Stock Exchanges: Hedge funds as speculators

About 70% to 90% of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.

Investment management firms

Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.

Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.

Major stock exchanges

Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Total Turnover at the end of May 2009

Region	Stock Exchange	Market Value (millions USD)	Total Share Turnover (millions USD)
Africa	Johannesburg Securities Exchange	605,040.2	117,424.7
Americas	NASDAQ	2,773,684.3	12,256,704.3
Americas	São Paulo Stock Exchange	920,263.9	191,926.1
Americas	Toronto Stock Exchange	1,347,674.0	490,912.4
Americas	New York Stock Exchange	9,574,066.6	7,986,835.8
Asia-Pacific	Australian Securities Exchange	839,062.7	273,205.9
Asia-Pacific	Bombay Stock Exchange	1,032,589.6	83,906.6
Asia-Pacific	Hong Kong Stock Exchange	1,773,002.2	519,465.7
Asia-Pacific	Korea Exchange	640,357.6	618,607.8
Asia-Pacific	National Stock Exchange of India	968,815.1	242,641.7
Asia-Pacific	Shanghai Stock Exchange	2,069,937.1	1,685,862.2
Asia-Pacific	Shenzhen Stock Exchange	563,103.3	880,744.6
Asia-Pacific	Tokyo Stock Exchange	3,102,492.9	1,561,888.8
Europe	Euronext	2,262,751.6	742,885.6
Europe	Frankfurt Stock Exchange (Deutsche Börse)	1,132,126.2	1,101,064.6
Europe	London Stock Exchange	2,204,320.0	1,483,263.3
Europe	Madrid Stock Exchange (Bolsas y Mercados Españoles)	1,084,606.4	591,217.3
Europe	Milan Stock Exchange (Borsa Italiana)	554,613.9	341,421.1
Europe	Nordic Stock Exchange Group OMX¹	664,465.8	319,398.1
Europe	Swiss Exchange	854,369.0	272,201.5

^Note 1 includes the Copenhagen, Helsinki, Iceland, Stockholm, Tallinn, Riga and Vilnius Stock Exchanges

Sources: World Federation of Exchanges - Statistics/Monthly
Remarks: There are 2 pending major mergers: NASDAQ with OMX; and London Stock Exchange with Milan Stock Exchange