Foreign Exchange Market Structure, Players and Evolution

47 Pages Posted: 30 Sep 2011

See all articles by Michael R. King

Michael R. King

Gustavson School Of Business

Carol L. Osler

Brandeis University - International Business School

Dagfinn Rime

BI Norwegian Business School

Date Written: August 14, 2011


Electronic trading has transformed foreign exchange markets over the past decade, and the pace of innovation only accelerates. This formerly opaque market is now fairly transparent and transaction costs are only a fraction of their former level. Entirely new agents have joined the fray, including retail and high-frequency traders, while foreign exchange trading volumes have tripled. Market concentration among dealers has risen reflecting the heavy investments in technology. Undeterred, some new non-bank market participants have begun to make markets, challenging the traditional foreign exchange dealers on their own turf. This paper outlines the players in this market and the structure of their interactions. It also presents new evidence on how that structure has changed over the past two decades. Throughout, it highlights issues relevant to exchange rate modelling.

Keywords: Exchange rates, algorithmic trading, market microstructure, electronic trading, high frequency trading

JEL Classification: F31, G12, G15, C42, C82

Suggested Citation

King, Michael Robert and Osler, Carol L. and Rime, Dagfinn, Foreign Exchange Market Structure, Players and Evolution (August 14, 2011). Norges Bank Working Paper No. 2011/10, Available at SSRN: or

Michael Robert King

Gustavson School Of Business ( email )

University of Victoria
Business & Economics Building, Room 246
Victoria, British Columbia V8W 2Y2
250-721-6425 (Phone)

HOME PAGE: http://

Carol L. Osler

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States
781-736-4826 (Phone)

Dagfinn Rime (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
+47-46410507 (Phone)


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics