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Foreign Exchange Dealing Room - Essay Example

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The foreign exchange is the value of the currency of one country determined in the currency of another country. It can also be defined as the relative price of two different currencies.
"The foreign exchange market is not a physical institution where the traders meet, transactions are made by telephone and computer rather than face to face" ( Winters Alan, 1991).
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Foreign Exchange Dealing Room
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Foreign Exchange Dealing Room

According to the world- wide central banking organization which is the Bank for International Settlements, the amount of daily trading done in the forex market is more than three trillion US Dollars. Thus the trading amount is so much that it is much larger than all of the US stock markets taken together. Here, trading from the whole world is done with or without the involvement of hard cash.
The trading begins in Sydney everyday, and moves first to Tokyo followed by London and then New York as the business day start in every financial sector. The exchange rates are shown around the world continuously on the computer.
The trading takes place when any trader quotes a price for any currency on his machine, and then anyone in the word willing to trade at that particular price can reply to that message and trade. Thus the buyer and sellers can be from any country and virtually trade with other without being present at any particular. The trading takes place between three continents which makes it possible to react or change any decision by any trader regarding his trading activity any event or activity. The value of a particular currency relative to other currencies is influenced by many factors but the main factor affecting it is pure supply and demand of the market. If the demand rises or supply falls, it results in price rise or price fall respectively.

Its organization consists of two tiers namely the retail tier and the wholesale tier.
In the retail tier, trading in forex is done by the small agents whereas in the wholesale tier, the dealings between dispersed and diverse banks and big financial institutions , multinational corporations take place.

In the forex market, the traders and the individuals have different access levels unlike the stock market, where every client can access the same price of stocks like the other participants or individuals. Whereas in the forex market, on the top level, there is the biggest investment banking firms like Citi and Deutsche Bank. At this level, where the difference between ... Read More
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