The largest market in the world

The Foreign Exchange market is the most influential market in the world!

The New York Stock Exchange (NYSE), the Nasdaq and the Tokyo stock exchange are the top three securities markets in the world with an average daily trading volume of $300 billion combed. Think that’s a lot of money? The Foreign Exchange (FX) market has an average daily trading volume of roughly $6 trillion.

Let’s dive deeper into why the FX market is so influential.

To understand why the FX market is so important, we need to look at the different economies across the world. Globalization has been the key driver behind the growing FX market. As countries specialize in the production of certain products, they have started to concentrate their resources in order to gain a comparative advantage.

Essentially countries are utilizing their resources in order to produce the goods that they are best situated to produce, whether it be agricultural goods due to geographical regions, or cheaper labor and less stringent labor laws to encourage mass production as we see in many Asian countries.

Without the FX market, global trade would be much more difficult.

Now, the FX market comes in to play. Think of it as the secondary market. European countries produce luxurious cars with exceptional quality, they now produce more than the local demand for their cars in order to sell their cars in other markets where there is a demand for imported European vehicles. On the other hand, China produces cellphones and handheld devices at a fraction of the cost compared to Europe, thereby they are producing more cellphones than what the local demand is in order to supply cellphones in markets where there is a demand for it.

The FX market serves as a tool so that we don’t have to do barter transactions (i.e., 10,000 cellphones for one BMW 3 series model). Also, companies want to be paid in their local currencies when they sell their goods. Meaning that a European company wants to be paid in Euros while a Chinese company wants to be paid in Chinese Yuan (CNY). This is where the FX market is utilized as buyers from one country have to do a FX conversion in order to pay the seller in their local currency.

 Who are we?

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

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Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.

Disclaimer

This report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Information and content

The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).