The foreign exchange or FX market facilitates the global exchange of currencies. At its core, every FX transaction is an agreement between counterparties to purchase one currency against another. These agreements are defined by two key terms, the agreed upon price called the FX rate, or foreign exchange rates, and a specific date on which it is settled.

The FX market is not just large, it's the largest and most liquid OTC or over the counter market in the world. It operates 24 hours a day reflecting its truly global nature. To give you an idea of its scale, the daily average turnover in the FX market has grown consistently over the years, reaching over $7 trillion in 2022. As you can see on this chart, this data comes from the BIS Triennial Central Bank Survey, the most comprehensive source of information on global FX trading. Conducted every three years by the bank for international settlements, this survey provides a detailed view of turnover and trends in the FX and over the counter derivatives markets.

This second chart highlights the dominance of the US dollar, which is involved in the majority of FX transactions followed by the Euro, Japanese Yen, and other currencies. You might notice that if you add up the daily turnover values for all currencies, the total is significantly higher than $7 trillion.

That's because every FX transaction involves two currencies. For example, a Euro, US Dollar trade is counted in both the US Dollar column and the Euro column. Reflecting the dual nature of currency pairs.

The FX market's unparalleled liquidity stems from the wide range of participants involved. These include central banks, commercial banks, corporations, hedge funds, asset managers, and even retail investors.

Together they drive the market's depth and ensure that it operates continuously across all major time zones.