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Insights into foreign exchange markets

According to 2015 statistics, the over 3.5 trillion pounds is exchanged on the foreign exchange markets. To describe the magnitude of the volume, a weeks’ worth of trade can be equated to a years’ worth of trade in physical goods worldwide. The best forex platforms operate round the clock; however, 40 percent of all activity takes place in London. Traders prefer London due to its central position in the time zone. Dealers in Hong Kong prefer to conduct their trading in London, which is then transmitted to New York before ending at the Asian time zone.
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Where Does Trading Take Place?

No other form of trading can rival the currency trading markets. Dealers are ever vigil trading among themselves as they witness the price flashes that appear on trading terminals. To simply describe what happens, a price of one currency is set up against another. The mainly traded currencies are the dollar and the euro, yen, and dollar, and the dollar and sterling. In the financial circles, some of these currencies have even been given nicknames. For instance, the sterling pound at times may be referred to as cable. This nickname was derived from the laying of the 1858 cable across the Atlantic that resulted in improved communications between the US and the UK. The Canadian dollar is given the name Lonnie, borrowed from the bird. Market dealers trade in millions or billions depending on their size and financial capability. This trading brings about the term yards.

Why Is It So Significant?

The shift in currency prices affect millions of people across the globe. For instance, car manufacturers, tourists, exporters, and much more are all affected.

How Do The Traders Use This To Their Advantage?

When the markets close, there remains uncertainty on what is the most suitable closing price within the currency markets. However, the penalty imposed on five banks in November 2014, outlined that 1.15 p.m. and 4 p.m. at the times when the price is fixed. A great deal of emphasis is laid to the 4 p.m. fix as it arrives at a 60-second trading period. Some customers give their banks the authority to engage in trading after 4 p.m. If these banks know the trading positions that their rivals have taken, they can calculate the price fix their rivals will settle at. Through discreet chatrooms, the traders exchanged information on client orders, influencing the price. The FCA unraveled this malpractice and penalized the culprits accordingly.

What Was The Effect Of The Scandal?

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This interest rate rigging scandal brought more focus and scrutiny in all markets. The manipulation process differed in other markets. One of the bodies charged with clamping down on dubious market trading practices are the central banks. As of 2017, they were to arrive at a global code of conduct touching on currency traders. Most of the scandals that have been unraveled involved price rigging and was perpetuated by some of the world’s largest banks. This resulted in the issuing of heavy multibillion fines in penalties.