Retail Forex trading has come a long way from the early days of the century, when it was the preserve of wealthy individuals with access to expensive trading platforms. We'll explain how Forex trading rose to prominence, through the rise of hundreds of online Forex brokers, powered by increasingly standardised trading platforms.
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First Forex and CFD brokers
Research by TrustedBrokers.com shows the first Forex and CFD brokers launched in the very last years of the 20th century, as Internet penetration rose. iFOREX was founded in 1996 as a Forex broker. It now offers CFDs on over 750 instruments spanning currencies, indices, stocks, commodities and crypto-currencies through its in-house trading platform.
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It was followed shortly after that by Alpari, a company founded in Russia in December 1998, in the wake of the 1998 Russian financial crisis. However, it wasn't until March 1999 that its first client traded Forex, as the company was only just setting up its back-office and operations. Three years later, Alpari launched its English-language website.
Henyep, a company whose roots stretch back to Hong Kong gold and silver dealers in the 1970s, launched its HY Trader Internet trading platform in the UK in 1999. Nowadays, the company operates under the HYCM brand and accepts clients from a wide range of countries. It also allows investors to trade CFDs on 300 instruments through the MetaTrader 4 and 5 platforms.
Our research shows a marked acceleration from 2005 onwards, with FP Markets, AvaTrade, FxPro, eToro and Plus500 launching in quick succession. These companies remain leading players to this day. As of June 2021, eToro had 2 million funded accounts for 23.2 million registered users, according to a SEC filing. For comparison, Israel-headquartered Plus500 had 216,928 active customers for 23 million registered accounts as at June 30th 2022, according to a press release.
Forex trading platforms
In the early days of retail Forex trading, brokers designed their trading platforms in-house, from the ground-up. This was, and remains to this day a complicated and expensive endeavour. Some like eToro, have designed their platform in-house, in an attempt to gain an edge over the competition by offering social trading capabilities. However, most brokers nowadays support the MetaTrader platform, and to a lesser extent, cTrader and TradingView.
MetaQuotes, the company behind the MetaTrader platform, was established in Russia in November 2000. Its first Forex trading platform broke the rules by providing a superior product at a lower price point. Since then, it has found success by creating a community of traders around its platform, underpinned by a shared programming language.
- FX Charts: MetaQuotes released its first trading platform called FX Charts in December 2000. The platform's charts showed real-time Forex quotes and allowed retail traders to easily place buy and sell orders. This was a breakthrough, to the extent that it was cheaper and more functional than existing platforms.
- MetaQuotes: the company released the second iteration of its trading platform under the MetaQuotes name. It came with a new client terminal, and its own programming language to enable automated trading strategies. The MetaQuotes Language, abbreviated as MQL, is the programme language behind today's Expert Advisors (EAs).
- MetaTrader: the company released the third iteration of its platform under the MetaTrader name in 2002. It added futures to currency pairs. A year later, MetaQuotes released mobile versions of the MetaTrader platform for Windows CE devices and Palm PDA devices.
- MetaTrader 4: released in July 2005, was a milestone for the company and retail Forex trading community at large. It was redesigned from the ground-up to facilitate the creation, testing and optimisation of Expert Advisors. It also supports Android, iPhone and iPad devices. To this day, MetaTrader 4 remains one of the most popular trading platforms and is used by over 750 brokers and financial institutions.
- MetaTrader 5: launched in 2010, marked another breakthrough. It added support for stocks, alongside Forex and futures, and delivered significant improvements in speed and overall performance. However, MetaTrader 5 has been slow to gain traction, in part because it made backward-incompatible changes to the MetaQuotes Language which prevented MT4 Expert Advisors from running on MT5.
cTrader is common alternative to MetaTrader, released in 2011. It supports the widely used C# programming language you could use to create custom trading bots or indicators. Like MetaTrader, its enjoys a thriving community of developers that have made over 1,000 such algorithms available to download from its marketplace.
The TradingView charting platform has also emerged as an alternative trading platform in recent years. TradingView rose to prominence by providing a rich collection of charting tools and indicators, and has since built a community that publishes trading ideas. It has partnered with a small number of brokers and crypto-currencies exchanges to enable users to trade from its charts.
Global foreign exchange market
Since 2001, global foreign exchange trading volumes have rise from around US$ 1.1 trillion a day to US$ 6.6 trillion, according to the Triennial Central Bank Survey published by the Bank for International Settlements in April 2019.
The Bank for International Settlements doesn't report on retail trading volumes per se. However, other financial institutions, a broad category which includes small regional banks, hedge funds and other non-bank players, accounted 55% of global trading volume. Over time, these participants have also become increasingly diverse.
The rise in electronic and automated trading has been a powerful force behind the growth in volumes. The growth in global foreign exchange trading volumes has favoured incumbents, with the USD dollar on one side of 88.3% of all trades. The UK also grew its share to 43% of global FX trading volumes, as participants sought to achieve economies of scale and faster trading speeds by colocating their services.
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