the history of it in travel

8/11/2019 The History of It in Travel

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THE HISTORY OF IT IN TRAVEL .

Information Technology & Tourism is the first scientific journal dealing with theexciting relationship between information technology and tourism. Informationand communication systems embedded in a global net have profound influenceon the tourism and travel industry. Reservation systems, distributed multimediasystems, highly mobile working places, electronic markets, and the dominantposition of tourism applications in the Internet are noticeable results of thisdevelopment. And the tourism industry poses several challenges to the IT fieldand its methodologies. Advances in the use and development of tools,technologies, and methodologies that have facilitated the efficient netting ofinformation and communication systems in tourism and travel are to bepresented and discussed within this journal. Information Technology & Tourismaims to contribute to the process of theory building, and hence to theadvancement of research and scholarship in this growing field. As aninterdisciplinary journal it can be placed between information technology andtourism research where both fields may influence each other. The need for sucha dialogue and scholarship can be reasoned by the growing number of TISconferences worldwide that each year attract a very large and growing audience.Information Technology & Tourism focuses on academia as well as industry. Itwill feature both empirical case studies and technical-theoretical papers lookingat tourism from an IT point of view and at IT from a tourism point of view, atreatment quite attractive for researchers in both fields

332 DAYS AGO


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A brief history of travel technology from itsevolution to looking at the future

It is said that necessity is the mother of all invention and we need look no further than thetravel industry to see this proverb in practice.Since the beginning of recorded history, the travel and hospitality industries have facedchallenges. Yet many of these challenges still exist even today.Travel technology has changed over the years driven primarily by the stakeholders mostaffected by the use of the technology. I believe we have seen four distinct stages dating fromthe 1400s to the present day.These stages are:

Supply creation Supply management Sales and distribution Advanced discovery

Before we can look at what the future holds for travel technology, we have to look to its past todetermine its path forward.Supply creation -

The very first recorded incident of overbooking and the subsequent denial of service to a guestcan be attributed to the case of the pregnant woman and her husband who, after a long journey,were forced to look for alternative accommodation because the inn at which they wished to staywas already full. The wife gave birth to their child in the stable next door, and well, you know therest. But how different that story could have been, if they had booked their accommodations inadvance or used a last minute booking application like HotelTonight? Think of the long termmarketing opportunity tha t Innkeeper missed out on. Instead, the innkeeper is vilified. It isntuntil the 1400s that we see a formalization of the hospitality industry when England and France(not at the same time) passed legislation that required hotels and inns to keep guest registries.Essentially, this was the first instance of customer relationship management in the hospitalityspace. During that time, over 600 inns were registered in England, primarily located alongarterial coach routes and highways. Interestingly, this formalization and centralized registry ofInns and hotels also made it possible to create the first printed guidebooks for travellers. Theindustrial revolution, starting in approximately 1760, resulted in the expansion of railinfrastructure across Europe and North America. This was the beginning of the era of mass

transportation and as a result, there was a boom in the development of high capacity hotelscentred around city cores. At the same time, however, there was a gradual decline in highwaycoach houses and inns as people shifted away from slower horse drawn coaches and opted forthe faster, and in most cases, much safer rail transportation. In 1841 Thomas Cook, a Baptistpreacher, struck a deal with the Midland Railway to organize the transportation of 540 membersof his temperance society. The railway would offer a train ticket and lunch for the cost of 1shilling or a current day equivalent value of approximately $70. For selling these packagedtickets, Cook received a commission from the railway. Cook effectively became the first


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recorded travel agent and created the first publicly available packaged excursion. Cookssuccess would go to define two important segments of the travel industry; travel agencies (andtour operators) as well as the packaged holiday segment. In 1845, Cook arranged travel for165,000 people without the aid of any technology. Consider for a moment, that the ball pointpen had not been invented yet, the telegraph was not yet commercially available in the UK until

1846 and the telephone would not be patented for another thirty years. Cook managed all thatcustomer and booking data with nothing but a fountain pen and a paper ledger. The thought ofmanaging that much information without the use of technology seems ludicrous, and yet, it wasdone. But even given the pain that Cook must have felt managing that many customers in 1841,the pain didnt fully materialize until the rapid growth of the airlines which began in the 1920s.Many of the brands we are familiar with today such as the Queensland and Northern Territory

