The New Generation of Forex Brokering and Trading

A great challenge to the Forex market has been the emerging technological presence in the field of investing.

Internet-based trading platforms are quickly (if they haven’t already) replacing brokers and other middlemen on the Forex market. Electronic brokers and electronic brokerage systems and market news sources like Reuters are providing computer platforms where bank dealers and traders can interface with the market through a computer (or EBS, electronic brokering system) without the need for a human broker. This increases the speed, and efficiency, of transactions, and also provides instantaneous prices and vital information, all the while cutting costs for most participants in the Forex market. Unfortunately, though, this has led to the human element of the brokerage process to be all but wiped extinct.

Structure of the Foreign Exchange Market

The Forex market can be separated into three main regions: Australasia (Australia and Asia), Europe, and North America. In each region there are several major financial centers. For example, the major centers in Europe are London, Paris, Frankfurt and Zurich. Banks, investment firms, fund managers and dealers all conduct Forex trading for themselves and their clients in each of these markets.

The opening of the Forex market begins with the Australasia region, followed by Europe and then North America. As the markets of one region close, another opens, or has already opened, and continues to trade in the Forex market. At various times throughout the day, the markets overlap. In these hours of overlapping, some of the most active trading occurs. Essentially, the Forex is a 24 hour market, as trading occurs across borders with little attention paid to time and space. Any trader in any region can trade at any given time. For example, if a trader in Seattle decides to trade currency at 2 a.m., they will be unable to do so through Forex dealers located in North America but they can use dealers in Europe or Australasia to make as many trades as they want. In summation, there is no point during the trading week that a participant in the Forex market can’t potentially make a currency trade.