Foreign exchange market

Forex redirects here. For the football club, see FCForex Braov. For the U.S. FBI sting operation, seeDominic Brooklier Bompensiero murder.

The foreign exchange market (forex, FX, or currencymarket) is a global decentralized market for the tradingof currencies. In terms of volume of trading, it is byfar the largest market in the world.[1] The main partic-ipants in this market are the larger international banks.Financial centres around the world function as anchors oftrading between a wide range of multiple types of buy-ers and sellers around the clock, with the exception ofweekends. The foreign exchange market determines therelative values of dierent currencies.[2] The foreign ex-change market works through nancial institutions, and itoperates on several levels. Behind the scenes banks turnto a smaller number of nancial rms known as dealers,who are actively involved in large quantities of foreign ex-change trading. Most foreign exchange dealers are banks,so this behind-the-scenes market is sometimes called theinterbank market, although a few insurance companiesand other kinds of nancial rms are involved. Tradesbetween foreign exchange dealers can be very large, in-volving hundreds of millions of dollars. Because of thesovereignty issue when involving two currencies, Forexhas little (if any) supervisory entity regulating its actions.The foreign exchange market assists international tradeand investments by enabling currency conversion. For ex-ample, it permits a business in the United States to importgoods from the European Union member states, espe-cially Eurozone members, and pay Euros, even though itsincome is in United States dollars. It also supports directspeculation and evaluation relative to the value of curren-cies, and the carry trade, speculation based on the inter-est rate dierential between two currencies.[3] In a typi-cal foreign exchange transaction, a party purchases somequantity of one currency by paying for some quantity ofanother currency. The modern foreign exchange mar-ket began forming during the 1970s after three decadesof government restrictions on foreign exchange transac-tions (the Bretton Woods system of monetary manage-ment established the rules for commercial and nancialrelations among the worlds major industrial states af-ter World War II), when countries gradually switched tooating exchange rates from the previous exchange rateregime, which remained xed as per the Bretton Woodssystem. The foreign exchange market is unique becauseof the following characteristics:

its huge trading volume representing the largest asset

class in the world leading to high liquidity; its geographical dispersion; its continuous operation: 24 hours a day exceptweekends, i.e., trading from 22:00 GMT on Sunday(Sydney) until 22:00 GMT Friday (New York);

the variety of factors that aect exchange rates; the low margins of relative prot compared withother markets of xed income; and

the use of leverage to enhance prot and loss mar-gins and with respect to account size.

As such, it has been referred to as themarket closest to theideal of perfect competition, notwithstanding currencyintervention by central banks. According to the Bankfor International Settlements,[4] the preliminary global re-sults from the 2013 Triennial Central Bank Survey ofForeign Exchange and OTC Derivatives Markets Activityshow that trading in foreign exchange markets averaged$5.3 trillion per day in April 2013. This is up from $4.0trillion in April 2010 and $3.3 trillion in April 2007. For-eign exchange swaps were the most actively traded instru-ments in April 2013, at $2.2 trillion per day, followed byspot trading at $2.0 trillion. According to the Bank for In-ternational Settlements,[5] as of April 2010, average dailyturnover in global foreign exchange markets is estimatedat $3.98 trillion, a growth of approximately 20% over the$3.21 trillion daily volume as of April 2007. Some rmsspecializing on foreign exchange market had put the aver-age daily turnover in excess of US$4 trillion.[6] The $3.98trillion break-down is as follows:

$1.490 trillion in spot transactions $475 billion in outright forwards $1.765 trillion in foreign exchange swaps $43 billion currency swaps $207 billion in options and other products

1 History

1.1 AncientCurrency trading and exchange rst occurred in ancienttimes.[7] Money-changing people, people helping others

1

2 1 HISTORY

to change money and also taking a commission or charg-ing a fee were living in the times of the Talmudic writ-ings (Biblical times). These people (sometimes calledkollybists) used city-stalls, at feast times the templesCourt of the Gentiles instead.[8] Money-changers werealso in more recent ancient times silver-smiths and/orgold-smiths.[9]

During the fourth century, the Byzantine governmentkept a monopoly on the exchange of currency.[10]

Currency and exchange was also a vital and crucial el-ement of trade during the ancient world so that peo-ple could buy and sell items like food, pottery and rawmaterials.[11] If a Greek coin held more gold than anEgyptian coin due to its size or content, then a merchantcould barter fewer Greek gold coins for more Egyptianones, or for more material goods. This is why, at somepoint in their history, most world currencies in circulationtoday had a value xed to a specic quantity of a recog-nized standard like silver and gold.

1.2 Medieval and later

During the fteenth century the Medici family wererequired to open banks at foreign locations in or-der to exchange currencies to act on behalf of textilemerchants.[12][13] To facilitate trade the bank createdthe nostro (from Italian translated ours) accountbook which contained two columned entries showingamounts of foreign and local currencies, informationpertaining to the keeping of an account with a foreignbank.[14][15][16][17] During the 17th (or 18th ) centuryAmsterdam maintained an active forex market.[18] Dur-ing 1704 foreign exchange took place between agentsacting in the interests of the nations of England andHolland.[19]

1.3 Early modern

Alex. Brown & Sons traded foreign currencies exchangesometime about 1850 and was a leading participant in thiswithin U.S.A.[20] During 1880, J.M. do Esprito Santo deSilva (Banco Esprito Santo) applied for and was givenpermission to begin to engage in a foreign exchange trad-ing business.[21][22]

The year 1880 is considered by at least one source to bethe beginning of modern foreign exchange, signicant forthe fact of the beginning of the gold standard during theyear.[23]

Prior to the rst world war there was a muchmore limitedcontrol of international trade. Motivated by the outsetof war, countries abandoned the gold standard monetarysystem.[24]

1.4 Modern to post-modern

From 1899 to 1913, holdings of countries foreign ex-change increased at an annual rate of 10.8%, while hold-ings of gold increased at an annual rate of 6.3% between1903 and 1913.[25]

