Foreign exchange

There is no central order book. Agreements are bilateral, which means several prices for the same pair exist at once at different institutions and none of them is the official one, and it means the standing of the party on the other side is part of what a participant carries. Trading runs continuously from the Asian open at the start of the week to the New York close at the end of it, through overlapping regional sessions whose depth differs markedly. Every quotation is relative: a position in a currency pair is a view on one currency stated in terms of another, never on a currency alone.

A pair is written base currency first, and the rate states how many units of the quote currency one unit of the base costs, with a bid and an ask around it. Turnover is heavily concentrated in a handful of pairs involving the United States dollar, and the largest share of it is not spot at all but swaps and forwards used to move exposure across dates, which surprises readers who picture foreign exchange as a market in immediate delivery.

Because the market is decentralised, it produces no consolidated tape and no official closing price. Any close quoted on a chart is a convention chosen by the data provider, usually a fixed cut in a stated time zone, so two providers can show different daily closes for the same pair and both be correct. That is also why sessions, rather than exchange hours, are the useful unit for thinking about when depth is present.