The Foreign Exchange market, better known as Forex, is where central banks, massive financial institutions, insurance companies, and investment funds transact the largest amounts of money in the world. It is, by far, the largest market in existence.
1. The $7.5 Trillion Reality: Forex Market Size
According to the latest triennial report published by the Bank for International Settlements (BIS), the volume of money traded in Forex was $7.51 trillion US dollars per day in April 2022. This volume continues its strong upward trend, despite global uncertainty from Covid-19 and the war in Ukraine.
To grasp the staggering size of this number—trillions, or millions of millions—it helps to compare it to the 2021 Gross Domestic Product (GDP) of developed countries:
| Country | GDP |
|---|---|
| Japan | 4.937 |
| Germany | 4.226 |
| United Kingdom | 3.188 |
| France | 2.935 |
| Italy | 2.180 |
| Spain | 1.460 |
The Forex market moves more money in a single day than the entire economies of France, Italy, and Spain combined can produce in a whole year. This immense daily activity fuels the imagination of those seeking rapid wealth.
The Daily $30 Billion Profit/Loss Shift
The exchange rate of most currency pairs changes, on average, by about 0.4% to 0.5% over a trading day. For a daily volume of $7.5 trillion, this means the profits and losses that shift hands total approximately $30 billion every 24 hours. The possibility of capturing even a tiny fraction of this wealth is why so many are drawn to trading, making Forex the closest thing to a money-printing machine—though certainly not an easy one to operate.
2. Structure and The Concentration of Power
Forex operates without a central coordination or physical exchange floor like stock markets. It is a worldwide, decentralized market that functions 24 hours a day, five days a week (opening Monday morning in Sydney and closing Friday afternoon in New York) through the Interbank Network—a vast web of interconnected computers.
Years ago, participation was strictly reserved for institutions with accounts holding at least one million dollars. Today, however, banks and specialized financial institutions act as brokers, opening retail Forex trading accounts to individuals for amounts as little as $100, democratizing access but not necessarily success.
Institutional Giants: The Top Dealers
Although thousands of institutions operate in Forex, the vast bulk of transactions are carried out by a select group of banks. According to the 2022 BIS Triennial Survey, the market share is heavily concentrated. The top ten dealers collectively controlled over 65% of the market volume.
| Dealer (Bank) | Market Share % (Approx.) |
|---|---|
| Deutsche Bank | 10.89 |
| UBS | 9.69 |
| JPMorgan | 8.67 |
| State Street | 7.66 |
| XTX Markets | 7.14 |
| Jump Trading | 5.60 |
| Citi (Citigroup) | 4.54 |
| BNY Mellon | 4.30 |
| Bank of America | 3.73 |
| Goldman Sachs | 3.65 |
The economic power concentrated in these organizations is enormous. The small trader can only trust that these giants operate under strict ethical standards.
3. The Lie of the 'Perfect Market': Institutional Manipulation
A common claim, frequently promoted in broker advertising, is that the Forex market is simply too large for anyone to manipulate, making it the closest thing to a perfect market ruled only by supply and demand. This claim is demonstrably false.
A few years ago, the US Department of Justice forced six of the world's largest banks—including Citi, Barclays, UBS, RBS, and JP Morgan—to pay a staggering $5.7 billion in fines for fraudulent practices involving foreign exchange market manipulation between 2007 and 2013. They acted as a cartel to rig prices at their convenience, specifically targeting the widely used 4:00 PM London Fix benchmark.
How Manipulation Works
With their immense financial muscle, a single large bank (let alone a cartel) can move an exchange rate. If they want to drive EUR/USD down, they simply dump huge amounts of the pair onto the market, well above the existing demand. The price plummets. A short time later, when the price is low enough, they buy the same pair back in an orchestrated cadence to prevent a quick recovery, guaranteeing a profit: buy low and sell high.
What they earned from their fraudulent practices was apparently more than what they had to pay in fines, as the shares of these banks, instead of falling, often rose after the fines were announced. The claim that Forex cannot be manipulated is simply false. This is a clear warning that even without outright cheating, the advantages institutional operators have over small traders are vast.
4. Commercial Necessity vs. Speculative Machine
The Foreign Exchange market is a necessary institution to facilitate international commerce, allowing currencies of buying countries to be exchanged for those of selling countries. This commercial need was the original reason for its creation. However, the constant fluctuations in relative prices create enormous opportunities for profit through speculation.
It is not surprising that nowadays, speculative Forex trades have largely outgrown the purely commercial ones. Forex trading is today a massive, mainly speculative activity.