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Forex Market: Unlocking Opportunities for Investors

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This is a commercial collaboration with Compare Forex Brokers.


The Forex Market

Forex Market: Unlocking Opportunities for Investors

In 2019, the global foreign exchange market (forex) was valued at a jaw-dropping $2.4 quadrillion.

In fact, this is equal to more than 50 times China, Japan, Germany, India and the U.S.’s economic output combined. Institutional investors, such as investment banks, pension funds, and large corporations have typically dominated this space, but there are avenues for individuals to enter the market as well.

This infographic from Compare Forex Brokers breaks down the world’s most interconnected financial market, and how individual investors can start trading.

The Forex Market: A Global Landscape

Across the forex market, 170 major, minor, and exotic currency pairs can be traded as contracts for difference (CFDs). A CFD enables you to speculate on whether the price of an asset will rise or fall.

Here, trades are conducted on over the counter (OTC) markets—non-centralized markets made up of a network of participants. This is different from traditional markets, such as the S&P 500 and the Nasdaq, which operate on formal, centralized exchanges.

While the forex market is by nature, decentralized, these core regions show where forex transactions are most concentrated by market participants including banks, commercial businesses, or individual investors.

Globally, the majority of forex trading takes place within the following hubs.

Forex Trading Centers (2019)CountryShare of Global Over the Counter (OTC) Forex Turnover
1UK43.1%
2U.S.16.5%
3Singapore7.6%
4Hong Kong7.6%
5Japan4.5%
6Switzerland3.3%
7France2.0%
8China1.6%
9Germany1.5%
10Australia1.4%

Source: BIS

The UK accounts for over 43% of global forex trading, averaging $2.7 trillion daily according to the 2019 Triennial Central Bank Survey by the Bank for International Settlements. London’s geographic location between the U.S. and Asia makes it an optimal forex trading centre—a trend that has held strong over the last 50 years.

With forex trading in the U.S. jumping over 50% in the last decade, the U.S. is the next most active forex market. Meanwhile, averaging $633 billion in trading volumes in 2019, Singapore is Asia’s largest forex trading center, with Hong Kong following close behind.

The Top Seven Currency Pairs

What are the most highly-traded currency pairs?

Overall, 68% of global forex trading falls into seven major currency pairs.

 Top Seven Currency PairsPercentage of Total
1United States Dollar vs Euro24.0%
2United States Dollar vs Japanese Yen17.8%
3United States Dollar vs Great British Pound9.3%
4United States Dollar vs Australian Dollar5.2%
5United States Dollar vs Canadian Dollar4.3%
6United States Dollar vs Chinese Yuan3.8%
7United States Dollar vs Swiss Franc3.6%

Source: BIS

Currency prices are impacted by factors including inflation, international trade, political stability, among other macroeconomic factors.

Breaking Down Institutional and Retail Trading

While commercial and central banks, hedge funds, and investment managers make up most of the forex market, only 5.5% are individual investors.

Importantly, they differ in a few key ways.

Institutional Forex TradingRetail Forex Trading
- Buy and sell the physical currency


- Interdealer market: Large institutions trade on an interdealer market, which is a non-centralized network of dealers


- Less formal: Often trades are conducted by phone, email or instant message.


- Non-transparent: Execution prices and buy/sell orders are not visible to the market.
- Buy and sell contracts for difference (CFD)


- Contracts for Difference (CFD): CFDs allow traders to speculate on the price of an underlying asset. Traders do not own the underlying asset.


- Long and Short Trades: Traders can take a long or short position:


- Long position: buying a CFD with the expectation the asset's market price will increase.


- Short position: selling a CFD with the expectation the asset's market price will decrease.

For various reasons, retail forex trading increases in popularity year after year. However, before diving in, it is important to know the stakes involved in this speculative market.

Understanding the High Risk of Forex Trading

Retail forex trading is, at is core, very risky.

In 2019, 71% of all retail forex trades lost money. One explanation is the highly leveraged nature of the market—many investors trade using borrowed money. But while trading with leverage can magnify losses, it also applies to gains.

Key Benefits of the Forex Market

While there is risk inherent in the market, what are some of the advantages in forex trading?

