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Why Trade Foreign
Exchange?
How technology drove the
development of the interbank market
With the banks paying fortunes in brokerage and Reuters,
a group decided to create an Electronic Broking System
or EBS – by the late 90s, voice broking had been
replaced with the ’machine’ – and over 90% of all
business was transacted over it. The system had the
advantage of being able to automatically monitor credit
limits between banks, and to allow
straight-through-processing (STP) of deal information to
the back office.
The EBS screen layout is the for runner of many
margin broking systems we have today, with a
dealable rate on screen that the trader could
click on, an audit trail of his deals, his
credit limits and other market information. The
system became popular with a new breed of
‘Nintendo kid’ traders who were fast with the
keyboard, and overall market liquidity became
absorbed into the machine.
With the demise of the voice brokers
and the rise of electronic trading, the
old market way of trading from the
‘feel’ of the markets was lost, and
technical analysis of markets became
crucial to determine direction and
support and resistance levels.
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Recent web portal developments
including FX All and Currenex
have taken electronic trading
into companies as well as banks,
and the modern market is as much
concerned with efficiency of
trading as the levels and
direction of markets. In the
future one click will deal,
confirm and move the settlement
amounts instantly on the same
day.
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True interconnectivity has arrived, with banks
supplying price feeds to web portals and margin
brokers, who pass on the price to companies and
retail traders with an extra margin added.
Electronic connection and the internet has
enabled true transparency and competition, so
what was once interbank pricing is now available
to the retail trader.
Foreign
Exchange Training by
www.fxmoneymap.co.uk
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