market

Market size and liquidity
The foreign exchange market is unique because of:
*its trading volume,
*the extreme liquidity of the market,
*the large number of, and variety of, traders in the market,
*its geographical dispersion,
*its long trading hours - 24 hours a day (except on weekends).
*the variety of factors that affect exchange rates,


Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004
*$600 billion spot
*$1,300 billion in derivatives, ie
*$200 billion in outright forwards
*$1,000 billion in forex swaps
*$100 billion in FX options.


The ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually only 1-3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $1,000,000.
These spreads do not apply to retail customers. To individuals, banks will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travellers' cheques.