Foreign exchange market structure, players and evolution

Michael King, Carol Osler and Dagfinn Rime ()
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Carol Osler: Brandeis International Business School, Brandeis University

No 2011/10, Working Paper from Norges Bank

Abstract: Electronic trading has transformed foreign exchange markets over the past decade, and the pace of innovation only accelerates. This formerly opaque market is now fairly transparent and transaction costs are only a fraction of their former level. Entirely new agents have joined the fray, including retail and high-frequency traders, while foreign exchange trading volumes have tripled. Market concentration among dealers has risen reflecting the heavy investments in technology. Undeterred, some new non-bank market participants have begun to make markets, challenging the traditional foreign exchange dealers on their own turf. This paper outlines the players in this market and the structure of their interactions. It also presents new evidence on how that structure has changed over the past two decades. Throughout, it highlights issues relevant to exchange rate modelling.

Keywords: exchange rates; algorithmic trading; market microstructure; electronic trading; high frequency trading (search for similar items in EconPapers)
JEL-codes: C42 C82 F31 G12 G15 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2011-08-14
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2011_10

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