Monday, October 12, 2009,
Ashok Niroula
Forex
From the contraction of the words Foreign Exchange, Forex is the nickname given to the universal exchange market, where currencies are traded against each other, exchange rates that vary continuously.
Economic Importance
This global market, which is essentially interchange is the second market of the world in terms of overall volume, behind the interest rates. It is nevertheless the most concentrated and the first for the liquidity of the most treaties, such as the euro / dollar.
To give an idea of liquidity in circulation, the daily volume of trade in 2004, 1 900 billion U.S. dollar, namely:
600 billion in spot transactions and 1 300 billion in futures almost solely in transactions over the counter, according to the three-year study of the Bank for International Settlements (BIS).
Transaction volume, were 53% between banks;
33% between a bank and a fund manager or a non-bank financial institutions;
and finally to 14% between a bank and a non-financial.
In every major bank, the operators (the traders) are the 3 × 8, though generally in different locations. A team based in Asia or Australia succeeds another located in Europe and a third located in North America, and so on.
However, despite the global nature and the release schedule between continents, a large (31% of total volume, according to the BIS) of market activity is still physically located in London.
The foreign exchange market has existed in its present form, called floating exchange rate regime since March 1973 and the abandonment of fixed exchange rates of various currencies against the dollar standard Bretton Woods in 1944.
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