Fertilizer

Fertilizers are chemical compounds applied to promote plant and fruit growth. Fertilizers are usually applied either through the soil (for uptake by plant roots) or, by foliar feeding (for uptake through leaves).

Fertilizers can be placed into the categories of organic fertilizers (composed of plant or animal matter), or inorganic fertilizers (made of simple, non-carbonaceous chemicals or minerals).

'Organic' fertilizers are composed of 'naturally' occurring compounds such as peat manufactured through natural processes (such as composting) or naturally occurring mineral deposits; or in the case of 'inorganic' fertilizers, manufactured through chemical processes (such as the Haber process) or from naturally occurring deposits that have been chemically altered (e.g. concentrated triple superphosphate^[1]).

Properly applied, organic fertilizers can improve the health, and productivity of soil and plants as they provide different essential nutrients intended to encourage plant growth. Organic nutrients increase the abundance of soil organisms such as mycorrhiza, which aid plants in absorbing nutrients . Chemical fertilizers have long-term adverse impact on the organisms living in soil^{[citation needed]} and a detrimental long term effect on soil productivity of the soil^{[citation needed]}.

Contents of fertilizer

Fertilizers typically provide, in varying proportions, the three major plant nutrients: nitrogen, phosphorus, potassium known shorthand as N-P-K); the secondary plant nutrients (calcium, sulfur, magnesium) and sometimes trace elements (or micronutrients) with a role in plant or animal nutrition: boron, chlorine, manganese, iron, zinc, copper, molybdenum and (in some countries) selenium.

Organic vs. Non-organic (MANURE)

Both organic and inorganic fertilizers were called "manure" derived from the French expression for manual (of or belonging to the hand^[2]) tillage, however, this term is currently restricted to organic manure. Though nitrogen is plentiful in the Earth's atmosphere, relatively few plants engage in nitrogen fixation (conversion of atmospheric nitrogen to a plant-accessible form).

It is believed by some that 'organic' agricultural methods are more environmentally friendly and better maintain soil organic matter (SOM) levels. There are some scientific studies that support this position.^[3]

History of fertilizers

While manure, cinder and ironmaking slag have been used to improve crops for centuries, the use of fertilizers is arguably one of the great innovations of the Agricultural Revolution of the 19th Century.

Key figures(Europe)

In the 1730s, Viscount Charles Townshend (1674–1738) first studied the improving effects of the four crop rotation system that he had observed in use in Flanders. For this he gained the nickname of Turnip Townshend.

Justus von Liebig

Chemist Justus von Liebig (1803–1883) contributed greatly to the advancement in the understanding of plant nutrition. His influential works first denounced the vitalist theory of humus, arguing first the importance of ammonia, and later promoting the importance of inorganic minerals to plant nutrition. Primarily Liebig's work succeeded in exposition of questions for agricultural science to address over the next 50 years^{[citation needed]}.

In England, he attempted to implement his theories commercially through a fertilizer created by treating phosphate of lime in bone meal with sulfuric acid^{[citation needed]}. Although it was much less expensive than the guano that was used at the time, it failed because it was not able to be properly absorbed by crops^{[citation needed]}.

Sir John Bennet Lawes

At that time in England, Sir John Bennet Lawes (1814–1900) was experimenting with crops and manures at his farm at Harpenden and was able to produce a practical superphosphate in 1842 from the phosphates in rock and coprolites^{[citation needed]}. Encouraged, he employed Sir Joseph Henry Gilbert, who had studied under Liebig at the University of Giessen, as director of research. To this day, the Rothamsted research station the pair founded still investigates the impact of inorganic and organic fertilizers on crop yields^{[citation needed]}.

Jean Baptiste Boussingault

In France, Jean Baptiste Boussingault (1802–1887) pointed out that the amount of nitrogen in various kinds of fertilizers is important.

Metallurgists Percy Gilchrist (1851–1935) and Sidney Gilchrist Thomas (1850–1885) invented the Thomas-Gilchrist converter, which enabled the use of high phosphorus acidic Continental ores for steelmaking. The dolomite lime lining of the converter turned in time into calcium phosphate, which could be used as fertilizer known as Thomas-phosphate.

Bosch Farben and Haber

In the early decades of the 20th Century, the Nobel prize-winning chemists Carl Bosch of IG Farben and Fritz Haber developed the process^[4] that enabled nitrogen to be cheaply synthesised into ammonia, for subsequent oxidation into nitrates and nitrites.

Erling Johnson

In 1927 Erling Johnson developed an industrial method for producing nitrophosphate, also known as the Odda process after his Odda Smelteverk of Norway^{[citation needed]}. The process involved acidifying phosphate rock (from Nauru and Banaba Islands in the southern Pacific Ocean) with nitric acid to produce phosphoric acid and calcium nitrate which, once neutralized, could be used as a nitrogen fertilizer[^[5]].

Industry

British

The Englishmen James Fison, Edward Packard, Thomas Hadfield and the Prentice brothers each founded companies in the early 19th century to create fertilizers from bonemeal^{[citation needed]}.

The developing sciences of chemistry and Paleontology, combined with the discovery of coprolites in commercial quantities in East Anglia, led Fisons and Packard to develop sulfuric acid and fertilizer plants at Bramford, and Snape, Suffolk in the 1850s to create superphosphates, which were shipped around the world from the port at Ipswich^{[citation needed]}. By 1871 there were about 80 factories making superphosphateTemplate:Where?.^[6]

After World War I these businesses came under competitive pressure from naturally-produced guano, primarily found on the Pacific islands, as their extraction and distribution had become economically attractive^{[citation needed]}.

The interwar period^[7] saw innovative competition from Imperial Chemical Industries who developed synthetic ammonium sulfate in 1923, Nitro-chalk in 1927, and a more concentrated and economical fertilizer called CCF based on ammonium phosphate in 1931. Competition was limited as ICI ensured it controlled most of the world's ammonium sulfate supplies.