At the time of the closing of the year 1913, nearly halfof the worlds foreign exchange was conducted using thePound sterling.[26] The number of foreign banks oper-ating within the boundaries of London increased in theyears from 1860 to 1913 from 3 to 71. In 1902 there werealtogether two London foreign exchange brokers.[27] Inthe earliest years of the twentieth century trade was mostactive in Paris, New York and Berlin, while Britain re-mained largely uninvolved in trade until 1914. Between1919 and 1922, the employment of foreign exchange bro-kers within London increased to 17, in 1924 there were40 rms operating for the purposes of exchange.[28] Dur-ing the 1920s the occurrence of trade in London resem-bled more the modern manifestation, by 1928 forex tradewas integral to the nancial functioning of the city. Con-tinental exchange controls, plus other factors, in Europeand Latin America, hampered any attempt at wholesaleprosperity from trade for those of 1930s London.[29]

During the 1920s, the Kleinwort family were known to bethe leaders of the foreign exchangemarket; while Japheth,Montagu &Co., and Seligman still warrant recognition assignicant FX traders.[30]

1.4.1 After WWII

After WWII, the Bretton Woods Accord was signed al-lowing currencies to uctuate within a range of 1% to thecurrencies par.[31] In Japan the law was changed during1954 by the Foreign Exchange Bank Law, so, the Bankof Tokyo was to become, because of this, the centre offoreign exchange by September of that year. Between1954 and 1959 Japanese law was made to allow the in-clusion of many more Occidental currencies in Japaneseforex.[32]

U.S. President Richard Nixon is credited with ending theBrettonWoods Accord and xed rates of exchange, even-tually bringing about a free-oating currency system. Af-ter the ceasing of the enactment of the Bretton WoodsAccord during 1971,[33] the Smithsonian Agreement al-lowed trading to range to 2%. During 196162, theamount of foreign operations by the U.S. Federal Reservewas relatively low.[34][35] Those involved in controllingexchange rates found the boundaries of the Agreementwere not realistic and so ceased this in March 1973, whensometime afterward none of the major currencies weremaintained with a capacity for conversion to gold, organ-isations relied instead on reserves of currency.[36][37] Dur-ing 1970 to 1973 the amount of trades occurring in themarket increased three-fold.[38][39][40] At some time (ac-cording toGandolfo during FebruaryMarch 1973) some

3of the markets were split, so a two tier currency marketwas subsequently introduced, with dual currency rates.This was abolished during March 1974.[41][42][43]

Reuters introduced during June 1973 computer moni-tors, replacing the telephones and telex used previouslyfor trading quotes.[44]

1.4.2 Markets close

Due to the ultimate ineectiveness of the Bretton WoodsAccord and the European Joint Float the forex marketswere forced to close sometime during 1972 and March1973.[45][46] The very largest of all purchases of dollarsin the history of 1976 was when the West German gov-ernment achieved an almost 3 billion dollar acquisition(a gure given as 2.75 billion in total by The Statesman:Volume 18 1974), this event indicated the impossibil-ity of the balancing of exchange stabilities by the mea-sures of control used at the time and the monetary sys-tem and the foreign exchange markets in West Ger-many and other countries within Europe closed for twoweeks (during February and, or, March 1973. Giersch,Paqu, & Schmieding state closed after purchase of 7.5million Dmarks Brawley states "... Exchange marketshad to be closed. When they re-opened ... March 1 " thatis a large purchase occurred after the close).[47][48][49][50]

1.4.3 After 1973

The year 1973 marks the point to which nation-state,banking trade and controlled foreign exchange ended andcomplete oating, relatively free conditions of a marketcharacteristic of the situation in contemporary times be-gan (according to one source),[51] although another statesthe rst time a currency pair were given as an option forU.S.A. traders to purchase was during 1982, with addi-tional currencies available by the next year.[52][53]

On 1 January 1981, as part of changes beginning dur-ing 1978, the Peoples Bank of China allowed certaindomestic enterprises to participate in foreign exchangetrading.[54][55] Sometime during the months of 1981 theSouth Korean government ended forex controls and al-lowed free trade to occur for the rst time. During 1988the countries government accepted the IMF quota for in-ternational trade.[56]

Intervention by European banks especially theBundesbank inuenced the forex market, on Februarythe 27th 1985 particularly.[57] The greatest proportionof all trades world-wide during 1987 were within theUnited Kingdom, slightly over one quarter, with theU.S. of America the nation with the second most placesinvolved in trading.[58]

During 1991 the republic of Iran changed internationalagreements with some countries from oil-barter to foreignexchange.[59]

2 Market size and liquidity

Main foreign exchange market turnover, 19882007, measuredin billions of USD.

The foreign exchange market is the most liquid nancialmarket in the world. Traders include large banks, cen-tral banks, institutional investors, currency speculators,corporations, governments, other nancial institutions,and retail investors. The average daily turnover in theglobal foreign exchange and related markets is continu-ously growing. According to the 2010 Triennial Cen-tral Bank Survey, coordinated by the Bank for Interna-tional Settlements, average daily turnover was US$3.98trillion in April 2010 (vs $1.7 trillion in 1998).[5] Of this$3.98 trillion, $1.5 trillion was spot transactions and $2.5trillion was traded in outright forwards, swaps and otherderivatives.In April 2010, trading in the United Kingdom accountedfor 36.7% of the total, making it by far the most impor-tant centre for foreign exchange trading. Trading in theUnited States accounted for 17.9% and Japan accountedfor 6.2%.[60]

In April 2013, for the rst time, Singapore surpassedJapan in average daily foreign-exchange trading volumewith $383 billion per day. So the rank became: theUnited Kingdom (41%), the United States (19%), Sin-gapore (5.7)%, Japan (5.6%) and Hong Kong (4.1%).[61]

Turnover of exchange-traded foreign exchange futuresand options have grown rapidly in recent years, reaching$166 billion in April 2010 (double the turnover recordedin April 2007). Exchange-traded currency derivativesrepresent 4% of OTC foreign exchange turnover. Foreignexchange futures contracts were introduced in 1972 at theChicago Mercantile Exchange and are actively traded rel-ative to most other futures contracts.Most developed countries permit the trading of deriva-tive products (like futures and options on futures) on theirexchanges. All these developed countries already havefully convertible capital accounts. Some governmentsof emerging economies do not allow foreign exchangederivative products on their exchanges because they havecapital controls. The use of derivatives is growing in

