FX Market Size

The foreign exchange market is the largest financial market in the world and also the most liquid. There are many types of forex trader, including governments, multinational corporations, national companies, speculators, central banks, private banks and retail investors. Financial institutions of all types will generally have some activity on the forex markets.

The average daily turnover in forex has increased by around four times since the early 1990s and now stands at around $4 trillion daily. Out of this figure, $1.5 trillion is dealt in spot transactions while the remaining $2.5 trillion accounts for swaps, forwards, futures and other forex transaction types. While trading has no direct central base, as stock markets do, London is the epicentre for forex trading world wide, accounting for over a third of total turnover. Second is New York City with around 18% of daily turnover on average and Tokyo is the third busiest centre for forex trading, accounting for approximately 6% of the total.

Futures and options now account for a total $166 billion, as of April 2010, while currency exchanges and foreign currency counters account for 4% of annual forex turnover. Though most developed countries permit forex trading, there are some who do not. For example, Islamic law prevents some forms of currency exchange.

Regarding financial institutions, the Deutsche Bank accounts for 18% of all forex turnover by financial institutions, with Swiss bank, UBS AG and British bank, Barclays Capital, accounting for around 11% each.