North America and other European Countries

Other European and North American fertilizer companies developed their market share, forcing the English pioneer companies to merge, becoming Fisons, Packard, and Prentice Ltd. in 1929^{[citation needed]}. Together they produced 85,000 tons of superphosphate/year in 1934 from their new factory and deep-water docks in Ipswich. By World War II they had acquired about 40 companies, including Hadfields in 1935^{[citation needed]}, and two years later the large Anglo-Continental Guano Works, founded in 1917^{[citation needed]}.

The post-war environment was characterized by much higher production levels as a result of the "Green Revolution" and new types of seed with increased nitrogen-absorbing potential, notably the high-response varieties of maize, wheat, and rice. This has accompanied the development of strong national competition, accusations of cartels and supply monopolies, and ultimately another wave of mergers and acquisitions. The original names no longer exist other than as holding companies or brand names: Fisons and ICI agrochemicals are part of today's Yara International^[8] and AstraZeneca companies.

Major players in this market now include the Russian Uralkali fertilizer company Uralkali (listed on the London Stock Exchange), whose majority owner is Dmitry Rybolovlev, ranked by Forbes as 60th in the list of wealthiest people in 2008.

Inorganic fertilizers (mineral fertilizer)

Naturally occurring inorganic fertilizers include Chilean sodium nitrate, mined rock phosphate, and limestone (a calcium source).

Macronutrients and micronutrients fertilizers

Fertilizers can be divided into macronutrients and micronutrients based on their concentrations in plant dry matter. There are six macronutrients: nitrogen, phosphorus, and potassium, often termed "primary macronutrients" because their availability is usually managed with NPK fertilizers, and the "secondary macronutrients" — calcium, magnesium, and sulfur — which are required in roughly similar quantities but whose availability is often managed as part of liming and manuring practices rather than fertilizers^{[citation needed]}.

The macronutrients are consumed in larger quantities and normally present as a whole number or tenths of percentages in plant tissues (on a dry matter weight basis)^{[citation needed]}. There are many micronutrients, required in concentrations ranging from 5 to 100 parts per million (ppm) by mass^{[citation needed]}. Plant micronutrients include iron (Fe), manganese (Mn), boron (B), copper (Cu), molybdenum (Mo), nickel (Ni), chlorine (Cl), and zinc (Zn).

Tennessee Valley Authority: "Results of Fertilizer" demonstration 1942.

Further information: Plant nutrition

Macronutrient fertilizers

Synthesized materials are also called artificial, and may be described as straight, where the product predominantly contains the three primary ingredients of nitrogen (N), phosphorus (P), and potassium (K), (known as N-P-K fertilizers or compound fertilizers when elements are mixed intentionally).

Reporting of N-P-K

Such fertilizers are named or labeled according to the content of these three elements. The percent (mass fraction) of nitrogen is reported directly. However, phosphorus is reported as phosphorus pentoxide (P₂O₅), the anhydride of phosphoric acid, and potassium is reported as potassium oxide (K₂O), which is the anhydride of potassium hydroxide mass fraction.

Fertilizer composition is expressed in this fashion for historical reasons in the way it was analyzed (conversion to ash for P and K) mass fraction; this practice dates back to Justus von Liebig.

The remaining 11% is known as ballast^{[citation needed]} and may or may not be valuable to the plants, depending on what is used as ballast. Although analyses are no longer carried out by ashing first, the naming convention remains. If nitrogen is the main element, they are the fertilizer is often described as nitrogen fertilizers.

FERRARI

The Ferrari automobile company has produced sports cars since 1947.

Unlike many similar yet independent companies, Fiat Group-owned Ferrari continued to thrive after the death of its charismatic founder and is today one of the most successful sports car companies in the world.

1947 The beginning of the sport car (ferrari)

The first Ferrari road car was the 1947 125 Sport, powered by a 1.5 L V12 engine; Enzo reluctantly built and sold his automobiles to fund the Scuderia. While his beautiful and blazingly fast cars quickly gained a reputation for excellence, Enzo maintained a famous distaste for his customers, most of whom he felt were buying his cars for the prestige and not the performance.

1961 The great walkout(ENZO'S TENSION)

Enzo Ferrari's strong personality had served his company and racing team well for decades. But internal tensions reached the boiling point in November 1961 Long-time sales manager, Girolamo Gardini, had long chafed at Enzo's wife, Laura's involvement in the company. The two frequently argued, but their dispute became a crisis for the company when Gardini made an ultimatum to Enzo: If tensions continued, he would leave the company.

Enzo was never a man to accept a challenge to his authority, and he dealt with the situation with a typically heavy hand. Gardini was ousted, as was Scuderia Ferrari manager, Romolo Tavoni, chief engineer Carlo Chiti, experimental sports car development chief, Giotto Bizzarrini, and a number of others who stood by them. All were tremendous losses to the company, and many thought this might be the end of Ferrari. Indeed, the defectors immediately formed a new company, ATS, to directly compete with Ferrari on the street and the track, and took with them Scuderia Serenissima, one of Ferrari's best racing customers.

This "great walkout" came at an especially difficult time for Ferrari. At the urging of Chiti, the company was developing a new 250-based model to defend its honor against the Jaguar E-Type. Development of this car, the 250 GTO, was at a critical point, with the chassis development and styling left incomplete. Even if the car could be finished, it was unclear if it could be raced successfully without Tavoni and his lieutenants.

Into this void stepped young engineer Mauro Forghieri and long-time racing bodyman, Sergio Scaglietti. Both were up to the task, with Forghieri successfully honing the GTO's handling and Scaglietti designing an all-new body for the car. The GTO went to Sebring with driver Phil Hill and placed first in class. It continued winning through 1962, brushing aside the challenge from Jaguar and becoming one of the most famous sports cars in history.

