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Towards Increasing Complexity: The Evolution of the FX Market

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Abstract

The foreign exchange market has evolved extensively over time, undergoing important shifts in the types of market participants and the mix of instruments traded, within a trading ecosystem that has become increasingly complex. In this post, we discuss fundamental changes in this market over the past twenty-five years and highlight some of the implications for its future evolution. Our analysis suggests that maintaining a healthy price discovery process and fostering a level playing field among participants are areas to watch for challenges. The consequences of the evolution of the FX market—well beyond those anticipated twenty-five years ago—remain active areas of research and policy consideration.

Suggested Citation

  • Alain P. Chaboud & Lisa Chung & Linda S. Goldberg & Anna Nordstrom, 2024. "Towards Increasing Complexity: The Evolution of the FX Market," Liberty Street Economics 20240111, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:97576
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    File URL: https://libertystreeteconomics.newyorkfed.org/2024/01/towards-increasing-complexity-the-evolution-of-the-fx-market/
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    More about this item

    Keywords

    foreign exchange; currency; spot market; derivatives; FX Global Code;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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