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Major centres of foreign exchange

8 Largest Forex Trading Centers in the World

1. United Kingdom – The UK and its financial center of London participate in the largest percentage of overall global forex daily trading volume of any geographical location.

UK daily trading volume increased from 35 percent in 2007 to a total of 37 percent of the world’s overall trading volume in 2010,.

Daily trading volume rose by just about 25 percent since 2007 when dollar volume equaled $1,483 billion to 2010 when volume stood at $1,854 billion per day.

The number one on the financial centres list is London, with a bit more than 40% of the total daily trading volume.

London has held the first place for several years and it doesn’t look like it will lose it any time soon as its share is much higher than anyone else is on the list.

2. United States – The United States comes in second in daily trading volume and is the largest country on the list with over 300 million people.

o The second financial centre on the list is situated on the other side of the Atlantic.

o New York recorded a daily trading volume of almost 19%, which is one percentage point more than in 2010.

3. Singapore – Singapore is up next with a total of 5 percent of the world’s daily forex trading volume.

This small country of roughly 5 million people averaged $266 billion of total daily volume in 2010.

This was an increase from a total of $242 billion in 2007 which accounted for 6 percent of the overall global forex trade.

Financial Capital: SingaporeAverage Daily Trading Volume: $266 billionPercentage of Daily Global Forex Volume: 5 %

4. Japan – Japan is the third-largest forex trading center with a total of 6 percent of global foreign exchange turnover taking place in this country of 128 million people.

Japan also amounted to 6 percent of the global turnover in 2007 following an 8 percent share in 2004.

Total dollar amount of trading surged by over 20 percent from 250 billion in 2007 to a total of 312 billion in 2010.

o Japan lost one position when compared to the previous survey and let gave up third place to Singapore.

o The volume of transactions of the financial centre placed in Tokyo dropped from 6.2% in 2010 to 5.6% in 2013.

5. Hong Kong – Hong Kong follows Switzerland as the sixth largest trading center in 2010 with approximately 5 percent of forex daily trade volume.

This is an increase from 4 percent in 2007 for this city-state on the southern coast of China which has an estimated population of 7 million people.

Hong Kong’s total daily volume averaged $238 billion in 2010 which was over a 30 percent increase from 2007.

The transaction volume fell in Hong Kong as well, from 4.7% in 2010 to 4.1% in 2013.

However it holds the fifth position of the largest Forex Trading centres in the world.

Hong Kong gained one position when compared to the previous BIS survey, overtaking Switzerland.

6. Switzerland –

Switzerland was the fifth-largest forex trading center in 2010 with 5 percent of the total global volume which was small a decrease from 2007 when it accounted for 6 percent of daily volume.

This European country of roughly 8 million people is famous for its banking sector and is one of the richest countries in the world on a GDP per capita basis.

Total daily volume increased to $263 billion in 2010 from a total of $254 billion in 2007.

Switzerland like Hong Kong and Japan has also seen its transactions volume decrease.

Data showed a fall from 4.9% in 2010 to 3.2% in 2013. Moreover, Switzerland lost one position in the ranking.

7. Australia – Australia is next on the list with a 4 percent share of total forex daily volume which matches its 2007 volume share.

o At the bottom of our list we find the country that opens the weekly session. Australia also lost some points when compared to 2010, from 3.8% to 2.7% in 2013.

Financial Capital: Sydney

8. France – Number eight on our list with right around a 3 percent share of the daily forex trading volume is France with its financial center of Paris.

France also amounted to 3 percent of the daily global forex trade in 2007 and saw its daily total volume rise by roughly 20 percent from a total of $127 billion in 2007 to a total of $152 billion in 2010.

Financial Capital: ParisAverage Daily Trading Volume: $152 billionPercentage of Daily Global Forex Volume: 3 %

Interbank Market

DEFINITION

The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties.

Interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts.

The interbank market is an important segment ofthe foreign exchange market. It is a wholesalemarket through which most currency transactionsare channeled. It is mainly used for trading amongbankers.

The three main constituents of the interforeigncurrency options are regulated in the United Statesand trade on the Philadelphia Stock Exchange.Further, in the U.S., the Federal Reserve Bankpublishes closing spot prices on a daily basis.

Bank markets are

spot market

forward market

SWIFT (Society for World-Wide Interbank Financial Telecommunications)

The interbank market is unregulated and decentralized. There is no specific location or exchange where these currency transactions take place.

CUSTOMER MARKETS

Customer market" is a term for the portion of available customers who currently patronize a business, usually for a product or service. Most frequently used in business marketing, it can sometimes be called the market or customer base for a business.

This group of customers can grow and shrink due to changes in the business environment.

Maintaining a stable or growing market ultimately depends on keeping the existing paying customers of the business happy.

Paying consumers choose where they shop and what products they purchase for a variety of reasons.

There are many types of customers in a customer market, including loyal customers, customers who shop at a discount, customers who buy things for fun, and those who shop to browse.

A customer base can also include employees who use the product or service they make, as well as indirect customers who use the product or service although someone else purchased it at the store.

Types of Foreign Exchange Markets

Foreign exchange markets exist to allow businessowners to purchase currency in another country sothey can do business in that country.

The "FX" market, also called the Forex market, is aworldwide network of currency traders who workaround the clock to complete these transactions, andtheir work drives the exchange rate for currenciesaround the world.

Spot Market

These are the quickest transactions involving currency in foreign markets. These transactions involve immediate payment at the current exchange rate, which is also called the spot rate. The Federal Reserve says the spot market accounts

for one-third of all currency exchange, and tradesusually take place within two days of the agreement.

This does leave the traders open to the volatility ofthe currency market, which can raise or lower theprice between the agreement and the trade.

Futures Market

These transactions involve future payment andfuture delivery at an agreed exchange rate, alsocalled the future rate.

These contracts are standardized, which meansthe elements of the agreement are set and non-negotiable.

It also takes the volatility of the currency market,specifically the spot market, out of the equation.

These are popular among traders who makelarge currency transactions and are seeking asteady return on their investments.

Forward Market

These transactions are identical to the Futures Marketexcept for one important difference---the terms arenegotiable between the two parties. This way, the termscan be negotiated and tailored to the needs of theparticipants.

It allows for more flexibility.

Forward market involves a currency swap, where twoentities swap currency for an agreed-upon amount of time,and then return the currency at the end of the contract.

There are approximately five different types of entities thatuse the foreign exchange markets on a daily basis.

Commercial banks are the leaders in this market and arethe main source of currency transactions.

Traditional users refer to entities that do businessacross national borders.

Participants

Central banks are the official players in this market,and each country has a central bank to manage its moneysupply.

Brokers work as go-betweens for banks, typically duringlarge transactions.

And, traders and speculators work to take advantageof short-term trends in the market.

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