4 3 MARKET PARTICIPANTS

many emerging economies.[62] Countries such as Korea,South Africa, and India have established currency futuresexchanges, despite having some capital controls.Foreign exchange trading increased by 20% betweenApril 2007 and April 2010 and has more than doubledsince 2004.[63] The increase in turnover is due to a num-ber of factors: the growing importance of foreign ex-change as an asset class, the increased trading activityof high-frequency traders, and the emergence of retailinvestors as an important market segment. The growthof electronic execution and the diverse selection of ex-ecution venues has lowered transaction costs, increasedmarket liquidity, and attracted greater participation frommany customer types. In particular, electronic trading viaonline portals has made it easier for retail traders to tradein the foreign exchange market. By 2010, retail tradingis estimated to account for up to 10% of spot turnover, or$150 billion per day (see below: Retail foreign exchangetraders).Foreign exchange is an over-the-counter market wherebrokers/dealers negotiate directly with one another, sothere is no central exchange or clearing house. Thebiggest geographic trading center is the United Kingdom,primarily London, which according to TheCityUK esti-mates has increased its share of global turnover in tradi-tional transactions from 34.6% in April 2007 to 36.7% inApril 2010. Due to Londons dominance in the market,a particular currencys quoted price is usually the Londonmarket price. For instance, when the International Mone-tary Fund calculates the value of its special drawing rightsevery day, they use the London market prices at noon thatday.

3 Market participants

See also: Forex scandal

Unlike a stock market, the foreign exchange market isdivided into levels of access. At the top is the interbankmarket, which ismade up of the largest commercial banksand securities dealers. Within the interbank market,spreads, which are the dierence between the bid and askprices, are razor sharp and not known to players outsidethe inner circle. The dierence between the bid and askprices widens (for example from 0 to 1 pip to 12 pips fora currencies such as the EUR) as you go down the levelsof access. This is due to volume. If a trader can guaran-tee large numbers of transactions for large amounts, theycan demand a smaller dierence between the bid and askprice, which is referred to as a better spread. The levels ofaccess that make up the foreign exchange market are de-termined by the size of the line (the amount of moneywith which they are trading). The top-tier interbank mar-ket accounts for 39% of all transactions.[60] From there,smaller banks, followed by large multi-national corpora-

tions (which need to hedge risk and pay employees in dif-ferent countries), large hedge funds, and even some of theretail market makers. According to Galati and Melvin,Pension funds, insurance companies, mutual funds, andother institutional investors have played an increasinglyimportant role in nancial markets in general, and in FXmarkets in particular, since the early 2000s. (2004) Inaddition, he notes, Hedge funds have grown markedlyover the 20012004 period in terms of both number andoverall size.[65] Central banks also participate in the for-eign exchange market to align currencies to their eco-nomic needs.

3.1 Commercial companiesAn important part of the foreign exchange market comesfrom the nancial activities of companies seeking foreignexchange to pay for goods or services. Commercial com-panies often trade fairly small amounts compared to thoseof banks or speculators, and their trades often have littleshort term impact on market rates. Nevertheless, tradeows are an important factor in the long-term directionof a currencys exchange rate. Some multinational corpo-rations (MNCs) can have an unpredictable impact whenvery large positions are covered due to exposures that arenot widely known by other market participants.

3.2 Central banksNational central banks play an important role in the for-eign exchange markets. They try to control the moneysupply, ination, and/or interest rates and often have of-cial or unocial target rates for their currencies. Theycan use their often substantial foreign exchange reservesto stabilize the market. Nevertheless, the eectivenessof central bank stabilizing speculation is doubtful be-cause central banks do not go bankrupt if they make largelosses, like other traders would, and there is no convinc-ing evidence that they do make a prot trading.

3.3 Foreign exchange xingForeign exchange xing is the daily monetary exchangerate xed by the national bank of each country. The ideais that central banks use the xing time and exchange rateto evaluate behavior of their currency. Fixing exchangerates reects the real value of equilibrium in the market.Banks, dealers and traders use xing rates as a trend in-dicator.The mere expectation or rumor of a central bank foreignexchange intervention might be enough to stabilize a cur-rency, but aggressive intervention might be used severaltimes each year in countries with a dirty oat currencyregime. Central banks do not always achieve their ob-jectives. The combined resources of the market can eas-ily overwhelm any central bank.[66] Several scenarios of

3.7 Non-bank foreign exchange companies 5

this nature were seen in the 199293 European ExchangeRate Mechanism collapse, and in more recent times inAsia.

3.4 Hedge funds as speculators

About 70% to 90% of the foreign exchange transactionsconducted are speculative. This means the person or in-stitution that bought or sold the currency has no plan toactually take delivery of the currency in the end; rather,they were solely speculating on the movement of that par-ticular currency. Since 1996, Hedge funds have gained areputation for aggressive currency speculation. They con-trol billions of dollars of equity and may borrow billionsmore, and thus may overwhelm intervention by centralbanks to support almost any currency, if the economicfundamentals are in the hedge funds favor.

3.5 Investment management rms

Investment management rms (who typically managelarge accounts on behalf of customers such as pensionfunds and endowments) use the foreign exchange marketto facilitate transactions in foreign securities. For exam-ple, an investment manager bearing an international eq-uity portfolio needs to purchase and sell several pairs offoreign currencies to pay for foreign securities purchases.Some investment management rms also havemore spec-ulative specialist currency overlay operations, whichman-age clients currency exposures with the aim of generatingprots as well as limiting risk. While the number of thistype of specialist rms is quite small, many have a largevalue of assets under management and, hence, can gen-erate large trades.

3.6 Retail foreign exchange traders

Individual retail speculative traders constitute a growingsegment of this market with the advent of retail foreignexchange trading, both in size and importance. Currently,they participate indirectly through brokers or banks. Re-tail brokers, while largely controlled and regulated in theUSA by the Commodity Futures Trading Commissionand National Futures Association, have in the past beensubjected to periodic foreign exchange fraud.[67][68] Todeal with the issue, in 2010 the NFA required its mem-bers that deal in the Forexmarkets to register as such (I.e.,Forex CTA instead of a CTA). Those NFAmembers thatwould traditionally be subject to minimum net capital re-quirements, FCMs and IBs, are subject to greater mini-mum net capital requirements if they deal in Forex. Anumber of the foreign exchange brokers operate fromthe UK under Financial Services Authority regulationswhere foreign exchange trading using margin is part ofthe wider over-the-counter derivatives trading industry

that includes Contract for dierences and nancial spreadbetting.There are two main types of retail FX brokers oeringthe opportunity for speculative currency trading: brokersand dealers or market makers. Brokers serve as an agentof the customer in the broader FX market, by seeking thebest price in the market for a retail order and dealing onbehalf of the retail customer. They charge a commissionor mark-up in addition to the price obtained in the mar-ket. Dealers or market makers, by contrast, typically actas principal in the transaction versus the retail customer,and quote a price they are willing to deal at.