This shakeup, and Forghieri's engineering talent, made the 1960s even more successful for Ferrari than the previous decade. The mid-engined Dino racers laid the foundation for Forghieri's dominant 250-powered 250 P. On the street, the Dino road cars sold strongly, and legendary models like the 275 and Daytona were on the way.

1963-1967 The US rivals of Ferrari

The big V8-powered Shelby Cobra developed and built by the American engineer Carroll Shelby challenged the Ferraris in the early 1960s. By mid 60's, Ford tried to buy Ferrari but no agreement was reached. Instead, after being defeated in 1964 and 1965 races the Ford GT40 ended the dominance of Ferrari Prototypes at the 24 Hours of Le Mans in 1966 when the GT-40 Mark II dominated the race with a 1-2-3 finish.. Ford would win again in 1967, this time with its Mark IV prototype and also in 1968 and 1969 with the Gulf-Weyr entered Ford GT-40 Mk.I cars winning both years to close out the decade against the new and upcoming Porsche 917.

Ferrari boycott in 1968

After the performance of the big V8-powered Ford at the 1967 Le Mans, the FIA banned prototypes over 3000cc, which also affected the Ferrari 330P models. This was announced in late 1967 and came in effect for 1968, and the Scuderia did not take part in Sports car racing in order to protest this.

1969 to 1971

These years saw a new challenger. Formerly competing with smaller cars only, the Germans entered the new 3 litre sports car prototype class in 1968 with the Porsche 908, while Ferrari raced the Ferrari 312P in only few events in 1969. In March of that year, the presentation of the 5 litre Porsche 917, built in advance in 25 exemplars, had surprised also Ferrari, which answered later that year with the production of 25 Ferrari 512S, funded from the money gained by the FIAT deal. At that time, Porsche had almost a full season of experience with their new car, though, and also taken the World Sportscar Championship where Ferrari was only 4th.

The year 1970 saw epic battles between the two teams and the many cars they entered, yet Porsche won all races except the 12 Hours of Sebring, where the victorious car and its drivers Ignazio Giunti/Nino Vaccarella/Mario Andretti had their origins in Italy. Ferrari decided to give up the 512 in 1971 in order to prepare the new Ferrari 312PB for the 1972 season, when only 3 litre class would be allowed. In addition to Porsche, the old national rival with its Alfa Romeo T33/3 also had won two races in 1971, and thus was ranked 2nd in the World Championship, above Ferrari.

1972-1973 dominance, defeats and fare-well of Ferrari

The Ferrari 312PB models dominated the World Sportscar Championship in 1972 against a rival Alfa Romeo, as the Porsche factory did not compete after the rule changes, and Matra focused on Le Mans only. In their home race, the French won, as Ferrari did not enter in 1972 due insufficient reliability over 24 hours, in order not to blemish their otherwise perfect record in that season.

In 1973, though, the Matra team also challenged for the championship which Ferrari eventually lost with two wins, compared to Matra's five, while Alfa Romeo had not entered that year. In addition, Ferrari was now forced to race also at Le Mans, despite concerns that even the modified engine would not last. Yet, one car survived and scored an unexpected and honourable 2nd place.

Ferrari then retired from Sports car racing to focus on the ailing F1 effort.

1988 The Death Of Enzo's Ferrari

When Enzo died in 1988, Ferrari finally became a mythos. The value of used cars rose, as well as sales of current models. The last new model he commissioned was the specialist F40.

1996 Champion Schumacher to Scuderia Ferrari

The hiring of Michael Schumacher and other members from Benetton triggered a comeback of the F1 team, with three wins in 1996, and close yet eventually losing challenges to the driver's championship in the years 1997 to 1999.

2000-2004 Schumacher Dominates F1

In an unprecedented and record-setting fashion, Schumacher and Ferrari dominate F1 winning the World Driver's championship from 2000 through 2004 and the Constructors' Championship from 1999 through 2004. 2006 saw him retire from F1.

Forbes

Forbes is an American publishing and media company. Its flagship publication, Forbes magazine, is published bi-weekly. Its primary competitors in the national business magazine category are Fortune, which is also published bi-weekly, and Business Week. The magazine is well-known for its lists, including its lists of the richest Americans (the Forbes 400) and its list of billionaires. The motto of the magazine is "The Capitalist Tool."

Forbes history

Forbes headquaters on 5th Avenue in Manhattan

B.C. Forbes, a financial columnist for the Hearst papers, and his partner Walter Drey, the general manager of the Magazine of Wall Street,^[1] founded Forbes magazine in 1917.^[2] Forbes provided the money and the name and Drey provided the publishing expertise. The original name of the magazine was Forbes: Devoted to Doers and Doings.^[1] Drey became vice-president of the BC Forbes Publishing Company,^[3] while B.C. Forbes became editor-in-chief, a post he held until his death in 1954. B.C. Forbes was assisted in his later years by his two eldest sons, Bruce Charles Forbes (1916–1964) and Malcolm Stevenson Forbes (1917–1990).

