Liquidity

Liquidity
The Bank for International Settlements (BIS) is an international organization which fosters international monetary and financial cooperation and serves as a bank for central banks. Established on 17 May 1930, the BIS is the world’s oldest international financial organization. The head office is in Basel, Switzerland and there are two representative offices: one in Hong Kong and the other in Mexico City.

Every three years, the BIS coordinates a global central bank survey of foreign exchange (2001, 2004, 2007, 2010, 2013).  Their Triennial Survey reported the following:

Trading in the FX market reached an all-time high of $5.3 trillion per day in April 2013, a 35% increase relative to 2010.

Retail FX trading has since grown quickly. New breakdowns collected in the 2013 Triennial show that retail trading accounted for 3.5% and 3.8% of total and spot turnover, respectively. The largest retail volumes in absolute terms are in the United States and Japan. That said, Japan, which has a very active retail segment, is clearly biggest in spot.  In April 2013, retail trading in Japan accounted for 10% and 19% of total and spot, respectively.

  • With such enormous volume, positions can be opened and closed in seconds.  The high volume also results in fair prices and narrow spreads. Such volume also provides a ‘level playing field.’ No one participant or even institution can completely control the long term direction of the market.

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