Though Forex is not receiving the same attention as bonds or stocks in the trading market, Foreign exchange is still considered as the largest money market all over the world. It has an estimated amount of $4 trillion transactions that are executed on a daily basis. In this market, traders will be permitted to buy and then sell the currency or money.
What is Forex?
Forex is a short term for foreign exchange. However, the asset classes that we are using are currencies. The foreign exchange is the process of changing a currency of a distinct country into the currency of another country for commerce, tourism or various other reasons. Since Foreign Exchange is a global market, traders will have to transact with other countries using their currency. Before the introduction of the internet, currency exchange is pretty limited within the interbank activities. Little by little, the bank has introduced their own propriety desk when trading their account which is followed by the multi-national company. With the introduction of the internet, it has created a market that is targeting the individual traders and provides them convenient access to the Foreign exchange. That is basically the answer to the question ‘what is forex’.
The Comprehensive History of Forex
In the year 1970, currency trading is pretty much limited to the requirements of large companies that are doing business in various countries. Trading for speculative and investment purposes was not widely accepted, and trading is only occurring in individual stocks and commodities. The history of Forex began before the conclusion of World War II. Allied Nations realize the need to create a financial system that will replace the Gold Standard which was already abandoned during that time. In the month of July 1944, about 700 representatives of the Allied Nations gathered in the Bretton Woods to deliberate the system that we now refer to as Bretton Woods System. With the inception of this system, it led to the formation of a fixed exchange rate that will play a major role in Forex, US dollar will be replacing the abandoned gold standard system and the 3 international monetary agencies. By the year 1971, President Nixon ended the exchange of US Dollar to gold.
Fintech in Forex
Fintech firms played a crucial role in the industry of Forex. The traditional type of Fintech will serve as a facilitator and there are others who are acting as a disruptor. Fintech’s role in Forex can be divided into 4 categories; platform, data analytics, software, and payment. Global Fintech in Forex is gradually altering and changing the process. Some of them will provide a platform that provides a comprehensive solution which incorporates customized rate, automated transaction, control panel, and on-demand reports.
The future of Forex will be based on automation. It is believed that the computer will slowly replace the human traders in Forex. This will immensely reduce the overall cost associated with trading.