Bruce Forbes took over on his father's death, and his strengths lay in streamlining operations and developing marketing.^[2] During his tenure, 1954-1964, the magazine's circulation nearly doubled.^[2] Although credit for increased circulation must also be given to the magazine's increased outspokenness on the part of investors.^[2]

When Malcolm Forbes took over, he had a more hands-off approach on operations, but did provide two strategic initiatives that changed Forbes forever. He instituted a professional editorial staff, instead of the previous heavy reliance on freelancers, and he started the first of the rankings articles for which Forbes became famous.^[4]

On Malcolm's death, his eldest son Malcolm Stevenson "Steve" Forbes Jr. (1947–) became President and Chief Executive of Forbes and Editor-in-Chief of Forbes magazine.^[5] Between 1961 and 1999 the magazine was edited by James Michaels.^[6] In 1993, under Michaels, Forbes was a finalist for the National Magazine Award.^[7] In 2006, an investment group that includes rock star Bono bought a minority interest in the company.^[8]

The popularity of Forbes magazine has extended to mainstream and Hip-Hop culture. 50 Cent has released the official remix to his hit single, "I Get Money" off his September 11, 2008 album, Curtis, entitled Forbes 1,2,3 (also known as the "Billion Dollar Remix"). The title of the song comes from the fact that Jay-Z, 50 Cent, and Diddy were listed as Forbes' Top 3 money-making Kings of Hip-Hop, respectively. The unfinished video for Forbes 1,2,3 can be seen as the intro to 50 Cent's single, "I Still Kill" featuring Akon, off his multi-platinum album Curtis.

Other publications of company

Apart from Forbes and its lifestyle supplement, ForbesLife, other titles are published, including Forbes Asia and eight local language editions. Steve Forbes and his magazine's writers offer investment advice on the weekly Fox TV show Forbes on Fox and on Forbes On Radio. Other company groups include Forbes Conference Group, Forbes Investment Advisory Group and Forbes Custom Media.

The company formerly published American Legacy magazine as a joint venture, although that magazine separated from Forbes as of May 14, 2007^[9].

The company also formerly published American Heritage and Invention & Technology magazines. After failing to find a buyer, Forbes suspended publication of these two magazines as of May 14, 2007^[10]. Those magazines have since been purchased by the American Heritage Publishing Company, and have resumed publication as of Spring 2008 ^[11].

Forbes.com (The official website of Forbes)

David Churbuck founded Forbes' Web site in 1996. The site uncovered Stephen Glass' journalistic fraud in The New Republic in 1998, an article that drew attention to internet journalism. The site, like the magazine, publishes many lists focusing on billionaires and their possessions, especially expensive homes, a critical aspect of the website's apparent popularity. ^[12] See a list of lists below.

Forbes.com employs the slogan "Home Page For The World's Business Leaders" and sometimes claims to be the world's most widely visited business web site.^[13] The current president and chief executive officer is James J. Spanfeller; the current editor is Paul Maidment; the current managing editor is Carl Lavin,^[14] who succeeded founding managing editor Michael Noer and Dan Bigman.^[15]

According to Forbes.com, the Web site is among the most trusted resources for senior business executives, providing them the real-time reporting, uncompromising commentary, concise analysis, relevant tools and community they need to succeed at work, profit from investing and have fun with the rewards of winning.

Forbes.com also publishes subscription investment newsletters, a luxury-vehicles site, ForbesAutos edited by Matthew De Paula, and a luxury travel site, ForbesTraveler, edited by G. Barry Golson, the former executive editor of Playboy and TV Guide and former editor-in-chief of Yahoo! Internet Life, and an online guide to web sites, Best Of The Web.

Forbes.com is part of Forbes’ Digital, a division of Forbes Media LLC. Forbes.com and affiliated properties include:

• Forbes.com (site)
• ForbesTraveler.com (site)
• Investopedia.com (site)
• Realclearmarkets.com (site)
• Realclearsports.com (site)
• Realclearpolitics.com (site)
• Clipmarks.com (site)

Together these sites reach more than 27 million business people each month.

ForbesAutos.com and ForbesTraveler.com (Official sites of company)

Launched in May 2005 by Forbes.com, ForbesAutos.com is a web site designed specifically for luxury car buyers and enthusiasts. The editorial content is written specifically for affluent consumers, with an emphasis on objectivity, comprehensive analysis and intelligent insight.

ForbesTraveler.com is designed for the affluent, discerning traveler. Launched in September 2006 by Forbes.com, ForbesTraveler is dedicated to inspiring, planning and booking the world’s most distinctive travel experiences.

Lists about Forbes

Forbes creates many lists under various topics, the most popular being perhaps the list of billionaires.

Companies

• 200 Best Small Companies
• 400 Best Big Companies
• Forbes 500
• Forbes Global 2000, a list of largest companies in the world taking into account market capitalization, revenue, income and assets (this is different basis for ranking than that used by the Fortune Global 500, which is based only on revenues).
• Largest Private Companies

Peoples

In popular culture Forbes is perhaps best-known for its many periodic lists of net worth. As it often takes considerable detective work to determine the actual wealth of an individual, Forbes' figures are widely cited as nearly-definitive.

• Executive Pay
• Forbes 400, a list of the richest people in the United States
• Midas List, an annual list of the top dealmakers in technology and life sciences
• World's Richest People, a list of the richest people in the world
• China Rich List, a list of the richest people in mainland China
• India Rich List, list of the richest people in India
• Forbes Fictional 15, a self-parodying list of the richest movie, TV and literary characters
• The World's 100 Most Powerful Women
• The Celebrity 100, an annual list of famous and financially influential celebrities (i.e., entertainers, musicians, producers, directors, and athletes)
• The China Celebrity 100
• Top-Earning Dead Celebrities, a list of deceased celebrities that continue their revenue from posthumous material

Cuba's Fidel Castro conflict

In 2005, Forbes listed Fidel Castro among the world's richest people, with an estimated net worth of $550 million USD. In the 2006 article "Fortunes Of Kings, Queens And Dictators", Forbes increased their estimate to $900 million USD.^[16] The article notes that estimating net worth for government leaders is "more art than science", and points out that in the case of Castro the authors used a discounted cash flow method for several state-owned companies, and assumed a portion of that profit stream went to Castro.

Castro responded that he has a net worth of less than $1 USD, and challenged any one to prove that he has any money in overseas accounts.^[17] Castro also stated that Forbes should place a bucket over their head.

