Foreign exchange trading platforms have become more popular in recent years, with more than a dozen platforms available to buy and sell foreign exchange.
Foreign exchange platforms like ABOK, the leading provider, have gained a reputation as the “buyer’s market” for foreigners who want to buy foreign currency or swap in foreign currencies for their domestic currencies.
Now, however, they’re also gaining a reputation for the “seller’s markets” for people who want an easy way to exchange dollars for foreign currencies.
ABOK has been a popular source for foreign exchange trading for more than 10 years, said Andrew McAfee, ABOK’s chief technology officer.
ABoks platform, called ABOK-X, lets you buy and hold foreign currency in your account and convert it into dollars.
This way, you can buy and use your dollars for other transactions.
“The ABOK platform is a great way to get exposure to foreign exchange rates and trade at a fraction of the cost of a local exchange,” said McAfee.
In addition to ABOK and other platforms that allow for trading, the market for foreign currency swaps is growing in the United States and other countries around the world.
According to McAfee’s research, foreign exchange swaps are up about 20% year over year, to $8.8 billion in 2017.
That’s a lot of dollars, but a small percentage of the total volume of foreign exchange trades.
That volume, however is dwarfed by the volume of dollars traded on the U.S. dollar-denominated market, according to the Bank for International Settlements.
“It’s a very small amount of dollars that are being traded and used by people around the globe,” McAfee said.
“We think it’s the perfect place to look for foreign-exchange swaps, which are a way for people to get money into and out of the country in real time.”
That said, the value of the swap market is growing fast, especially as foreign-currency-denomination swaps grow in popularity, as well as the value in the international financial system.
“Foreign exchange swap markets are booming,” McElwain said.
The trend towards foreign exchange hedging has also been a boon to foreign-language exchange platforms.
Foreign-language exchanges are able to hedge against the risk of currency fluctuations by using foreign exchange funds as collateral, or using them to make their foreign-denominational exchanges more liquid.
This allows the platform to provide the liquidity needed to support their local currencies, without having to pay the fees associated with international currencies.
“Our foreign exchange markets are really booming,” said Matthew Janko, chief market strategist for FXTrader.
“As the value per transaction of dollars fluctuates, there are huge opportunities to hedge your currencies and diversify your portfolio.”
For example, if a foreign-origin exchange company is losing money due to a foreign currency devaluation, its exchange fund could hedge against it.
Foreign currency hedging platforms have also emerged as a popular way for small-cap investors to diversify their portfolio, said David Rolf, chief investment officer of Citi Investments.
“Many investors like to diversified portfolios and hedges because they provide a solid diversification tool and have very low risk,” Rolf said.
For example if an exchange platform is trading at $100 per share, and the value is at $70 per share at the end of the day, and $50 per share on Tuesday, its hedging fund could trade at $5,000 per share and still make it more liquid, he said.
In the end, the hedging strategy for any particular exchange platform depends on the specific market conditions.
If the exchange platform’s foreign exchange market fluctuates dramatically, it may not be a great idea to hedge it, said Rolf.
But if it’s a steady market and you see the market price rising, it’s worth it to hedge, he added.
Foreign Exchange Brokers is a national service provider for the exchange market.
You can learn more about our services, including our fees, here.