Foreign Exchange
A Reuters guide to Foreign Exchange
Find out about how Reuters can help you
Currencies worth more than $1 trillion are traded daily in the fast-paced global foreign exchange market. Foreign exchange transactions are in the form of spot (cash), forwards, futures and options.
Although most foreign exchange trading is between banks, other participants such as hedge funds and asset managers are entering the market.
While political and economic events influence levels of foreign exchange trading, new technology and structural shifts within the industry drive changes in the way the foreign exchange market operates.
Foreign exchange trading volumes are rising after several years of decline. The introduction of the euro and banking consolidation both contributed to the trading downturn. But recent price volatility and the arrival of new participants in the market have led to increased levels of foreign exchange activity.
Reuters revolutionised foreign exchange trading when it pioneered an electronic marketplace in the early 1980s, creating greater transparency and liquidity. Money, unlike other financial markets of the time, had no physical market place. Trading was conducted over the telephone or by telex. Reuters innovation allowed traders to complete deals on screen in seconds.
When the deployment of internet technologies became widespread, banks had a cost-effective means of reaching their own institutional and corporate treasury customers who had begun to play a more active role in the foreign exchange and money markets. The foreign exchange business started to become more customer-driven and less centred on proprietary trading which had previously accounted for the bulk of banks' foreign exchange activity.
Today, largely as a result of intense competition, only global banks have the scope to offer full foreign exchange services. Smaller banks are now becoming their customers in order to service their own customers. This trend is generating a need for global banks to provide their customers with electronic dealing, order management and information services.
Reuters has a long history of helping trading communities in the foreign exchange and money markets operate more effectively. In addition to information services, Reuters provides secure trading networks. It offers both a conversational trading application and a matching service which enables traders to match bids and offers anonymously and automatically. Reuters also provides a trading solution for banks who want to build comprehensive electronic sales channels to their own customers.