3.7 Non-bank foreign exchange companiesNon-bank foreign exchange companies oer currency ex-change and international payments to private individu-als and companies. These are also known as foreign ex-change brokers but are distinct in that they do not of-fer speculative trading but rather currency exchange withpayments (i.e., there is usually a physical delivery of cur-rency to a bank account).It is estimated that in the UK, 14% of currencytransfers/payments[69] are made via Foreign ExchangeCompanies. These companies selling point is usuallythat they will oer better exchange rates or cheaper pay-ments than the customers bank.[70] These companies dif-fer from Money Transfer/Remittance Companies in thatthey generally oer higher-value services.

3.8 Money transfer/remittance companiesand bureaux de change

Money transfer companies/remittance companies per-form high-volume low-value transfers generally by eco-nomic migrants back to their home country. In 2007,the Aite Group estimated that there were $369 billionof remittances (an increase of 8% on the previous year).The four largest markets (India, China, Mexico and thePhilippines) receive $95 billion. The largest and bestknown provider is Western Union with 345,000 agentsglobally followed by UAE ExchangeBureaux de change or currency transfer companies pro-vide low value foreign exchange services for travelers.These are typically located at airports and stations or attourist locations and allow physical notes to be exchangedfrom one currency to another. They access the foreign ex-change markets via banks or non bank foreign exchangecompanies.

4 Trading characteristicsThere is no unied or centrally cleared market for themajority of trades, and there is very little cross-border

6 5 DETERMINANTS OF EXCHANGE RATES

regulation. Due to the over-the-counter (OTC) natureof currency markets, there are rather a number of in-terconnected marketplaces, where dierent currenciesinstruments are traded. This implies that there is nota single exchange rate but rather a number of dierentrates (prices), depending on what bank or market makeris trading, and where it is. In practice the rates are quiteclose due to arbitrage. Due to Londons dominance in themarket, a particular currencys quoted price is usually theLondon market price. Major trading exchanges includeElectronic Broking Services (EBS) and Thomson ReutersDealing, while major banks also oer trading systems.A joint venture of the Chicago Mercantile Exchange andReuters, called Fxmarketspace opened in 2007 and as-pired but failed to the role of a central market clearingmechanism.Themain trading centers are NewYork City and London,though Tokyo, Hong Kong and Singapore are all impor-tant centers as well. Banks throughout the world partici-pate. Currency trading happens continuously throughoutthe day; as the Asian trading session ends, the Europeansession begins, followed by the North American sessionand then back to the Asian session, excluding weekends.Fluctuations in exchange rates are usually caused by ac-tual monetary ows as well as by expectations of changesin monetary ows caused by changes in gross domesticproduct (GDP) growth, ination (purchasing power par-ity theory), interest rates (interest rate parity, DomesticFisher eect, International Fisher eect), budget andtrade decits or surpluses, large cross-border M&A dealsand other macroeconomic conditions. Major news is re-leased publicly, often on scheduled dates, so many peoplehave access to the same news at the same time. However,the large banks have an important advantage; they can seetheir customers order ow.Currencies are traded against one another in pairs. Eachcurrency pair thus constitutes an individual trading prod-uct and is traditionally noted XXXYYY or XXX/YYY,where XXX and YYY are the ISO 4217 internationalthree-letter code of the currencies involved. The rst cur-rency (XXX) is the base currency that is quoted relative tothe second currency (YYY), called the counter currency(or quote currency). For instance, the quotation EURUSD(EUR/USD) 1.5465 is the price of the Euro expressed inUS dollars, meaning 1 euro = 1.5465 dollars. The mar-ket convention is to quote most exchange rates againstthe USD with the US dollar as the base currency (e.g.USDJPY, USDCAD, USDCHF). The exceptions are theBritish pound (GBP), Australian dollar (AUD), the NewZealand dollar (NZD) and the euro (EUR) where theUSD is the counter currency (e.g. GBPUSD, AUDUSD,NZDUSD, EURUSD).The factors aecting XXX will aect both XXXYYYand XXXZZZ. This causes positive currency correlationbetween XXXYYY and XXXZZZ.On the spot market, according to the 2013 Triennial Sur-

vey, the most heavily traded bilateral currency pairs were:

EURUSD: 24.1% USDJPY: 18.3% GBPUSD (also called cable): 8.8%

and the US currency was involved in 87.0% of transac-tions, followed by the euro (33.4%), the yen (23.0%),and sterling (11.8%) (see table). Volume percentages forall individual currencies should add up to 200%, as eachtransaction involves two currencies.Trading in the euro has grown considerably since the cur-rencys creation in January 1999, and how long the for-eign exchange market will remain dollar-centered is opento debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved twotrades: EURUSD and USDZZZ. The exception to thisis EURJPY, which is an established traded currency pairin the interbank spot market. As the dollars value haseroded during 2008, interest in using the euro as refer-ence currency for prices in commodities (such as oil), aswell as a larger component of foreign reserves by banks,has increased dramatically. Transactions in the curren-cies of commodity-producing countries, such as AUD,NZD, CAD, have also increased.

5 Determinants of exchange ratesMain article: Exchange rate

The following theories explain the uctuations in ex-change rates in a oating exchange rate regime (In a xedexchange rate regime, rates are decided by its govern-ment):

1. International parity conditions: Relative purchasingpower parity, interest rate parity, Domestic Fishereect, International Fisher eect. Though to someextent the above theories provide logical explana-tion for the uctuations in exchange rates, yet thesetheories falter as they are based on challengeable as-sumptions [e.g., free ow of goods, services and cap-ital] which seldom hold true in the real world.

2. Balance of payments model: This model, however,focuses largely on tradable goods and services, ig-noring the increasing role of global capital ows. Itfailed to provide any explanation for continuous ap-preciation of dollar during the 1980s and most partof the 1990s in face of soaring US current accountdecit.

3. Asset market model: views currencies as an impor-tant asset class for constructing investment portfo-lios. Assets prices are inuenced mostly by peoples

5.2 Political conditions 7

willingness to hold the existing quantities of assets,which in turn depends on their expectations on thefuture worth of these assets. The asset market modelof exchange rate determination states that the ex-change rate between two currencies represents theprice that just balances the relative supplies of, anddemand for, assets denominated in those curren-cies.