Aerial Service, also known as Qantas, Delta, American Airways (todays American Airlines), andPanAm were formed at this time. An era of commercial aviation had begun. But airplanes werenot the only form of transportation that was becoming popular. Cars were now being massproduced and, along with the newly available vehicles, schemes to monetize them alsodeveloped. Joe Saunders, an entrepreneur from Omaha, started an Automobile for Hirebusiness that is recognized as being the first recorded car rental company. Later that decadeJohn Hertz would purchase one of Saunders competitors and form the Hertz Drive -Ur-SelfSystem, which he eventually sold to General Motors. Air transportation in the 1930sexperienced rapid growth as new routes opened up as a result of government investment inairports and infrastructure. With the arrival of World War II, many of the airlines benefited fromgovernment contracts to transport troops and goods all over the World. Coincidentally, theincrease in air transportation opened up opportunities for companies to combine two modes oftransportation together. In 1946 Avis Rent a Car started business as the first airport rental carservice.

Supply management

During this period of rapid growth, the airlines, without the advantage of computerization wereforced to systematize their airline operations. The systems they developed included many of thetrip components that are still in use today. But systemization could only do so much in terms ofstreamlining inventory and passenger management challenges. In the early 1950s airlinesbegan to look seriously at tools for automating the booking process which, at the time, wouldtake airline agents upwards of 90 minutes per customer booking to complete. The jet age wasrapidly approaching and with it, the prospect of having to process millions of new passengers byhand. In 1952, American Airlines installed the Magnetronic Reservisor, an electromechanicalsystem of vacuum tubes and a magnetic storage drum that allowed the airline to store seat

availability on a centralized platform. Although the reservisor helped to reduce the time requiredto check availability and could store 31 days of availability for over 2,000 flights, it was still alargely manual process to book seats and required a reservisor agent to query the system.

Around the same time, TCA (Trans Canada Airlines) in conjunction with the University ofToronto and Ferranti Systems developed the worlds first computerized reservation system,known as the Reservec, which stood for Reservations Electronically Controlled. American

Airlines, which was aware of the early Reservec success, invested in the development of theirown computerized reservation system in partnership with IBM. The Sabre system was launched


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two years later at a cost of almost ten times that of the competing Reservec system. Despitebeing a superior technology, Reservec didnt see the same commercial success as Sabrebecause it was not able to effectively enter the IBM-controlled US market. The success,however, of both Reservec and Sabre promoted other airlines to develop their owncomputerized reservation platforms. In a very short period the Deltamatic, DATAS, Apollo, and

PARS were up and running in the 1960s.

Sales and distribution

On a parallel track with the growth of the airlines was the growth of the travel agencies. Many ofwhom had become important sales and booking channels for the airlines. As airline routes andbooking processes had become more complicated, travel agents had become a more popularmethod for consumers to book their airline tickets. But travel agents wanted more access toairline schedules and fares so they could sell tickets more efficiently and automate their side ofthe booking process. This could only be accomplished with direct computerized access to theairlines reservation systems. American Airlines, concerned by the potential growing influence of

travel agents, proposed the creation of centralized computer reservation system that could actas a clearing house for US travel. Other airlines opposed the idea and eventually, beginningwith Delta, reservation terminals were installed in travel agencies across the US. The race toown the agent desktop had begun. Opening up scheduling and fares to agencies proved to be agood move for the airlines. For some, primarily the airlines who owned their own GDSs, thetemptation to manipulate displays became too strong. After finding that American Airlines hadpurposefully biased search results in its Sabre reservation system In 1984, the US governmentintroduced legislation to ban screen bias. But this legislation has proven to be less thaneffective. Twenty years later, the airlines, GDSs, and now online travel agencies are still beingreprimanded by governments worldwide for this practice. During the 1980s, other GDS systemswere being developed. European airlines reluctant to use the US-centric Sabre system bandedtogether to create Amadeus. Meanwhile, Sabre in partnership with the growing computernetwork services business, Compuserve, provided the first known instance of online bookingsfor both airlines and hotels via EAASY Sabre. The increase in travel agent hotel reservationsand the advent of smaller and more powerful desktop computer systems prompted the creationof hotel reservation systems that could be conveniently located at the hotel front desk. Fideliolaunched its first property management and hotel reservation system in 1987. Thanks in part tothe success of the commercial internet in the early 1990s, many leading travel brands begandeveloping websites, some with online reservation capabilities. In 1995, Viator Systems (nowViator) launched its travel technology business with a focus on providing tours and excursionbookings via the world wide web. In 1996, a small division of Microsoft called Expedia launched

