Timeline:
1980s to 2010s: Dominance of Large Banks
Since the 1980s, large internationally active banks have dominated foreign exchange markets.
Banks build thriving dealer businesses, controlling markets in swaps, forwards, and spot FX.
The market for spot FX delivery remains opaque with an interdealer and dealer-to-customer segment.
1980s: Emergence of Electronic Brokerage Systems
The FX market, including spot FX, operates with limited transparency and efficiency.
FX trades are conducted via telephone.
In the early 1990s, Reuters introduced the first electronic brokerage system in 1992.
The Electronic Broking Service (EBS) is developed by dealer banks in response to Reuters' system.
Technological innovation increases transparency and efficiency, marking a turning point in the FX market.
1990s to Early 2000s: Technological Breakthroughs and Market Expansion
EBS and Reuters report real-time prices, providing data feeds for faster, more efficient trading.
The FX market's size and complexity multiply, reaching a multi-trillion dollar scale.
Early 2017: Creation of GFXC and The FX Global Code
Global Foreign Exchange Committee (GFXC) is formed by monetary authorities and financial giants.
The FX Global Code, a set of recommendations for the $7.5 trillion-a-day FX market, is introduced to transform the global financial system.
Progress and Challenge to Dealer Banks
Dealer banks' power peaks with elaborate trading platforms and improved processing systems.
Lower transaction costs open the FX market to a wider group of participants.
New players emerge to challenge dominant dealer banks in traditionally opaque areas of the FX market.
Present: The FX Market Evolution
The FX Market Evolution unfolds as a transformative process, reducing the power of dominant players and rewiring global monetary plumbing.
A power shift is evident as guidelines and recommendations enhance the strength of the global foreign exchange system.
New participants rise to prominence, challenging the longstanding dominance of large dealer banks.
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