  1. Low transaction costs: No exchange or regulatory fees. Overall trading costs are low with both commission and no commission pricing structures available.
  2. High liquidity: Along with being the largest market globally, it is also the most liquid with $6.6 trillion in daily trading volume.
  3. 24-hour market: Trading is not confined to limited hours or time zones.
  4. Leverage: Forex brokers offer retail traders leverage which allows the to increase their exposure

Unlike equities, currency trading is all about relativity. A currency can depreciate overall, but can also appreciate relative to a currency that has depreciated even more.

Connect to New Markets

While big gains are possible, many trades lose money, but regulatory improvements have helped build trust in the market.

Meanwhile, multiple digital platforms provide a link to global currencies, allowing retail forex traders to enter the market and trade from any location. For those comfortable taking more risk, currency markets offer opportunities with outsized potential.

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Visualizing the Economic Impact of British Columbia’s Golden Triangle

British Columbia’s Golden Triangle generates massive revenue and investments for the province, but where did it all begin?

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BCRMA Golden Triangle

The Economic Impact of British Columbia’s Golden Triangle

At the heart of British Columbia’s mining industry lies the Golden Triangle. This region has helped transform the province’s mining industry into a significant source of revenue and investment.

In 2020, the Golden Triangle accounted for roughly 44% of the $422 million in mineral exploration expenditures in British Columbia. In 2019, the Red Chris and Brucejack mines contributed around $1 billion to the province’s estimated annual gross mining revenues.

This infographic is sponsored by the B.C. Regional Mining Alliance (BCRMA) which brings the best of this region to the world through a partnership between indigenous groups, industry, and provincial government representatives.

Here is how the Golden Triangle began.

The Golden Triangle’s Unique Geology

Between 220 and 175 million years ago, the Golden Triangle’s wealth was forming deep in the Earth for the world to discover. Most metal deposits form from superheated water that cycle over many kilometers, collecting metal atoms as they rise to the surface of the Earth’s crust and settle into deposits.

Industry, government, and university geologists have worked for over a century to understand the Golden Triangle’s unique geology to uncover its mineral wealth. This unique geology cradles the world-class deposits that define the legendary “Golden Triangle” of British Columbia.

A History of Discovery and Mining in the Golden Triangle

Historical gold rushes brought mining to the area, but the region’s vast copper deposits will deliver the key mineral for B.C.’s green future. More than 150 mines have operated in the area since prospectors first arrived at the end of the 19th century.

  • 1861: Alexander Choquette kicked off the Stikine Gold Rush after finding gold at the confluence of the Stikine and Anuk Rivers.
  • 1918 – 1952: The first big discovery in the Golden Triangle was at the Premier Gold Mine, which started operations in 1918. It produced 2 million ounces of gold and 45 million ounces of silver. Today, Ascot Resources is re-starting processing from this gold mine.
  • 1964: The Snip Mine was discovered by Cominco but the deposit stayed dormant until 1986. The mine produced approximately 1 million ounces of gold from 1991 until 1999. Today, Skeena Resources is advancing the Snip Project.
  • 1994: Eskay became Canada’s highest-grade gold mine and the world’s fifth largest silver producer, with production above 3 million ounces of gold and 160 million ounces of silver. Skeena Resources is also bringing the Eskay mining back into production.
  • 2009: The discovery of the Brucejack gold and silver deposit led to the development of an underground mine. The mine has produced 1,230,644 ounces of gold since it began operations in 2017.
  • 2013: The KSM Project is one of the largest undeveloped gold projects in the world. A Preliminary Feasibility Study estimates proven and probable reserves total 38.8 million ounces of gold and 10.2 billion pounds of copper.
  • 2015: The Red Chris shipped its first load of copper concentrate. In 2020 metals production was 88.3 million pounds copper and 73,787 ounces gold. Imperial Metals and Newcrest jointly operate the mine.

This long tradition of discovery and mining is laying the foundations for the next generation of investment.

Today’s Golden Age for Exploration and Development

Continued exploration is necessary for new discoveries and advancing projects to new mines. More importantly, the minerals discovered today will be needed in the low carbon economy and British Columbia—in particular, the Golden Triangle will play its part in delivering metals for renewable technology.

