The size of the FX market..

Random quotes from the Internet:
"daily average turnover of approximately 1.7 trillion US$."

"Largest in the world (1995): $1.2 trillion daily."

"$1.9 trillion/day"

"The New York Stock Exchange, for example, has a daily trading volume of approximately $30 billion." (from Oanda.com)

I have often pondered on this:

Is it really fair to say that the FX market is by far and away the biggest market in the world?

My objection is this: you trade FX with leverage, but you don't trade stocks with leverage, so wouldn't it make more sense to look at the amount that traders place as collateral, as this is the money that the investor actually has paid into his own account. A stockinvestor only trades the money he actually have in his account..

But then maybe we should compare leveraged FX trading to leveraged CFD trading...But I don't think that the 30 billion on the NYSE are inclusive of leveraged CFD trading(??)

I must admit that my understanding of this may not be 100%, so actually I would like to ask the following question: If a trader opens a trade in EURUSD, trades 1.000.000 Euro and places 1% (10.000 Euro) as collateral, is it then true to say that HE has traded 1.000.000 Euro..? In reality, it is the bank that has lent him the USD, he has then converted them into Euro - would this be a correct description of what takes place..?

I don't know if this is a very stupid thread, I hope not, because I am a little confused about this...

Maybe the real comparison would be:

"Physical shares + leveraged CFD trading" vs "FX market"???

Interesting, but when measuring the FX, or any market, you're looking for the amount of money that was traded. Does it matter where the money came from?

If you buy a car for $50,000 using $5,000 as a down payment, the amount purchased is still $50,000. So, when calculating new car sales the amount would be $50,000 not $5,000.

Leveraged money, like borrowed money, is still placed into the market, just not from your account.

Why would you CFD individual stocks?

Andersxman,

Highly leveraged retail traders are only a very small part of the FX market. If you took away all of us and the amount we trade, whether in actual cash or leveraged amount, it wouldn't make a huge difference. We are only a by-product.

Billflet, you are very likely to be much more of an expert than me on this. So what you're saying is that the intrabank market is really the biggest part, maybe, and banks trading between them are making up the bulk of the FX market?

Who are, in your view, the market participants who create the better part of the volume in the FX market..?

i read somewhere that 60% of forex volume is made by bank's traders (including physical trading). I truelly don't think that bank's traders have leverage...who would offer them leverage? :
Second, big hedge funds don't think they can have big leverage (even if i read everywhere that they have leverage). Imagine a 200 billion hedge fund abusing a 1:100 leverage

I'm no expert, but there are some here and they'll probably show up. But I think this is fairly accurate.
Central Banks and governments adjusting reserve volume to manipulate currency value, Hedgers--big businesses trying to protect themselves against currency fluctuations while conducting everyday international transactions of buying, selling and repatriating their earnings, Institutional investors, Banks buying and selling in the course of normal business--serving those who do global business.
I'm not sure what percentage we highly leveraged retail traders make up, but we're fairly new to the big picture and the market was already huge before we showed up. And I don't know how much of our volume even shows up as a good share of it never leaves the broker.

I must disagree.. The collateral covers the maximum potential loss.. you are still trading with borrowed funds. These borrowed funds are in trade.. so they have to count.. Doesn't the stock market figures include all the Level2 CFD trades? as with these the shares are being physically bought.. I am not certain about this.. I have only ever traded stocks with spread betting..

Would you say that this following observation is correct, then?

With FX providers who are market makers, they can "keep the positions" on their books. If an FX marketmaker has a client that goes long 1 mill EURUSD, and another that goes short for the same amount at the same time, this trade will never hit the actual market---If the market maker has "residual risk" that they're not interested in having on their book, they will execute an offsetting trade in the market.. Correct?

Exactly the same thing can be the case for marketmakers with CFDs..

If a CFD marketmaker has a client that takes a long position for 10.000 USD, and another one taking a short position for the same amount, in the same CFD, then this trade will stay on this market maker's book, and no physical shares will be traded... Like in the other example, the market maker might need to execute a trade in the market to offset any undesired residual risk...

Incidentally, I now remember that I have heard that 30-40% of trades on LSE stem from CFD trading. If any expert CFD traders should stumble upon this thread, don't hesitate to comment, you are most welcome!

Are these observations of mine valid?