What is Forex?
Foreign exchange is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are executed in currency pairs. For example: the Euro and the US Dollar (EUR/USD) or the British Pound and the Japanese Yen (GBP/JPY). The Foreign Exchange Market (Forex) is the largest financial market in the world, with a daily volume of over $4 trillion. This is more than three times the total amount of the stocks and futures markets combined. Unlike other financial markets, the Forex spot market has neither a physical location nor a central exchange. It operates through an electronic network of banks, corporations, and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one time zone to another across the major financial centers. This fact - that there is no centralized exchange - is important to keep in mind as it permeates all aspects of the Forex experience.
What is Currency trading?
Trade is an international business and for any trade payments are settled in Currencies, which are specific to the countries/regions involved. Whenever any Currency is bought or sold for another, the transaction is known as 'Currency trading'. Currency trading is the largest financial market globally, followed by Commodities and Equities. Investors, speculators and corporate are involved in cross-border Currency trade.
Why do we have Exchange Traded Currency Derivatives?
Exchange Traded Currency Derivatives provide greater access for market participants, be it investors, speculators or corporate who may want to trade Currencies to hedge their Currency risk. Exchange Traded Currency Derivatives offer efficient risk management mechanisms and provide a transparent trading platform, with no chance of anybody dealing with insider information. Currency Derivatives are known for their efficiency in price discoveries providing immunity from counter-party credit risks. They also provide access to all types of market participants and make it an easy-to-use financial instrument by offering standardized products and settlement cycles. In Currency Derivatives, even small orders, ie up to one contract or USD 1,000, can be executed.
What are Exchange Traded Currency Futures?
The Exchange Traded Currency Futures contract is an agreement to buy or sell the underlying Currency on a specified date in the future and at a specified rate. The underlying asset for a Currency Futures contract is a Currency. The Exchange's clearing house acts as a central counter-party for all trades and thus, takes on a performance guarantee.