None of the models developed so far succeed to explainexchange rates and volatility in the longer time frames.For shorter time frames (less than a few days) algorithmscan be devised to predict prices. It is understood fromthe abovemodels thatmanymacroeconomic factors aectthe exchange rates and in the end currency prices are aresult of dual forces of demand and supply. The worldscurrency markets can be viewed as a huge melting pot: ina large and ever-changing mix of current events, supplyand demand factors are constantly shifting, and the priceof one currency in relation to another shifts accordingly.No other market encompasses (and distills) as much ofwhat is going on in the world at any given time as foreignexchange.[73]

Supply and demand for any given currency, and thus itsvalue, are not inuenced by any single element, but ratherby several. These elements generally fall into three cate-gories: economic factors, political conditions and marketpsychology.

5.1 Economic factors

These include: (a) economic policy, disseminated by gov-ernment agencies and central banks, (b) economic condi-tions, generally revealed through economic reports, andother economic indicators.

Economic policy comprises government scal pol-icy (budget/spending practices) and monetary pol-icy (the means by which a governments central bankinuences the supply and cost of money, which isreected by the level of interest rates).

Government budget decits or surpluses: The mar-ket usually reacts negatively to widening governmentbudget decits, and positively to narrowing budgetdecits. The impact is reected in the value of acountrys currency.

Balance of trade levels and trends: The trade owbetween countries illustrates the demand for goodsand services, which in turn indicates demand for acountrys currency to conduct trade. Surpluses anddecits in trade of goods and services reect thecompetitiveness of a nations economy. For exam-ple, trade decits may have a negative impact on anations currency.

Ination levels and trends: Typically a currencywill lose value if there is a high level of ina-tion in the country or if ination levels are per-ceived to be rising. This is because ination erodespurchasing power, thus demand, for that particu-lar currency. However, a currency may sometimesstrengthen when ination rises because of expecta-tions that the central bank will raise short-term in-terest rates to combat rising ination.

Economic growth and health: Reports such as GDP,employment levels, retail sales, capacity utilizationand others, detail the levels of a countrys economicgrowth and health. Generally, the more healthy androbust a countrys economy, the better its currencywill perform, and the more demand for it there willbe.

Productivity of an economy: Increasing productivityin an economy should positively inuence the valueof its currency. Its eects are more prominent if theincrease is in the traded sector.[74]

5.2 Political conditionsInternal, regional, and international political conditionsand events can have a profound eect on currency mar-kets.All exchange rates are susceptible to political instabilityand anticipations about the new ruling party. Political up-heaval and instability can have a negative impact on a na-tions economy. For example, destabilization of coalitiongovernments in Pakistan and Thailand can negatively af-fect the value of their currencies. Similarly, in a countryexperiencing nancial diculties, the rise of a politicalfaction that is perceived to be scally responsible can havethe opposite eect. Also, events in one country in a re-gion may spur positive/negative interest in a neighboringcountry and, in the process, aect its currency.

5.3 Market psychologyMarket psychology and trader perceptions inuence theforeign exchange market in a variety of ways:

Flights to quality: Unsettling international eventscan lead to a "ight-to-quality", a type of capitalight whereby investors move their assets to a per-ceived "safe haven". There will be a greater de-mand, thus a higher price, for currencies perceivedas stronger over their relatively weaker counterparts.The US dollar, Swiss franc and gold have been tra-ditional safe havens during times of political or eco-nomic uncertainty.[75]

Long-term trends: Currency markets often move invisible long-term trends. Although currencies do not

8 6 FINANCIAL INSTRUMENTS

have an annual growing season like physical com-modities, business cycles do make themselves felt.Cycle analysis looks at longer-term price trends thatmay rise from economic or political trends.[76]

Buy the rumor, sell the fact": This market truismcan apply to many currency situations. It is the ten-dency for the price of a currency to reect the impactof a particular action before it occurs and, when theanticipated event comes to pass, react in exactly theopposite direction. This may also be referred to asa market being oversold or overbought.[77] Tobuy the rumor or sell the fact can also be an exam-ple of the cognitive bias known as anchoring, wheninvestors focus too much on the relevance of outsideevents to currency prices.

Economic numbers: While economic numbers cancertainly reect economic policy, some reports andnumbers take on a talisman-like eect: the numberitself becomes important to market psychology andmay have an immediate impact on short-term mar-ket moves. What to watch can change over time.In recent years, for example, money supply, employ-ment, trade balance gures and ination numbershave all taken turns in the spotlight.

Technical trading considerations: As in other mar-kets, the accumulated price movements in a cur-rency pair such as EUR/USD can form apparentpatterns that traders may attempt to use. Manytraders study price charts in order to identify suchpatterns.[78]

6 Financial instruments

6.1 Spot

Main article: Foreign exchange spot

A spot transaction is a two-day delivery transaction (ex-cept in the case of trades between theUS dollar, Canadiandollar, Turkish lira, euro and Russian ruble, which set-tle the next business day), as opposed to the futures con-tracts, which are usually three months. This trade repre-sents a direct exchange between two currencies, has theshortest time frame, involves cash rather than a contract,and interest is not included in the agreed-upon transac-tion. Spot trading is one of the most common types ofForex Trading. Often, a forex broker will charge a smallfee to the client to roll-over the expiring transaction intoa new identical transaction for a continuum of the trade.This roll-over fee is known as the Swap fee.

6.2 ForwardSee also: Forward contract

One way to deal with the foreign exchange risk is to en-gage in a forward transaction. In this transaction, moneydoes not actually change hands until some agreed uponfuture date. A buyer and seller agree on an exchange ratefor any date in the future, and the transaction occurs onthat date, regardless of what the market rates are then.The duration of the trade can be one day, a few days,months or years. Usually the date is decided by both par-ties. Then the forward contract is negotiated and agreedupon by both parties.

6.3 SwapMain article: Foreign exchange swap

The most common type of forward transaction is the for-eign exchange swap. In a swap, two parties exchange cur-rencies for a certain length of time and agree to reversethe transaction at a later date. These are not standardizedcontracts and are not traded through an exchange. A de-posit is often required in order to hold the position openuntil the transaction is completed.