SILICON VALLEY

Silicon Valley is the southern part of the San Francisco Bay Area in Northern California, United States. The term originally referred to the region's large number of silicon chip innovators and manufacturers, but eventually came to refer to all the high-tech businesses in the area; it is now generally used as a metonym for the high-tech sector. Despite the development of other high-tech economic centers throughout the United States, Silicon Valley continues to be the leading high-tech hub because of its large number of engineers and venture capitalists. Geographically, Silicon Valley encompasses the northern part of the Santa Clara Valley and adjacent communities.

STUFF [hide] 1 Origin of the term 2 History 3 Social Roots of information technology revolution in America 3.1 Roots in radio and military technology 3.2 Stanford Industrial Park 3.3 Silicon transistor 3.4 Venture capital firms 3.5 The rise of software 3.6 Internet bubble 4 Economy 4.1 Notable companies 4.2 Notable government facilities 5 Universities 6 Cities 7 See also 8 Further reading 9 References 10 External links

Origin

The term Silicon Valley was coined by Ralph Vaerst, a Northern California entrepreneur. Its first published use is credited to Don Hoefler, a friend of Vaerst's, who used the phrase as the title of a series of articles in the weekly trade newspaper Electronic News. The series, entitled "Silicon Valley USA," began in the paper's issue dated January 11, 1971.^[1] Valley refers to the Santa Clara Valley, located at the southern end of San Francisco Bay, while Silicon refers to the high concentration of companies involved in the semiconductor and computer industries that were concentrated in the area. These firms slowly replaced the orchards which gave the area its initial nickname, the Valley of Heart's Delight.

History

Perhaps the strongest thread that runs through the Valley's past and present is the drive to "play" with novel technology, which, when bolstered by an advanced engineering degree and channeled by astute management, has done much to create the industrial powerhouse we see in the Valley today.^[2]

Looking west over northern San Jose (downtown is at far left) and other parts of Silicon Valley

Since the early twentieth century, Silicon Valley has been home to a vibrant, growing electronics industry. The industry began through experimentation and innovation in the fields of radio, television, and military electronics. Stanford University, its affiliates, and graduates have played a major role in the evolution of this area.^[3]

Social Roots of IT revolution in America

It was in Silicon Valley that the integrated circuit, the microprocessor, the microcomputer, among other key technologies, were developed, and has been the site of electronic innovation for over four decades, sustained by about a quarter of a million information technology workers. Silicon Valley was formed as a milieu of innovations by the convergence on one site of new technological knowledge; a large pool of skilled engineers and scientists from major universities in the area; generous funding from an assured market with Defense Department; the development of an efficient network of venture capital firms; and, in the very early stage, the institutional leadership of Stanford University. ^[4]

Roots in radio and military technology

The San Francisco Bay Area had long been a major site of U.S. Navy research and technology. In 1909, Charles Herrold started the first radio station in the United States with regularly scheduled programming in San Jose. Later that year, Stanford University graduate Cyril Elwell purchased the U.S. patents for Poulsen arc radio transmission technology and founded the Federal Telegraph Corporation (FTC) in Palo Alto. Over the next decade, the FTC created the world's first global radio communication system, and signed a contract with the U.S. Navy in 1912.^[2]

In 1933, Air Base Sunnyvale, California was commissioned by the United States Government for the use as a Naval Air Station (NAS) to house the airship USS Macon in Hangar One. The station was renamed NAS Moffett Field, and between 1933 and 1947, US Navy blimps were based here.^[5] A number of technology firms had set up shop in the area around Moffett to serve the Navy. When the Navy gave up its airship ambitions and moved most of its West Coast operations to San Diego, NACA (the National Advisory Committee for Aeronautics, forerunner of NASA) took over portions of Moffett for aeronautics research. Many of the original companies stayed, while new ones moved in. The immediate area was soon filled with aerospace firms such as Lockheed.

Stanford Industrial Park

After World War II, universities were experiencing enormous demand due to returning students. To address the financial demands of Stanford's growth requirements, and to provide local employment opportunities for graduating students, Frederick Terman proposed the leasing of Stanford's lands for use as an office park, named the Stanford Industrial Park (later Stanford Research Park). Leases were limited to high technology companies. Its first tenant was Varian Associates, founded by Stanford alumni in the 1930s to build military radar components. However, Terman also found venture capital for civilian technology start-ups . One of the major success stories was Hewlett-Packard. Founded in Packard's garage by Stanford graduates William Hewlett and David Packard, Hewlett-Packard moved its offices into the Stanford Research Park slightly after 1953. In 1954, Stanford created the Honors Cooperative Program to allow full-time employees of the companies to pursue graduate degrees from the University on a part-time basis. The initial companies signed five-year agreements in which they would pay double the tuition for each student in order to cover the costs. Hewlett-Packard has become the largest personal computer manufacturer in the world, and transformed the home printing market when it released the first ink jet printer in 1984. In addition, the tenancy of Eastman Kodak and General Electric made Stanford Industrial Park a center of technology in the mid-1990s.^[6][7]

Silicon transistor

In 1953, William Shockley left Bell Labs in a disagreement over the handling of the invention of the transistor. After returning to California Institute of Technology for a short while, Shockley moved to Mountain View, California in 1956, and founded Shockley Semiconductor Laboratory. Unlike many other researchers who used germanium as the semiconductor material, Shockley believed that silicon was the better material for making transistors. Shockley intended to replace the current transistor with a new three-element design (today known as the Shockley diode), but the design was considerably more difficult to build than the "simple" transistor. In 1957, Shockley decided to end research on the silicon transistor. As a result, eight engineers left the company to form Fairchild Semiconductor. Two of the original employees of Fairchild Semiconductor, Robert Noyce and Gordon Moore, would go on to found Intel.^[8]

Venture capital firms

By the early 1970s there were many semiconductor companies in the area, computer firms using their devices, and programming and service companies serving both. Industrial space was plentiful and housing was still inexpensive. The growth was fueled by the emergence of the venture capital industry on Sand Hill Road, beginning with Kleiner Perkins in 1972; the availability of venture capital exploded after the successful $1.3 billion IPO of Apple Computer in December 1980.

