Foreign Exchange Market Structure, Players and Evolution

47 Pages Posted: 30 Sep 2011

See all articles by Michael R. King

Michael R. King

Ivey Business School

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

Ivey Business School ( email )

Western University
1255 Western Road
London, Ontario N6G 0N1
519 661 3084 (Phone)


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)


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