 British ColumbiaNorthwest Mining RegionThe Golden Triangle
2020 Projects2596726
Total Expenditures$422M$255M$184M
Drilling (meters)991,319470,058352,247
Average Expenditure Per Project$1.6M$3.4M$7.09M

Source: Based on data collected for the EY LLP, 2020 British Columbia Mineral and Coal Exploration Survey

Gold and copper account for most of the exploration in the Golden Triangle, but other commodities for the low-carbon economy such as silver, nickel, and zinc also attract interest. A strong exploration industry is the beginning for future investment, new jobs, and community development.

A Bright Future: Investing in Community

The Golden Triangle continues to attract exploration activity as infrastructure and community development lays the success for future generations and industries.

Community:

  • Agreements with First Nations (Tahltan and Nisga’a Nations)
  • 38% of expenditures stays in the region
  • 97% stays in British Columbia
  • 150+ communities benefit

Infrastructure:

  • The paving of the Stewart-Cassiar highway
  • The opening of ocean port facilities for concentrate export at Stewart
  • The completion of a $700-million high-voltage transmission line bringing power into the region

This is a new beginning for the continued economic impact of British Columbia’s Golden Triangle.

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A Geographic Breakdown of the MSCI ACWI IMI

The MSCI ACWI Investable Market Index (IMI) covers 99% of the investable global equity market. Here, we show its region and market breakdown.

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MSCI ACWI

A Geographic Breakdown of the MSCI ACWI IMI Index

How can investors track stock markets around the world?

Using the MSCI All Countries World Index Investable Market Index (MSCI ACWI IMI), investors can benchmark their portfolios to a comprehensive group of developed and emerging markets. With over $4.2 trillion in assets benchmarked to the ACWI—about 4% of all managed assets globally—the index is widely quoted.

In this graphic from MSCI, we explore a geographic breakdown of the MSCI ACWI IMI index, and how it has changed over time.

What is the MSCI ACWI IMI?

The MSCI ACWI IMI is a leading global equity index. It tracks the performance of a basket of securities that are intended to represent the entire global stock market. Altogether, it covers:

  • 9,200 securities
  • 23 developed markets
  • 27 emerging markets
  • 99% of the investable global equity market

Using a standardized approach, the index includes businesses of all sizes from small to large market capitalization.

Market Weights

The MSCI ACWI IMI Index is broken down into broad regions and specific markets, such as North America and the U.S. respectively. Below, we show the specific market weights of the index as of July 31, 2011 and July 31, 2021. We also show how much these weights have increased or decreased over the last 10 years.

MarketRegion2011 Weight2021 WeightPercentage Point Change
CanadaNorth America4.74%2.91%-1.8 p.p.
U.S.North America43.34%58.61%15.3 p.p.
AustriaEMEA0.16%0.08%-0.1 p.p.
BelgiumEMEA0.39%0.27%-0.1 p.p.
DenmarkEMEA0.42%0.68%0.3 p.p.
FinlandEMEA0.37%0.33%0.0 p.p.
FranceEMEA3.50%2.73%-0.8 p.p.
GermanyEMEA3.24%2.31%-0.9 p.p.
IrelandEMEA0.13%0.18%0.1 p.p.
IsraelEMEA0.29%0.26%0.0 p.p.
ItalyEMEA0.99%0.67%-0.3 p.p.
NetherlandsEMEA0.92%1.11%0.2 p.p.
NorwayEMEA0.42%0.24%-0.2 p.p.
PortugalEMEA0.10%0.05%-0.1 p.p.
SpainEMEA1.21%0.61%-0.6 p.p.
SwedenEMEA1.20%1.20%0.0 p.p.
SwitzerlandEMEA3.09%2.47%-0.6 p.p.
United KingdomEMEA8.28%3.99%-4.3 p.p.
ArgentinaEM0.00%0.02%0.0 p.p.
BrazilEM1.86%0.65%-1.2 p.p.
ChileEM0.21%0.06%-0.2 p.p.
ChinaEM2.32%3.76%1.4 p.p.
ColombiaEM0.10%0.02%-0.1 p.p.
Czech RepublicEM0.05%0.01%0.0 p.p.
EgyptEM0.05%0.01%0.0 p.p.
GreeceEM0.10%0.03%-0.1 p.p.
HungaryEM0.05%0.03%0.0 p.p.
IndiaEM1.01%1.40%0.4 p.p.
IndonesiaEM0.39%0.14%-0.2 p.p.
KoreaEM2.07%1.67%-0.4 p.p.
KuwaitEM0.00%0.07%0.1 p.p.
MalaysiaEM0.44%0.18%-0.3 p.p.
MexicoEM0.55%0.23%-0.3 p.p.
PakistanEM0.00%0.01%0.0 p.p.
PeruEM0.06%0.02%0.0 p.p.
PhilippinesEM0.09%0.07%0.0 p.p.
PolandEM0.23%0.10%-0.1 p.p.
QatarEM0.00%0.08%0.1 p.p.
RussiaEM0.85%0.38%-0.5 p.p.
Saudi ArabiaEM0.00%0.36%0.4 p.p.
South AfricaEM1.00%0.44%-0.6 p.p.
TaiwanEM1.63%1.85%0.2 p.p.
ThailandEM0.28%0.22%-0.1 p.p.
TurkeyEM0.20%0.05%-0.1 p.p.
United Arab EmiratesEM0.00%0.09%0.1 p.p.
AustraliaAsia Pacific3.34%1.94%-1.4 p.p.
Hong KongAsia Pacific1.11%0.79%-0.3 p.p.
JapanAsia Pacific8.37%6.22%-2.2 p.p.
New ZealandAsia Pacific0.07%0.09%0.0 p.p.
SingaporeAsia Pacific0.74%0.32%-0.4 p.p.

