FT Guide to Banking

23

Foreign exchange markets

Foreign exchange (forex or FX) markets developed thousands of years ago in response to the growth of international trade. Today most of that trading is carried out by the FX departments of major banks, and it is a colossal amount each day – around $4,000bn. Actual import and export trading forms a tiny percentage of this figure. World exports are about $16,000bn per year, equating to a mere $44bn per day, about 1% of the amount traded on the FX markets.

This chapter looks at the foreign exchange markets from a number of angles. First, there is a description of the different types of FX markets, from simple spot ‘immediate’ delivery of one currency for another (immediate means within two days), to options which ...