6.4 FuturesMain article: Currency future

Futures are standardized forward contracts and are usu-ally traded on an exchange created for this purpose. Theaverage contract length is roughly 3 months. Futures con-tracts are usually inclusive of any interest amounts.Currency futures contracts are contracts specifying astandard volume of a particular currency to be exchangedon a specic settlement date. Thus the currency futurescontracts are similar to forward contracts in terms of theirobligation, but dier from forward contracts in the waythey are traded. They are commonly used by MNCs tohedge their currency positions. In addition they are tradedby speculators who hope to capitalize on their expecta-tions of exchange rate movements.

6.5 OptionMain article: Foreign exchange option

A foreign exchange option (commonly shortened to justFX option) is a derivative where the owner has the rightbut not the obligation to exchange money denominatedin one currency into another currency at a pre-agreed ex-change rate on a specied date. The FX options market

9is the deepest, largest and most liquid market for optionsof any kind in the world.

7 Speculation

Controversy about currency speculators and their eecton currency devaluations and national economies recursregularly. Nevertheless, economists including MiltonFriedman have argued that speculators ultimately are astabilizing inuence on the market and perform the im-portant function of providing a market for hedgers andtransferring risk from those people who don't wish to bearit, to those who do.[79] Other economists, such as JosephStiglitz, consider this argument to be based more on pol-itics and a free market philosophy than on economics.[80]

Large hedge funds and other well capitalized positiontraders are the main professional speculators. Accordingto some economists, individual traders could act as "noisetraders" and have a more destabilizing role than largerand better informed actors.[81] Also to be considered isthe rise in foreign exchange autotrading; algorithmic, orautomated, trading has increased from 2% in 2004 up to45% in 2010.[82]

Currency speculation is considered a highly suspect ac-tivity in many countries. While investment in traditionalnancial instruments like bonds or stocks often is consid-ered to contribute positively to economic growth by pro-viding capital, currency speculation does not; accordingto this view, it is simply gambling that often interfereswith economic policy. For example, in 1992, currencyspeculation forced the Central Bank of Sweden to raiseinterest rates for a few days to 500% per annum, and laterto devalue the krona.[83] Mahathir Mohamad, one of theformer Prime Ministers of Malaysia, is one well-knownproponent of this view. He blamed the devaluation ofthe Malaysian ringgit in 1997 on George Soros and otherspeculators.Gregory Millman reports on an opposing view, compar-ing speculators to vigilantes who simply help enforceinternational agreements and anticipate the eects of ba-sic economic laws in order to prot.[84]

In this view, countries may develop unsustainable -nancial bubbles or otherwise mishandle their nationaleconomies, and foreign exchange speculators made theinevitable collapse happen sooner. A relatively quick col-lapse might even be preferable to continued economicmishandling, followed by an eventual, larger, collapse.Mahathir Mohamad and other critics of speculation areviewed as trying to deect the blame from themselves forhaving caused the unsustainable economic conditions.

8 Risk aversionSee also: Safe-haven currencyRisk aversion is a kind of trading behavior exhibited by

Fig.1 Chart showing MSCI World Index of Equities fell while theUS dollar Index rose.

the foreign exchange market when a potentially adverseevent happens which may aect market conditions. Thisbehavior is caused when risk averse traders liquidate theirpositions in risky assets and shift the funds to less riskyassets due to uncertainty.[85]

In the context of the foreign exchange market, traders liq-uidate their positions in various currencies to take up po-sitions in safe-haven currencies, such as the US dollar.[86]Sometimes, the choice of a safe haven currency is more ofa choice based on prevailing sentiments rather than one ofeconomic statistics. An example would be the FinancialCrisis of 2008. The value of equities across the world fellwhile the US dollar strengthened (see Fig.1). This hap-pened despite the strong focus of the crisis in the USA.[87]

9 Carry tradeMain article: Carry trade

Currency carry trade refers to the act of borrowing onecurrency that has a low interest rate in order to purchaseanother with a higher interest rate. A large dierencein rates can be highly protable for the trader, especiallyif high leverage is used. However, with all levered in-vestments this is a double edged sword, and large ex-change rate uctuations can suddenly swing trades intohuge losses.

10 Forex signalsMain article: Forex signal

Forex trade alerts, often referred to as forex signals, aretrade strategies provided by either experienced traders ormarket analysts. These signals which are often chargeda premium fee for can then be copied or replicated by a

10 12 REFERENCES

trader to his own live account. Forex signal products arepackaged as either alerts delivered to a users inbox orSMS, or can be installed to a traders trading platforms.Algorithmic trading, whereby foreign exchange users canprogramme (or buy ready made software) to place tradeson their behalf, according to pre-determined rules has be-come very popular in recent years. This means that userscan set their 'Algos to trade on their behalf, thus reduc-ing the need to sit and monitor the markets continuously,plus it can remove the element of human emotion aroundexecuting a trade.

11 See also

12 References[1] Record, Neil, Currency Overlay (Wiley Finance Series)

[2] The Economist Guide to the Financial Markets (pdf)

[3] Global imbalances and destabilizing speculation (2007),UNCTAD Trade and development report 2007 (Chapter1B).

[4] http://www.bis.org/press/p130905.htm

[5] 2013 Triennial Central Bank Survey, Bank for Interna-tional Settlements.

[6] "What is Foreign Exchange?". Published by theInternational Business Times AU. Retrieved: February 11,2011.

[7] CR Geisst Encyclopedia of American Business HistoryInfobase Publishing, 1 Jan 2009 Retrieved 2012-07-14ISBN 1438109873

[8] GW Bromiley International Standard Bible Encyclope-dia: AD Wm. B. Eerdmans Publishing, 13 Feb 1995Retrieved 2012-07-14 ISBN 0802837816

[9] T Crump The Phenomenon of Money (Routledge Re-vivals) Taylor & Francis US, 14 Jan 2011 Retrieved 2012-07-14 ISBN 0415611873

[10] J Hasebroek Trade and Politics in Ancient Greece Biblo& Tannen Publishers, 1 Mar 1933 Retrieved 2012-07-14ISBN 0819601500

[11] http://www.ancient.eu.com/article/115/

[12] RC Smith, I Walter, G DeLong Global Banking Ox-ford University Press, 17 Jan 2012 Retrieved 2012-07-13ISBN 0195335937

[13] (tertiary) G Vasari The Lives of the Artists Retrieved2012-07-13 ISBN 019283410X

