One-half of world economy online by yearend – PFEC

Forty percent of the world population and 50 percent of the world economy will be online before the year is over.

The Performance Foreign Exchange Corp. (PFEC), which tracks and analyzes foreign currency movements worldwide, made this observation in citing the importance of Internet currency trading in the conduct of global business.

Mark dela Paz, PFEC research manager, cited reports by the International Data Corp. (IDC) and the Computer Industry Almanac (CIA) of the fast growing use of the Internet for business, general information, and other purposes.

IDC found that in 12 nations, 40 percent of the population will be online by 2003 and together they will account for 50 percent of the world economy. In the US alone, the Internet will account for seven percent of the gross domestic product by 2003. Sixty-two percent of US adults will have Internet access by end 2003.

Dela Paz cited the findings to explain the changing trend in currency trading worldwide.

In an internal paper, PFEC noted the declining volumes involved in traditional inter-bank foreign exchange dealing. Falling substantially from $908 billion a few years back to the current $689 billion.

"This can be explained in part by the growing role of electronic brokers in the spot foreign exchange market," said Dela Paz. "The use of electronic brokers has steadily eaten into the market share of traditional phone based dealing systems as traders gravitate to the cost efficiencies provided by ECN’s."

This means that many currency traders no longer course their activities through banks but make use of the Internet for their trade.

"This development might be associated with the trend towards concentration on the corporate sector through the centralization of corporate treasury functions and the consequent increase in intra-company netting of foreign exchange flows," further explained Dela Paz.

"It may also reflect the acceleration over the past few years of the trend towards cross-border consolidation in the corporate sector. By contrast, trading between banks and financial customers increased from $279 billion to $329 billion," added Dela Paz.

The spot foreign exchange market is the primary venue available to most investors, in currency trading. To conform with the modern trend of using the Internet for electronic trading, PFEC offers investors an Internet currency trading system on a deferred margin basis, allowing traders to close or liquidate positions when they decide to do so.

The increased use of the Internet for business purposes the world over would make it necessary for local traders also to keep up with the trend in order to be fully competitive and to benefit from the world of currency trading.