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Online for growth

Posted: 22 February 2010 | FX-MM | No comments yet

Immediately after the Second World War, which left much of Europe’s economy landscape in tatters, the country that emerged with the fewest scars was USA. In 1944 after Brenton Woods Accord and IMF, the US dollar become the reserve currency for all capitalist countries of the world and the rest of the currencies, gold and crude oil were compared against it. This, we can identify, was the beginning of foreign exchange market. FX&MM charts the seemingly inexorable rise of the incredibly resilient FX market, to the point where – according to the Fed Reserve’s latest foreign exchange volume figures pertaining to the October 2009 reporting period – average daily volume in total over-the-counter foreign exchange instruments for North American alone saw a 28.1 percent rise to $675 billion.

Immediately after the Second World War, which left much of Europe's economy landscape in tatters, the country that emerged with the fewest scars was USA. In 1944 after Brenton Woods Accord and IMF, the US dollar become the reserve currency for all capitalist countries of the world and the rest of the currencies, gold and crude oil were compared against it. This, we can identify, was the beginning of foreign exchange market. FX&MM charts the seemingly inexorable rise of the incredibly resilient FX market, to the point where - according to the Fed Reserve's latest foreign exchange volume figures pertaining to the October 2009 reporting period - average daily volume in total over-the-counter foreign exchange instruments for North American alone saw a 28.1 percent rise to $675 billion.

Immediately after the Second World War, which left much of Europe’s economy landscape in tatters, the country that emerged with the fewest scars was USA. In 1944 after Brenton Woods Accord and IMF, the US dollar become the reserve currency for all capitalist countries of the world and the rest of the currencies, gold and crude oil were compared against it. This, we can identify, was the beginning of foreign exchange market. FX&MM charts the seemingly inexorable rise of the incredibly resilient FX market, to the point where – according to the Fed Reserve’s latest foreign exchange volume figures pertaining to the October 2009 reporting period – average daily volume in total over-the-counter foreign exchange instruments for North American alone saw a 28.1 percent rise to $675 billion.

These findings, though eye-popping enough, in fact represent a reduction when contrasted against the same period in 2008, which reached $762 billion – the highest average daily volume reported in the Federal Reserve Foreign Exchange Committee survey’s five-year history. Nonetheless, the rebound since the April 2009 survey – occurring as it did across all instrument types, counterparty types, and execution methods as well as across most currency pairs – amply demonstrates the resilience of this marketplace. As Jeff Feig, Chair of the Foreign Exchange Committee, comments: “Throughout the challenging market environment in the third and fourth quarters of 2008, the FX market remained active, liquid, and robust. While there was an understandable drop in volumes in early 2009 – as counterparties and clients contended with lower asset levels and reassessed their market, credit, and other risks — we are not surprised that market participants have returned to actively managing their exposures in the FX markets and that volumes have continued to grow.”

To get a sense of just how this growth referred to by Feig came about, we cast back to the post-WWII era, when for many years only central banks and big financial corporations had access to international currency trading. However, after free currency trade became accessible to individual traders around the nineteen-seventies, forex experienced a dynamic burst of daily turnover, reaching $5billion in 1977, which – although a mere decade later had ballooned to $600billions – paled utterly in contrast to the $1 trillion high of September 1992.

KEEPING UP WITH THE PACE

Fast-forward – quite literally – to our technologically fast-forwarded internet world of ultra low latency, unlimited market information and algorithmic trading portals has allowed countless individual investors, along with small and medium corporations, to gain profits from the exchange markets hitherto undreamed of. Hence, today’s FX market has reached a daily trading turnover of $1.5 trillion of turnover, which in some ways mirrors the expansion, globally, of international trade and the prodigious expansion in global finance and investment during recent years, all of which provides fertile ground for growth in foreign exchange trading.

Yet, as we know, technology advances; along with leaps forward in the sophistication of computer software and industry’s tremendous developmental pace.

For view of where we are and an idea as to where does the FX market go from here, FX&MM hears from George Xydas, Director of International Operations at FxPro, one of the leading international companies competing in the forex world and winner of Best Broker Europe 2009 at the Financial Technology Awards.

As to how he perceives the reasons behind the current rude health of the FX retail market and its growth potential, Xydas is unequivocal in his view that the expansion of online forex trading companies, such as FxPro, has led to reduced trading costs and increased investor awareness of the forex market. This, says Xydas, has resulted in greater volumes and market participation. As he explains: “As the world economy emerges from the economic crisis and risk appetite increases, we expect activity in the forex market to increase as well.”

On the all-important aspect of being able to look in the crystal ball and define the future for retail FX, George Xydas believes whole-heartedly that we are set for continued growth. In identifying a number of inter-related trends, Xydas points not only to a growing recognition of currency trading as an alternative investment and as a tool for portfolio diversification by retail traders, and increased availability of investor education on the FX market and trading opportunities, but also – as he says: “There is a much improved access to the forex market thanks to rising global broadband and wireless penetration. Related to the internet growth is the surge in FX media coverage, as well as FX-related social media in the last few years, including the many online forums, resource sites, independent broker reviews, and chat rooms, and these have all helped contribute to a growing interest in retail trading.”

Xydas goes on to pinpoint certain other important trends, “such as reduced transaction costs and more efficient execution have also helped the market grow,” he says, “as well as comfort that retail traders can take by working with brokers that are properly regulated and authorised (so the heightened domestic and international regulatory oversight has contributed positively here). Inevitably, too, the expansion of marketing, advertising and other communications efforts by FX players, not least ourselves, has also helped.”

With technology, therefore, forming evermore the overarching determining factor in the next stage of FX’s trajectory, George Xydas highlights a key element in FxPro’s client business development projects being the development of the firm’s website, especially – as he explains – its multiple language domains, and continuing to strengthen and enrich the FxPro services, platforms and conditions for its clients.

“Our goal to is become to world’s preferred FX broker,” insists Xydas, “and we recognise that, in addition to providing highly competitive spreads, leverage and excellent customer service support, we need to deliver value through a productive and user-friendly trading experience. We will also be providing richer and deeper editorial trading content that will benefit traders in terms of understanding the world of FX.”

Xydas is fully aware that mobile platforms have seen massive growth in recent years and leading CFD providers have some sort of mobile application that can be used by their customers for both accessing their accounts and placing actual trades. “While we are pleased already to be providing services for traders on-the-move through platforms tailored for mobiles/PDAs,” says Xydas, “we are delighted to advise that we will soon be launching a free, downloadable platform from the App Store, for those clients of ours who have iPhones.

“Importantly, too, our dealing desk is always looking to add financial instruments that are relevant to the country in which we have a presence. For example, we offer the CAC-40 index on our platform, which is proving very popular with our clients in France.”

In conclusion, and as to his thinking in regard to the evolution of forex over the coming months, George Xydas restates his belief that retail forex trading in particular is set for continued growth as a result of the following trends:

  • growing recognition of currency trading as an alternative investment and as a tool for portfolio diversification by retail traders
  • improved access to the forex market, reduced transaction costs and more efficient execution
  • increased availability of investor education relating to the forex market and trading opportunities
  • expansion of marketing efforts by many leading firms such as FxPro
  • increasing media coverage of the forex market
  • heightened domestic and international regulatory oversight
  • rising global broadband and wireless penetration.

FOR MORE INFORMATION ABOUT FxPro, visit: www.fxpro.com

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