its website offering online bookings for air, hotels, and car rentals. Later that year, Travelocity,owned by Sabre, launched its own site to help the do -it-yourself traveler. Following on thegro wing trend of helping travelers book their own holidays, Priceline with its Name your ownprice opaque pricing model launched. It later extended the pricing model to include cars, homeloans, and even second hand goods but ultimately reverted back to their successful hotelmodel. The airlines, in anticipation of the increased connectivity demands that internettechnologies afforded, came together to develop an industry standard for messaging. Theresulting messages were to be managed and updated by the newly created OpenTravel


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Alliance (the first OpenTravel messages were published in 2001). Coincidentally, in the sameyear, five of the six major airlines joined, still on some apparent mission of cooperation, joinedforces to create their own online travel agency. Despite protests of unfair competition andpotential collusion brought forth by the existing online travel agencies and GDSs, Orbitz waslaunched.

Advanced discovery

As the growth of the Internet accelerated and the demise of the first dot com era subsided, newopportunities emerged to provide travelers with more information about the hotels they werebooking in increasing numbers online. Though travel forums and bulletin boards were around,there was no one forum that could provide the depth and recommendations on hotels thatconsumers were looking for. In 2004, TripAdvisor launched in the hope of filling that gap. Inaddition to providing consumers with access to reviews and recommendations, it becameapparent that consumers were shopping across multiple websites looking for deals on airlinefares. Kayak, whose co-founders had previously worked at Orbitz and Expedia, allowed

customers to find airline pricing results across multiple sites with one search. The model, whichhas remained relatively unchanged, is known today as the metasearch model and is one of thefastest growing search models for airfare and now hotel bookings. The mid-2000s was also atime for lesser known segments of the travel industry to begin their climb out of obscurity. Thevacation rental market, led by Homeaway in 2004, has become one of the fast growingsegments of the travel market, helped in many ways by the ubiquity of the web. As manageddata centres and dedicated servers were replaced with virtual private servers and cloud hosting,more and more traditionally desktop applications were moved online. Software as a servicebusinesses like Rezgo, TourCMS, and Guestcentric launched with the promise of helping smallbusinesses such as long tail operators and boutique hotels manage their services and open upnew sources or supply without the capital expenditures traditionally associated with dedicatedreservation services. Continued advancements in internet connectivity also meant greateraccess to web content on mobile devices. For years the travel industry had been toying withtechnologies like WAP and cHTML, creating websites that were compatible with earlysmartphone technologies like those from Blackberry and Nokia. 2008 marked a major milestoneis the long awaited mobile r evolution. Apple, after the very successful launch of its first iPhonethe previous year, made the iOS SDK available for third party developers. The move wouldprove to be a pivotal point in the history of mobile development, allowing travel companies tocreate dedicated applications designed specifically for the mobile consumer. 2008 also markedthe first of a new trend of websites that would shake up the existing travel landscape and causelocal governments around the world to take a second look at their housing policies. Airbnb, the

first of many Peer -to-Peer marketplaces launched providing home -owners (and renters) with aplace to list and rent out their spare rooms to strangers. Although other similar marketplaces,such as Couchsurfing, had already been around for a few years, they tended to be focused onniche markets such as the backpacker or budget traveler. As with any new platform, it is notunusual to see many existing travel businesses develop mobile applications in order to takeadvantage of the marketing opportunities. Often times, though, it takes a bit of time forcompanies to form that are dedicated entirely to the platform. One such company, HotelTonight,launched in 2010 around a last-minute mobile only model. The company raised $35 million