Note: numbers may not sum to 100 due to rounding. EM stands for Emerging Markets, and EMEA stands for Europe, Middle East, and Africa.

Over the last decade, the UK’s index weighting has halved. Brexit uncertainty caused British stocks to underperform relative to other markets. In addition, the UK’s public equity marketing has been shrinking, with the number of listed companies falling by 21% in just eight years.

Japan saw its weighting decline by more than two percentage points. The country has faced a very slow recovery since the asset price bubble in 1989, and the stock market has yet to surpass its previous peak.

On the other hand, China’s weighting in the MSCI ACWI IMI has increased over the last 10 years. This is primarily due to two factors:

  • China A shares, shares of mainland China based companies that are quoted in the local renminbi currency, were previously only available to domestic investors. China’s market reforms made them more widely accessible to international investors.
  • As accessibility and growth increased in the region, foreign investors expressed increased interest in the Chinese market. This drove up demand for the country’s stocks.

Perhaps the biggest takeaway from this data is the increasing dominance of the U.S. stock market, which now makes up almost 60% of the index. What implications does this have on the MSCI ACWI IMI index’s diversification?

Revenue Exposure of the MSCI ACWI IMI

As it turns out, the index is more diversified than it may seem at first glance. American companies have international operations, and earn revenue from many different markets. This makes the revenue exposure of the index much more spread out across each region.

Region% of Revenue Exposure
EM36.4%
North America31.9%
EMEA16.7%
Asia Pacific12.0%
Other3.1%

Note: numbers may not sum to 100 due to rounding. Countries included in Other are Bosnia and Herzegovina, Bangladesh, Burkina Faso, Bulgaria, Bahrain, Benin, Botswana, Cote D’Ivoire, Estonia, Ghana, Guinea-Bissau, Croatia, Iceland, Jamaica, Jordan, Kenya, Kazakhstan, Lebanon, Sri Lanka, Lithuania, Morocco, Mali, Mauritius, Niger, Nigeria, Oman, Palestine, Romania, Serbia, Slovenia, Senegal, Togo, Tunisia, Trinidad and Tobago, Ukraine, Vietnam and Zimbabwe.

On a revenue exposure basis, North America—where the U.S. is by far the largest market—has a weighting of just over 30%. Emerging markets take the top spot, making up over a third of the index’s revenue exposure. This presents an opportunity for investors, as these markets are projected to have higher GDP growth compared to North America.

Broad Exposure

For investors looking to capture the world’s stock market performance, the MSCI ACWI IMI can be a good benchmark. The index offers comprehensive and diversified exposure to various markets. Through regular reviews and rebalancing, it also adjusts to market movements. This ensures it continues to accurately reflect the composition of the global stock market over time.

While investors can’t invest in the index itself, they can invest in a product that tracks the index—and be poised to take advantage of opportunities around the globe.

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