The Forex (foreign exchange market) is the market on which the so-called convertible currencies (currency pair) are exchanged against each other at exchange rates that vary constantly. We can not exchange currencies but we buy a digital currency eur-usd that must then resell in euros. No conversion possible from the euro to the dollar. Forex is designed to bet the rise or fall of one currency against another.
This market, global by nature, is the second largest financial market in the world in terms of volume, behind that of interest rates. It is nevertheless the most concentrated and the first for the liquidity of the most traded products, like the euro / dollar pair: the average daily volume of trade was 5 100 billion US dollars in 2016, a 6% decrease in the volume compared to 20131. All figures that follow are also derived from the triennial survey conducted on the foreign exchange market by the Bank for International Settlements (BIS):
This average volume breaks down as follows:
- $ 2,460 billion in swaps;
- $ 1,652 billion in cash transactions;
- 954 billion in futures, options and other financial products.
Volume transactions were:
- 51% between financial institutions other than brokerage firms;
- 42% between a bank and a brokerage firm; and finally for 7% between a bank and a non-financial entity such as a company or a government.
To ensure coverage of their customers, 24 hours a day, each major bank has a trading room on three continents. A team located in Asia or Australia succeeds another located in Europe and finally a third located in North America. Thus, the foreign exchange market is open from 10pm GMT on Sunday, at the opening of the Sydney session, at 10pm GMT on Friday at the close of the New York 2 meeting.
Nevertheless, despite this global nature and time spread between continents, a significant portion of market activity remains physically located in London.
According to the latest BIS report in 2016, foreign exchange trading has increased by 54% since 2007 to reach $ 5.1 trillion. The United Kingdom and the United States remain at the forefront of trade, with 36.9% market share for London and 19.5% for the United States in 2016. France is far behind with only 2 , 8% of world trade, against 3% in 2010.
The US Dollar remains the most traded currency, being present in 87.6% of transactions in 2016 compared to 87% in 2013. The Euro concerns 31.3% of transactions against 33.4% in 2013 and the Yen's share also fell from 23.1 to 21.6% from 2013 to 2016. In exchange, the share of emerging market currencies increased from 18.8% to 21.2% and that of the British Pound from 11.8% to 12.8%. % over the same period, again according to BIS figures.
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