The rise of software

Although semiconductors are still a major component of the area's economy, Silicon Valley has been most famous in recent years for innovations in software and Internet services. Silicon Valley has significantly influenced computer operating systems, software, and user interfaces.

Using money from NASA and the U.S. Air Force, Doug Engelbart invented the mouse and hypertext-based collaboration tools in the mid-1960s, while at Stanford Research Institute (now SRI International). When Engelbart's Augmentation Research Center declined in influence due to personal conflicts and the loss of government funding, Xerox hired some of Engelbart's best researchers. In turn, in the 1970s and 1980s, Xerox's Palo Alto Research Center (PARC) played a pivotal role in object-oriented programming, graphical user interfaces (GUIs), Ethernet, PostScript, and laser printers.

While Xerox marketed equipment using its technologies, for the most part its technologies flourished elsewhere. The diaspora of Xerox inventions led directly to 3Com and Adobe Systems, and indirectly to Cisco, Apple Computer and Microsoft. Apple's Macintosh GUI was largely a result of Steve Jobs' visit to PARC and the subsequent hiring of key personnel.^[9] Microsoft's Windows GUI is based on Apple's work, more or less directly.^[10] Cisco's impetus stemmed from the need to route a variety of protocols over Stanford's campus Ethernet.

Internet bubble

Silicon Valley is generally considered to have been the center of the dot-com bubble which started from the mid-1990s and collapsed after the NASDAQ stock market began to decline dramatically in April 2000. During the bubble era, real estate prices reached unprecedented levels. For a brief time, Sand Hill Road was home to the most expensive commercial real estate in the world, and the booming economy resulted in severe traffic congestion.

Even after the dot-com crash, Silicon Valley continues to maintain its status as one of the top research and development centers in the world. A 2006 Wall Street Journal story found that 13 of the 20 most inventive towns in America were in California, and 10 of those were in Silicon Valley. ^[11] San Jose led the list with 3,867 utility patents filed in 2005, and number two was Sunnyvale, at 1,881 utility patents.^[12]

Economy

According to a 2008- study by AeA in 2006 Silicon Valley was the third largest (cybercity) high-tech center in the United States, behind the New York metropolitan area and Washington metropolitan area, with 225,300 high-tech jobs. The Bay Area as a whole however, of which Silicon Valley is a part, would rank first with 386,000 high-tech jobs. Silicon Valley has the highest concentration of high-tech workers of any metropolitan area, with 285.9 out of every 1,000 private-sector workers.

The Silicon Valley has the highest average high-tech salary at $144,800. The region is the biggest high-tech manufacturing center in the United States.^[13] The unemployment rate of the region was 9.4% in January 2009, up from 7.8% in the previous month.^[14]

Notable companies

See also: Category:Companies based in Silicon Valley

Thousands of high technology companies are headquartered in Silicon Valley; among those, the following are in the Fortune 1000:

Adobe Systems

Advanced Micro Devices (AMD)

Apple Inc.

eBay

Google

Hewlett-Packard

Intel

Intuit

Nvidia

Oracle

VMware

Yahoo!

• Adobe Systems
• Advanced Micro Devices (AMD)
• Agilent Technologies
• Apple Inc.
• Applied Materials
• Business Objects
• Cisco Systems
• eBay
• Google
• Hewlett-Packard
• Intel
• Intuit
• Juniper Networks
• LSI Logic
• National Semiconductor
• NetApp
• Nvidia
• Oracle Corporation
• SanDisk
• Sun Microsystems
• Symantec
• Yahoo!

Additional notable companies headquartered (or with a significant presence) in Silicon Valley include (some defunct or subsumed):

• 3Com (headquartered in Marlborough, Massachusetts)
• Actel
• Actuate Corporation
• Adaptec
• Aeria Games and Entertainment
• Amdahl
• Aricent
• Asus
• Atari
• Atmel
• Broadcom
• BEA Systems
• Cypress Semiconductor
• Facebook
• Force10
• Foundry Networks
• Fujitsu (headquartered in Tokyo, Japan)
• Hitachi Global Storage Technologies
• IBM Almaden Research Center
• Logitech
• Maxtor
• McAfee
• Memorex (acquired by Imation and moved to Cerritos, California)
• Micron (headquartered in Boise, Idaho)
• Microsoft (headquartered in Redmond, Washington)
• Netflix
• Netscape (acquired by AOL)
• NeXT Computer, Inc. (acquired by Apple)
• Opera Software
• OPPO
• Palm, Inc.
• PalmSource, Inc. (acquired by ACCESS)
• PayPal (now part of eBay)
• PlayPhone
• Rambus
• Redback Networks (acquired by Ericsson)
• SAP AG (headquartered in Walldorf, Germany)
• Siemens (headquartered in Berlin and Munich, Germany)
• Silicon Graphics (now defunct)
• Silicon Image
• Solectron (acquired by Flextronics)
• Sony
• SRI International
• SunPower
• Tesla Motors
• Tellme Networks (acquired by Microsoft)
• TiVo
• VA Software (Slashdot)
• WebEx (acquired by Cisco Systems)
• Western Digital
• VeriSign
• Veritas Software (acquired by Symantec)
• VMware (acquired by EMC)
• Xilinx
• Youtube
• Zoran Corporation

Silicon Valley is also home to the high-tech superstore retail chain Fry's Electronics.

