Introduction
The following facts and figures relate to the
foreign exchange market. Much of the information is drawn from the 2010 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2010. 53 central banks and monetary authorities participated in the survey, collecting informa
tion from 1,309 market participants.
Excerpt from the BIS:
"The 2010 triennial survey shows another significant increase in global foreign exchange market activity since the last survey in 2007, following the unprecedented rise in activity between 2004 and 2007. Global foreign exchange market turnover was 20% higher in April 2010 than in April 2007. This increase brought average daily turnover to $4.0 trillion (from $3.3 trillion) at current exchange rates...The higher global foreign exchange market turnover in 2010 is largely due to the increased
trading activity of “other financial institutions” – a category that includes nonreporting banks, hedge funds, pension funds, mutual funds, insurance companies and central banks, among others. Turnover by this category grew by 42%, increasing to $1.9 trillion in April 2010 from $1.3 trillion in April 2007." - BIS
Structure
Decentralised 'interbank' market
Main participants: Central Banks, commercial and investment banks, hedge funds, corporations & private speculators
The free-floating currency system arose from the collapse of the Bretton Woods agreement in 1971
Online trading began in the mid to late 1990's
Trading Hours
24 hour market
Sunday 5pm EST through Friday 4pm EST.
Trading begins in the Asia-Pacific region followed by the Middle East, Europe, and America
Size
One of the largest financial markets in the world
$4.0 trillion average daily turnover, equivalent to:
More than 12 times the average daily turnover of global equity markets1
More than 50 times the average daily turnover of the NYSE2
More than $500 a day for every man, woman, and child on earth3
An annual turnover more than 10 times world GDP4
The spot market accounts for over one-third of daily turnover
1. About $320 billion - World Federation of Exchanges aggregate 2009
2. About $70 billion - World Federation of Exchanges 2009
3. Based on world population of 6.9 billion - US Census Bureau
4. About $58 trillion - World Bank 2009.
Major Markets
The US & UK markets account for over 50% of daily turnover
Major markets: London, New York, Tokyo
Trading activity is heaviest when major markets overlap5
Nearly two-thirds of NY activity occurs in the morning hours while European markets are open6
5. The Foreign Exchange Market in the United States - NY Federal Reserve
6. The Foreign Exchange Market in the United States - NY Federal Reserve
Average Daily Turnover by Geographic Location
Source: BIS Triennial Survey 2010
Concentration in the Banking Industry
9 banks account for 75% of turnover in the U.K.
7 banks account for 75% of turnover in the U.S.
2 banks account for 75% of turnover in Switzerland
8 banks account for 75% of turnover in Japan
Source: BIS Triennial Survey 2010
Technical Analysis
Commonly used technical indicators:
Moving averages
RSI
Fibonacci retracements
Stochastics
MACD
Momentum
Bollinger bands
Pivot point
Elliott Wave
Currencies
The US dollar is involved in over 80% of all foreign exchange transactions, equivalent to over US$3.3 trillion per day
Currency Codes
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar (Sometimes referred to as the "Loonie")
AUD = Australian Dollar
NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Source: BIS Triennial Survey 2010
Currency Pairs
Majors: EUR/USD (Euro-Dollar), USD/JPY, GBP/USD - (commonly referred to as the "Cable"), USD/CHF
Dollar bloc: USD/CAD, AUD/USD, NZD/USD - (commonly referred to as the "Kiwi")
Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
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