[14] (page 130 of ) RA De Roover The Rise and Declineof the Medici Bank: 1397-1494 Beard Books, 1999 Re-trieved 2012-07-14 ISBN 1893122328

[15] RADe Roover TheMedici Bank: its organization, man-agement, operations and decline New York Univ. Press,1948 Retrieved 2012-07-14

[16] Cambridge dictionaries online nostro account

[17] Oxford dictionaries online nostro account

[18] SHomer, Richard E Sylla AHistory of Interest Rates JohnWiley & Sons, 29 Aug 2005 Retrieved 2012-07-14 ISBN0471732834

[19] T Southclie Ashton An Economic History of England:The 18th Century, Volume 3 Taylor & Francis, 1955 Re-trieved 2012-07-13

[20] (page 196 of) JW Markham A Financial History of theUnited States, Volumes 12M.E. Sharpe, 2002 Retrieved2012-07-14 ISBN 0765607301

[21] (page 847) of M Pohl, European Association for BankingHistory Handbook on the History of European BanksEdward Elgar Publishing, 1994 Retrieved 2012-07-14

[22] (secondary) Retrieved 2012-07-13

[23] S Shamah A Foreign Exchange Primer ["1880 is within1.2 Value Terms] John Wiley & Sons, 22 Nov 2011 Re-trieved 2102-07-27 ISBN 1119994896

[24] T Hong Foreign Exchange Control in China: First Edi-tion (Asia Business Law Series Volume 4) Kluwer LawInternational, 2004 ISBN 9041124268 Retrieved 2013-01-12

[25] P Mathias, S Pollard The Cambridge Economic Historyof Europe: The industrial economies : the development ofeconomic and social policies Cambridge University Press,1989 Retrieved 2012-07-13 ISBN 0521225043

[26] S Misra, PK Yadav International Business: Text AndCases PHI Learning Pvt. Ltd. 2009 Retrieved 2012-07-27 ISBN 8120336526

[27] P. L. Cottrell Centres and Peripheries in Banking:The Historical Development of Financial Markets Ash-gate Publishing, Ltd., 2007 Retrieved 2012-07-13 ISBN0754661210

[28] P. L. Cottrell (p.75)

[29] J Atkin The Foreign Exchange Market Of London: De-velopment Since 1900 Psychology Press, 2005 Retrieved2012-07-13 ISBN 041534901X

[30] J Wake Kleinwort, Benson: The History of Two Fami-lies in Banking Oxford University Press, 27 Feb 1997 Re-trieved 2012-07-13 ISBN 0198282990

[31] Laurence S. Copeland Exchange Rates and InternationalFinance Pearson Education, 2008 Retrieved 2012-07-15ISBN 0273710273

[32] M Sumiya A History of Japanese Trade and IndustryPolicy Oxford University Press, 2000 Retrieved 2012-07-13 ISBN 0198292511

[33] RC Smith, I Walter, G DeLong (p.4)

[34] AH Meltzer A History of the Federal Reserve, Volume2, Book 1; Books 19511969University of Chicago Press,1 Feb 2010 Retrieved 2012-07-14 ISBN 0226520013

11

[35] (page 7 xed exchange rates of) DF DeRosa Optionson Foreign Exchange Retrieved 2012-07-15

[36] K Butcher Forex Made Simple: A Beginners Guide toForeign Exchange Success John Wiley and Sons, 18 Feb2011 Retrieved 2012-07-13 ISBN 0730375250

[37] J Madura International Financial Management Cen-gage Learning, 12 Oct 2011 Retrieved 2012-07-14 ISBN0538482966

[38] N DraKoln Forex for Small Speculators Enlightened Fi-nancial Press, 1 Apr 2004 Retrieved 2012-07-13 ISBN0966624580

[39] (SFOMagazine, RRWasendorf, Jr.) (INT) Forex Trad-ing PARosenstreich The Evolution of FX and EmergingMarkets Traders Press, 30 Jun 2009 Retrieved 2012-07-13 ISBN 1934354104

[40] J Jagerson, SW Hansen All About Forex TradingMcGraw-Hill Professional, 17 Jun 2011 Retrieved 2012-07-13 ISBN 007176822X

[41] Franz Pick Picks currency yearbook 1977 Retrieved2012-07-15

[42] page 70 of Swoboda

[43] G Gandolfo International Finance and Open-EconomyMacroeconomics Springer, 2002 Retrieved 2012-07-15ISBN 3540434593

[44] City of London: The History Random House, 31 Dec2011 Retrieved 2012-07-15 ISBN 1448114721

[45] C Robles How To Prot From The Falling Dol-lar AuthorHouse, 2007 Retrieved 2012-07-15 ISBN1434311023

[46] Thursday was aborted by news of a record assault on thedollar that forced the closing of most foreign exchangemarkets. in The outlook: Volume 45, published by Stan-dard and Poors Corporation 1972 Retrieved 2012-07-15

[47] HGiersch, K-H Paqu, H Schmieding The FadingMira-cle: Four Decades of Market Economy in Germany Cam-bridge University Press, 10 Nov 1994 Retrieved 2012-07-15 ISBN 0521358698

[48] International Center for Monetary and Banking Studies,AK Swoboda Capital Movements and Their Control:Proceedings of the Second Conference of the Interna-tional Center for Monetary and Banking Studies BRILL,1976 Retrieved 2012-07-15 ISBN 902860295X

[49] ( -p. 332 of ) MR Brawley Power, Money, And Trade:Decisions That Shape Global Economic Relations Univer-sity of Toronto Press, 2005 Retrieved 2012-07-15 ISBN1551116839

[50] "... forced to close for several days in mid-1972, ... Theforeign exchange markets were closed again on two oc-casions at the beginning of 1973,.. " in H-J Rstow Newpaths to full employment: the failure of orthodox economictheoryMacmillan, 1991 Retrieved 2012-07-15

[51] J Chen Essentials of Foreign Exchange Trading JohnWiley & Sons, 9 Mar 2009 Retrieved 2012-07-13 ISBN0470390867

[52] (page 1 of) AHicks Managing Currency RiskUsing For-eign Exchange Options Woodhead Publishing, 2000 Re-trieved 2012-07-14 ISBN 1855734915

[53] (secondary) -GG Johnson Formulation of Exchange RatePolicies in Adjustment Programs International Mone-tary Fund, 15 Aug 1985 Retrieved 2012-07-14 ISBN0939934507

