purpose of foreign exchange is to foster and facilitate international trade and investment. The FOREX market allows businesses and individuals to convert one currency to another at prevailing exchange rates. For example, suppose an American company wants to import merchandise from a Japanese company. In order to pay for the merchandise the American company has to go to a FOREX dealer, receive yen for dollars, and make their purchase. As economic barriers fall and the world’s economies continues to integrate, trade will keep increasing rapidly and so too will the size of the FOREX market.Because of its high trading volumes, extreme liquidity, and longs hours, the FOREX market is considered the most efficient in the world. Market participants include central banks, large banks, multinational corporations, speculators, hedge funds, and other financial institutions. There is over $4 trillion traded globally every day. London is the center of international foreign exchange, accounting for 35% of the total daily volume. This is more than twice the volume of New York (16%) and several times that of Tokyo (6%).
FOREX IN THE UNITED KINGDOM
There are several reasons why London has come to dominate the international trade in foreign currency. Most important is London’s status as one of the financial capitals of the world. London has the existing infrastructure and market participants required to handle the high volume levels in the FOREX market. Also, the Pound Sterling is the fourth most actively traded currency and one of the strongest and most valuable currencies of world trade.
There are several reasons why London has come to dominate the international trade in foreign currency. Most important is London’s status as one of the financial capitals of the world. London has the existing infrastructure and market participants required to handle the high volume levels in the FOREX market. Also, the Pound Sterling is the fourth most actively traded currency and one of the strongest and most valuable currencies of world trade.
FOREX FUNDAMENTALS
Part of the reason for the vast increase in the daily volume of FOREX trades in the past years is the development of electronic trading. As with all other markets, the FOREX market originally involved “paper trading” between central banks and large financial institutions. Access to market information was limited and prices were delayed. There were also higher transaction costs due to the effort involved in executing a trade. With the advent of electronic trading, the costs of trading have drastically decreased while the accessibility to it has increased substantially. Along with the creation of the trading platform, which allows individual investors to access real time market data and participate in trading activities, these developments paved the way for the huge expansion of the FOREX market.
Part of the reason for the vast increase in the daily volume of FOREX trades in the past years is the development of electronic trading. As with all other markets, the FOREX market originally involved “paper trading” between central banks and large financial institutions. Access to market information was limited and prices were delayed. There were also higher transaction costs due to the effort involved in executing a trade. With the advent of electronic trading, the costs of trading have drastically decreased while the accessibility to it has increased substantially. Along with the creation of the trading platform, which allows individual investors to access real time market data and participate in trading activities, these developments paved the way for the huge expansion of the FOREX market.
FOREX REGULATION IN THE UNITED KINGDOM
The London Foreign Exchange Joint Standing Committee (FX JSC) oversees the FOREX market in the United Kingdom. The FX JSC was set up in 1973 under the auspices of the Bank of England. Its work is aimed at furthering the discussion of ideas regarding the FOREX market and oversight.
The London Foreign Exchange Joint Standing Committee (FX JSC) oversees the FOREX market in the United Kingdom. The FX JSC was set up in 1973 under the auspices of the Bank of England. Its work is aimed at furthering the discussion of ideas regarding the FOREX market and oversight.
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