The Forex Market
The world of foreign exchange rates and the role of governments in the international markets are changing rapidly. Communication networks around the world are becoming more advanced by the day and access to the international marketplace and inter-bank prices means that exchange rates are controlled less easily. Faced with the increasing worldwide volumes and the power of world markets, the governments of the most powerful nations have begun to accept that their role in the international markets has diminished greatly.
Not long ago, governments still controlled and regulated world trade and exchange rates. Until the end of World War II, banks were little more than cashiers; the serious matters - the management of industry, the development of trade and the control of exchange rates - were largely in the hands of governments. After the war, the economic powers tried to regulate the money markets yet further and at Bretton Woods they agreed to fix currency exchange rates by pegging their value against the dollar. But the dollar's weakness in the early 1970's led to the collapse of the system, and the suspension of the dollar's convertibility into gold was announced. The market then began to adopt new methods of placing valuations on currencies and the power of the speculator grew.
The rise in the power of the speculator and the great progress which we have made in global communications have led to the creation of big bank dealing rooms where hundreds of millions of dollars, pounds, euro or yen can be exchanged in a matter of seconds, and over $3 trillion is traded on an average day. Speculation is now done mostly on screens - electronic brokers now account for approximately 70% brokered spot FX market in London and single trades for tens of millions of dollars are priced and executed in seconds. Electronic trading and the deregulation, which has accomplished it, caused a tremendous increase in liquidity.
Subsequently, the speculative market grew quickly, whilst the influence of central banks have fallen greatly - today their actual holdings account for less than the total volume of FX transacted in a single day on the world's Forex markets. The market has changed so much that today most international financial transactions are carried out not to buy and sell goods but just for speculative purposes - the aim for most deals done today is to make money out of money.
Over the years, London has grown to become the world's leading international financial centre. Today, it is the world's largest market for foreign shares, the largest point of exchange for Eurodollars, the most important OTC (over the counter) marketplace as measured by booking and location, the world's largest fund management centre and, perhaps most significantly of all, the centre of the world FX spot trading.
The sizes dealt in these markets are huge and the smaller banks, commercial hedgers and private investors hardly ever have access to this liquid and competitive market - either because they fail to meet the credit requirements or because their transaction sizes are too small.
IQ Managed Forex was set up to cater for the private investors who, for whatever reason, are not able to, or do not have the time, to trade on their own behalf.