Notable government facilities

• Moffett Federal Airfield
• NASA Ames Research Center
• Onizuka Air Force Station

Universities

• San José State University
• Santa Clara University
• Stanford University
• Cal State Hayward

Cities

A number of cities are located in Silicon Valley (in alphabetical order):

• Campbell
• Cupertino
• East Palo Alto (San Mateo County)
• Fremont (Alameda County)
• Los Altos
• Los Altos Hills
• Los Gatos
• Menlo Park (San Mateo County)
• Milpitas
• Mountain View
• Palo Alto
• San Jose
• Santa Clara
• Saratoga
• Sunnyvale

Cities sometimes associated with the region:

• Foster City
• Gilroy
• Morgan Hill
• Newark (Alameda County)
• Redwood City (San Mateo County, home to Oracle, Electronic Arts and PDI/DreamWorks)
• Santa Cruz^[15]

FOREIGN EXCHANGE MARKET

The foreign exchange market (currency, forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. ^[1]FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Presently, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.^[2] Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.^[3]

The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

STUFF [hide] 1 Market size and liquidity 2 Market participants 2.1 Banks 2.2 Commercial companies 2.3 Central banks 2.4 Hedge funds as speculators 2.5 Investment management firms 2.6 Retail foreign exchange brokers 2.7 Non-bank Foreign Exchange Companies 2.8 Money Transfer/Remittance Companies 3 Trading characteristics 4 Determinants of FX Rates 4.1 Economic factors 4.2 Political conditions 4.3 Market psychology 5 Algorithmic trading in foreign exchange 6 Financial instruments 6.1 Spot 6.2 Forward 6.3 Future 6.4 Swap 6.5 Option 6.6 Exchange-Traded Fund 7 Speculation 8 References 9 See also 10 External links

Market size

The foreign exchange market is unique because of

• its trading volumes,
• the extreme liquidity of the market,
• its geographical dispersion,
• its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
• the variety of factors that affect exchange rates.
• the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
• the use of leverage

Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.

As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements,^[2] average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this. This approximately $3.21 trillion in main foreign exchange market turnover was broken down as follows:

• $1.005 trillion in spot transactions
• $362 billion in outright forwards
• $1.714 trillion in foreign exchange swaps
• $129 billion estimated gaps in reporting

Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%.^[4] In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.

Exchange-traded FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.

Several other developed countries also permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges. All these developed countries already have fully convertible capital accounts. Most emerging countries do not permit FX derivative products on their exchanges in view of prevalent controls on the capital accounts. However, a few select emerging countries (e.g., Korea, South Africa, India—[1]; [2]) have already successfully experimented with the currency futures exchanges, despite having some controls on the capital account.

FX futures volume has grown rapidly in recent years, and accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).

Top 10 currency traders ^[5]
% of overall volume, May 2008

Rank	Name	Volume
1	Deutsche Bank	21.70%
2	UBS AG	15.80%
3	Barclays Capital	9.12%
4	Citi	7.49%
5	Royal Bank of Scotland	7.30%
6	JPMorgan	4.19%
7	HSBC	4.10%
8	Lehman Brothers	3.58%
9	Goldman Sachs	3.47%
10	Morgan Stanley	2.86%

Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues have made it easier for retail traders to trade in the foreign exchange market. In 2006, retail traders constituted over 2% of the whole FX market volumes with an average daily trade volume of over US$50-60 billion (see retail trading platforms).^[6] Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to IFSL estimates has increased its share of global turnover in traditional transactions from 31.3% in April 2004 to 34.1% in April 2007. The ten most active traders account for almost 80% of trading volume, according to the 2008 Euromoney FX survey.^[3] These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually 0–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203 on a retail broker. Minimum trading size for most deals is usually 100,000 units of base currency, which is a standard "lot".

These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100/1.2300 for transfers, or say 1.2000/1.2400 for banknotes or travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide (i.e., 0.0003). Competition is greatly increased with larger transactions, and pip spreads shrink on the major pairs to as little as 1 to 2 pips.

Participants

Financial markets

Bond market Fixed income Corporate bond Government bond Municipal bond Bond valuation High-yield debt

Stock market Stock Preferred stock Common stock Registered share Voting share Stock exchange

Foreign exchange market

Derivatives market Credit derivative Hybrid security Options Futures Forwards Swaps

Other Markets Commodity market Money market OTC market Real estate market Spot market

Finance series Financial market Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation

v • d • e

Unlike a stock market, where all participants have access to the same prices, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. The difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread. The levels of access that make up the foreign exchange market are determined by the size of the “line” (the amount of money with which they are trading). The top-tier inter-bank market accounts for 53% of all transactions. After that there are usually smaller investment banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail FX-metal market makers. According to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly over the 2001–2004 period in terms of both number and overall size” Central banks also participate in the foreign exchange market to align currencies to their economic needs.

Banks

The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.

Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. Today, however, much of this business has moved on to more efficient electronic systems. The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.

Commercial companies

An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.

[edit] Central banks

National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high—that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank.^[7] Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.

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.

[edit] 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.

Retail foreign exchange brokers

There are two types of retail brokers offering the opportunity for speculative trading: retail foreign exchange brokers and market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail brokers, while largely controlled and regulated by the CFTC and NFA might be subject to foreign exchange scams.^[8][9] At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented.

Non-bank Foreign Exchange Companies

Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers but are distinct in that they do not offer speculative trading but currency exchange with payments. I.e., there is usually a physical delivery of currency to a bank account.

It is estimated that in the UK, 14% of currency transfers/payments^[10] are made via Foreign Exchange Companies.^[11] These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.

Money Transfer/Remittance Companies

Money transfer/remittance companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Aite Group estimated that there were $369 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally.

