FX MARKET TRENDS by Keith Raphael
Global Integration And Volatility in
The Currency Markets
EVOLUTION PART THREE
Troughout the 1990’s, I presented the premise of the transition from Horizontal Integration of the markets to Vertical Integration of the markets. From the 1500’s until the mid-1900’s [Part One of this Evolution], most intercontinental global trade took place between Europe and Asia, then Europe and North America, then
28 FX TRADER MAGAZINE April - June 2014
Europe and South America, and finally North America and Asia. Tere was no standardized exchange until the tail end of this period, and volatility was only contained by loosely networked arbitrage.
Ten came the end of the Gold
Standard in 1971 and the onset of free floating currencies. Te volatility which we FX desk traders experienced
into the early 1990’s was the result of a lack of effective policy coordination between the G-10 of the era, as well as the high concentration of capital of the speculators of the times. Te complexity of the influences on the currency markets deterred smaller speculators, and barriers to entry deterred others.
As the horizontal integration of
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