[54] JA Dorn China in the New Millennium: Market Re-forms and Social Development Cato Institute, 1998 Re-trieved 2012-07-14 ISBN 1882577612

[55] B Laurens, H Mehran, M Quintyn, T Nordman Monetary and Exchange System Reforms in China: AnExperiment in Gradualism International Monetary Fund,26 Sep 1996 Retrieved 2012-07-14 ISBN 1452766126

[56] Y-I Chung South Korea in the Fast Lane: Eco-nomic Development and Capital Formation Oxford Uni-versity Press, 20 Jul 2007 Retrieved 2012-07-14 ISBN0195325451

[57] KM Dominguez, JA Frankel Does Foreign ExchangeIntervention Work? Peterson Institute, 1993 Retrieved2012-07-14 ISBN 0881321044

[58] (page 211 [source BIS 2007])H Van Den Berg International Finance and Open-Economy Macroeco-nomics: Theory, History, and Policy World Scientic, 31Aug 2010 Retrieved 2012-07-14 ISBN 9814293512

[59] PJ Quirk Issues in International Exchange and PaymentsSystems International Monetary Fund, 13 Apr 1995 Re-trieved 2012-07-14 ISBN 1557754802

[60] BIS Triennial Central Bank Survey - Foreign exchangeand derivatives market activity in April 2010, publishedin September 2010.

[61] Singapore Overtakes Japan as Asias Top Foreign-Exchange Hub. Bloomberg. September 6, 2013.

[62] Derivatives in emerging markets, the Bank for Interna-tional Settlements, December 13, 2010

[63] The $4 trillion question: what explains FX growth sincethe 2007 survey?, the Bank for International Settlements,December 13, 2010

[64] Source: Euromoney FX survey 2014 : The EuromoneyFX survey is the largest global poll of foreign exchangeservice providers.'

[65] Gabriele Galati, MichaelMelvin (December 2004). Whyhas FX trading surged? Explaining the 2004 triennial sur-vey. Bank for International Settlements.

[66] Alan Greenspan, The Roots of the Mortgage Crisis: Bub-bles cannot be safely defused by monetary policy beforethe speculative fever breaks on its own. , the Wall StreetJournal, December 12, 2007

12 13 EXTERNAL LINKS

[67] McKay, Peter A. (2005-07-26). Scammers Operatingon Periphery Of CFTCs Domain Lure Little Guy WithFantastic Promises of Prots. The Wall Street Journal(Dow Jones and Company). Retrieved 2007-10-31.

[68] Egan, Jack (2005-06-19). Check the Currency Risk.Then Multiply by 100. The New York Times. Retrieved2007-10-30.

[69] The Sunday Times (UK), 16 July 2006

[70] http://www.choice.com.au/reviews-and-tests/money/banking/travel-money/overseas-money-transfers/page.aspx

[71] Worlds Most Traded Currencies By Value 2012. http://www.investopedia.com/. Retrieved 10 June 2013.

[72] The total sum is 200% because each currency trade alwaysinvolves a currency pair.

[73] The Microstructure Approach to Exchange Rates,Richard Lyons, MIT Press (pdf chapter 1)

[74] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=711362

[75] Safe Haven Currency. Financial Glossary (Reuters).Retrieved 22 April 2013.

[76] John J. Murphy, Technical Analysis of the Financial Mar-kets (New York Institute of Finance, 1999), pp. 343375.

[77] Overbought. Investopedia. Retrieved 22 April 2013.

[78] Sam Y. Cross, All About the Foreign Exchange Marketin the United States, Federal Reserve Bank of New York(1998), chapter 11, pp. 113115.

[79] Michael A. S. Guth, "Protable Destabilizing Specula-tion, Chapter 1 in Michael A. S. Guth, Speculative be-havior and the operation of competitive markets under un-certainty, Avebury Ashgate Publishing, Aldorshot, Eng-land (1994), ISBN 1-85628-985-0.

[80] What I Learned at the World Economic Crisis JosephStiglitz, The New Republic, April 17, 2000, reprinted atGlobalPolicy.org

[81] Summers LH and Summers VP (1989) 'When nancialmarkets work too well: a Cautious case for a securitiestransaction tax' Journal of nancial services

[82] Anatomy of the Forex Market. Pepperstone. Retrieved22 April 2013.

[83] But Don't RushOut to BuyKronor: Swedens 500%Gam-ble International Herald Tribune

[84] Gregory J. Millman, Around the World on a Trillion Dol-lars a Day, Bantam Press, New York, 1995.

[85] Risk Averse. Investopedia. Retrieved 2010-02-25.

[86] Moon, Angela (2010-02-05). Global markets USstocks rebound, dollar gains on risk aversion. Reuters.Retrieved 2010-02-27.

[87] Stewart, Heather (2008-04-09). IMF says US crisis is'largest nancial shock since Great Depression'". London:guardian.co.uk. Retrieved 2010-02-27.

13 External links Frankel, Jerey A. (2008). Foreign Exchange.In David R. Henderson (ed.). Concise Encyclope-dia of Economics (2nd ed.). Indianapolis: Libraryof Economics and Liberty. ISBN 978-0865976658.OCLC 237794267.

A users guide to the Triennial Central Bank Surveyof foreign exchange market activity, Bank for Inter-national Settlements

London Foreign Exchange Committee with links(on right) to committees in NY, Tokyo, Canada,Australia, HK, Singapore

United States Federal Reserve daily update of ex-change rates

Bank of Canada historical (10-year) currency con-verter and data download

OECD Exchange rate statistics (monthly averages) National Futures Association (2010). Trading inthe Retail O-Exchange Foreign Currency Market.Chicago, Illinois.

13

14 Text and image sources, contributors, and licenses14.1 Text

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14 14 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

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HistoryAncientMedieval and laterEarly modernModern to post-modernAfter WWIIMarkets closeAfter 1973

Market size and liquidityMarket participantsCommercial companiesCentral banksForeign exchange fixingHedge funds as speculatorsInvestment management firmsRetail foreign exchange tradersNon-bank foreign exchange companiesMoney transfer/remittance companies and bureaux de change

Trading characteristicsDeterminants of exchange ratesEconomic factorsPolitical conditionsMarket psychology

Financial instrumentsSpotForwardSwapFuturesOption

SpeculationRisk aversionCarry tradeForex signalsSee alsoReferencesExternal linksText and image sources, contributors, and licensesTextImagesContent license