Trading characteristics

Most traded currencies^[2]
Currency distribution of reported FX market turnover

Rank	Currency	ISO 4217 code (Symbol)	% daily share (April 2007)
1	United States dollar	USD ($)	86.3%
2	Euro	EUR (€)	37.0%
3	Japanese yen	JPY (¥)	17.0%
4	Pound sterling	GBP (£)	15.0%
5	Swiss franc	CHF (Fr)	6.8%
6	Australian dollar	AUD ($)	6.7%
7	Canadian dollar	CAD ($)	4.2%
8-9	Swedish krona	SEK (kr)	2.8%
8-9	Hong Kong dollar	HKD ($)	2.8%
10	Norwegian krone	NOK (kr)	2.2%
11	New Zealand dollar	NZD ($)	1.9%
12	Mexican peso	MXN ($)	1.3%
13	Singapore dollar	SGD ($)	1.2%
14	South Korean won	KRW (₩)	1.1%
Other			14.5%
Total			200%

There is no unified or centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of the Chicago Mercantile Exchange and Reuters, called Fxmarketspace opened in 2007 and aspired but failed to the role of a central market clearing mechanism.

The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.

Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in gross domestic product (GDP) growth, inflation (purchasing power parity theory), interest rates (interest rate parity, Domestic Fisher effect, International Fisher effect), budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.

The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.

On the spot market, according to the BIS study, the most heavily traded products were:

• EUR/USD: 27%
• USD/JPY: 13%
• GBP/USD (also called sterling or cable): 12%

and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (17.0%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.

Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.

Determinants of FOREX Rates

See also: exchange rates

The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):

(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.

(b) Balance of payments model (see exchange rate). This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.

(c) Asset market model (see exchange rate) views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”

None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.

Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.

[edit] Economic factors

These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.

1. Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
2. Economic conditions include:

   Government budget deficits or surpluses

   The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.

   Balance of trade levels and trends

   The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.

   Inflation levels and trends

   Typically a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising [. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.

   Economic growth and health

   Reports such as GDP, employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.

   Productivity of an economy

   Increasing productivity in an economy should positively influence the value of its currency. It affects are more prominent if the increase is in the traded sector [3].

Political conditions

Internal, regional, and international political conditions and events can have a profound effect on currency markets.

All exchange rates are susceptible to political instability and anticipations about the new ruling party. Political upheaval and instability can have a negative impact on a nation's economy. For example, destabilization of coalition governments in India, Pakistan and Thailand can negatively affect the value of their currencies. Similarly, in a country experiencing financial difficulties, the rise of a political faction that is perceived to be fiscally responsible can have the opposite effect. Also, events in one country in a region may spur positive or negative interest in a neighboring country and, in the process, affect its currency.

Market psychology of trading

Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:

Flights to quality

Unsettling international events can lead to a "flight to quality," with investors seeking a "safe haven". There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts. The Swiss franc has been a traditional safe haven during times of political or economic uncertainty.^[12]

Long-term trends

Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends. ^[13]

"Buy the rumor, sell the fact"

This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought".^[14] To buy the rumor or sell the fact can also be an example of the cognitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.

Economic numbers

While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect: the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment, trade balance figures and inflation numbers have all taken turns in the spotlight.

Technical trading considerations

As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form apparent patterns that traders may attempt to use. Many traders study price charts in order to identify such patterns.^[15]

Algorithmic trading in forex

Electronic trading is growing in the FX market, and algorithmic trading is becoming much more common. According to financial consultancy Celent estimates, by 2008 up to 25% of all trades by volume will be executed using algorithm, up from about 18% in 2005.^{[citation needed]}

An algorithmic trader needs to be mindful of potential fraud by the broker. Part of the weekly algorithm should include a check to see if the amount of transaction errors when the trader is losing money occurs in the same proportion as when the trader would have made money.

Financial instruments

Spot

A spot transaction is a two-day delivery transaction (except in the case of the Canadian dollar and the Mexican Nuevo Peso, which settle the next day), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot transactions has the second largest turnover by volume after Swap transactions among all FX transactions in the Global FX market.

Forward

See also: forward contract

One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a one day, a few days, months or years. Usually the date is decided by both parties.

Future

Main article: currency future

Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates — for example, $1000 for next November at an agreed rate [4],[5]. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.

Swap

Main article: foreign exchange swap

The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.

Options

Main article: foreign exchange option

A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.

Exchange-Traded Fund

Main article: exchange-traded fund

Exchange-traded funds (or ETFs) are open ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g., SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.

Speculation

Controversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Nevertheless, economists including Milton Friedman have argued that speculators ultimately are a stabilizing influence on the market and perform the important function of providing a market for hedgers and transferring risk from those people who don't wish to bear it, to those who do.^[16] Other economists such as Joseph Stiglitz consider this argument to be based more on politics and a free market philosophy than on economics.^[17]

Large hedge funds and other well capitalized "position traders" are the main professional speculators.

Currency speculation is considered a highly suspect activity in many countries. While investment in traditional financial instruments like bonds or stocks often is considered to contribute positively to economic growth by providing capital, currency speculation does not; according to this view, it is simply gambling that often interferes with economic policy. For example, in 1992, currency speculation forced the Central Bank of Sweden to raise interest rates for a few days to 500% per annum, and later to devalue the krona.^[18] Former Malaysian Prime Minister Mahathir Mohamad is one well known proponent of this view. He blamed the devaluation of the Malaysian ringgit in 1997 on George Soros and other speculators.

Gregory J. Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in order to profit.^[19]

In this view, countries may develop unsustainable financial bubbles or otherwise mishandle their national economies, and foreign exchange speculators allegedly made the inevitable collapse happen sooner. A relatively quick collapse might even be preferable to continued economic mishandling. Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions. Given that Malaysia recovered quickly after imposing currency controls directly against IMF advice, this view is open to doubt.