Also called Forex or FX, the foreign exchange market is a place where buyers and sellers exchange currency at a set exchange rate. It is the largest and most liquid market in the world. Note that in order to exchange goods and services across borders and ultimately to immerse in economic activities and trade internationally, it is necessary to exchange currencies. Remember that the exchange of currencies does not date from today.
It should be noted that in 1971, we were already converting gold into US dollars. Nowadays, these exchanges have evolved to become the largest financial market in the world. Every day, new stock market investments are born, which makes it possible to pay close attention to divergence trading in order to better understand the basics of Forex. The daily volume of currency transactions has already reached 6.6 trillion USD in 2020 according to the Bank for International Settlements report. But who controls the foreign exchange market? Keep reading to find out.
Quels sont les traits caractéristiques du marché des changes ?
The forex market highlights a very large number of characteristics. To this end, the latter thus distinguishes itself from other markets because of its many assets, which makes it possible to determine which is the strongest currency in no time. These include in particular:
- Its operation is continuous: i.e. 24 hours a day, 5 days a week,
- La variété des facteurs qui affectent le taux de change,
- La possibilité d’utiliser l’effet de levier,
- Il y a pas d’emplacement physique et est accessible dans le monde,
- Son volume de transaction lui confère le fait d’être le marché le plus liquide au monde.
Qui contrôle le marché des changes?
Le marché des changes est un marché décentralisé qui n’a pas d’emplacement physique spécifique dans lequel un commerçant peut acheter ou vendre les devises. N’étant pas sous contrôle d’une autorité telle qu’un gouvernement ou autre institution internationale, le marché des changes est considéré comme non réglementé. En effet, ce marché fonctionne selon le principe de l’offre et de la demande, sous la direction des banques centrales et des grandes banques commerciales.
This is how 4 major banks engage in the largest foreign exchange transactions and thus have a significant impact on the market. We can cite among others JP Morgan, CITI, Deutsche Bank, and UBS. Currency trading is organized as an over-the-counter or over-the-counter (OTC) market. These currency exchanges can take place directly between two parties with complete discretion without resorting to any official supervision.
Although OTCs have several advantages, especially when using the strongest currency in terms of exchange rates, given their availability, flexibility, and cheaper solutions, the risks should not be ignored either. presented by OTCs. Considering the multitude of currencies, bank accounts, and cross-border payments that are made every day in the world, a kind of system has been put in place. Its purpose is to ensure that international payments are made securely between trusted accounts.
This way, whatever bank or banking service you use to transfer money across borders, you must provide certain information. This will serve to identify the two bank accounts participating in the exchange. The countries in which the accounts are located must share an IBAN code or a SWIFT code… All this is to guard against certain risks related to the foreign exchange market.
Quelles sont les potentielles limites au marché des changes ?
Le marché des changes met en évidence quelques limites qu’il convient de souligner. Nous avons notamment :
- Le manque de transparence
There is no control, the prices are negotiated directly between the buyer and the seller. This means that the prices set are not necessarily the actual prices, the prices offered in the physical store. And the parties only provide the information that they themselves deem necessary.
- Le risque de contrepartie
Given the lack of regulation, exchanges between the buyer and the seller are not supervised. So there is a real risk that the buyer does not receive the object of the transaction, or the seller does not receive payment for the object of the transaction.
There is no trace of the exchanges between the buyer and the seller.
Thus, the exchange rate plays a very important role in the cost of supplies and the attractiveness of the products and services sold, as well as in the company’s income. It is therefore very important for companies to find out about world events that could influence currency fluctuations.