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shortly after its launch proving that a mobile-only focus could attract significant funding. Thebelief is that many more mobile only business models will emerge over the next few years,though HotelTonight is viewed as one of the most successful to date. In 2011, the internet wasabuzz with controversy surrounding the proposed acquisition of ITA Software by Google.Fairsearch, a group made up of online travel agencies, metasearch companies, and competing

airline reservation systems, looked to block the acquisition citing anti-trust concerns and unfaircompetition. Surprisingly, the airlines were not part of this protest since they stood to gain fromthe direct booking links that Google intended to include in their Google Flights service. Thoughthe fligh ts project has failed to have any material impact on the original members of theFairsearch, Googles forays into both flight and hotel search have been closely scrutinized byboth competitors and government agencies. Of course, a discussion on travel technology wouldnot be complete without some mention of the impact of social media on travel. In 2012Facebook reached one bllion active monthly users marking a major milestone for the eight yearold company. Recent studies have shown however, that traffic from social networks is quitesmall, so the influence of these networks is still quantitatively unknown.

Application of Information Technology (IT) has revolutionized thefunctioning of business all over the world. Its impact has been felt mostly inthe information dependent industries. Tourism is one such industry. Thisstudy examines the penetration of Information Technology in the context ofTourism Management. This study has found differences in usage of IT andattitudes towards its dependence upon size of tourism organizations. In thecase of smaller companies, the low cost access to Internet and on-linesystems was viewed as an expensive investment. Tour operators, travel

agents and direct tourism suppliers can increasingly use informationtechnologies to communicate destination images to prospectiveconsumers. The advent of Computerized Reservation Systems (CRS)means that travel products can be marketed directly to the potentialconsumer. This paper also investigates about different applications ofinformation technology like Virtual Reality (VR) simulations, e-payments,CRS that can be used to develop tourism market. Although VR technologyis rather primitive at present, it is argued that through its ability for

interactivity, consumers will be able to experience a destination withoutleaving their origin destination.


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Leisure , or free time , is time spent away from business , work, domestic chores ,

and education . It also excludes time spent on necessary activities such

as sleeping .

The distinction between leisure and unavoidable activities is not a rigidly definedone, e.g. people sometimes do work-oriented tasks fo r pleasure as well as for

long-term utility. A distinction may also be drawn between free time and leisure.

For example, Situationist International maintains that free time is illusory and

rarely free; economic and social forces appropriate free time from the individual

and sell it back to them [clarification needed ] as the commodity known as

"leisure" .[2] Certainly most people's leisure activities are not a completely free

choice, and may be constrained by social pressures, e.g. people may be coercedinto spending time gardening by the need to keep up with the standard of

neighbouring gardens.

Another concept of leisure is social leisure, which involves leisurely activities in a

social settings, such as extracurricular activities, e.g. sports, clubs.

Leisure studies is the academic discipline concerned with the study and analysis

of leisure.

GI Card Game, Watercolor by James Pollock, U. S. Army Vietnam Combat Artists Team IV(CAT IV 1967). During the Vietnam War soldiers waiting to go on patrol would sometimes spendtheir leisure time playing cards. Courtesy National Museum of the United States Army .

Time available for leisure varies from one society to the next, although

anthropologists have found that hunter-gatherers tend to have significantly more

leisure time than people in more complex societies. As a result, band

societies such as the Shoshone of the Great Basin came across as extraordinarily

lazy to European colonialists .[3]

Workaholics are those who work compulsively at the expense of other activities.

They prefer to work rather than spend time socializing and engaging in other

leisure activities.
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Men generally have more leisure time than women. In Europe and the United

States , adult men usually have between one and nine hours more leisure time

than women do each week .[4]

Adolescents [edit ] Free time has potential for youth development, which is influenced by parental

attitudes of interest and control, mediated by adolescent motivational style .[5]

Social Leisure [edit ]

Social leisure involves leisurely activities in a social settings, such as

extracurricular activities, e.g. sports, clubs. There are many benefits that come

from social leisure, such as the development of character, self-identity, andunderstanding of a communal setting or hierarchy. One key ingredient of social

leisure that tends to be overlooked is the concept of mealtime being an important

part of social leisure. It is during mealtimes where many individuals develop their

social skills and character that defines an individual.

The relation between social leisure and mealtime, which is essentially the act

accompanied with food, is uncanny. Both are used as a form of socialization,

both develop character as well as create development in youth, and both helpcreate social capital, these similarities are what make food a form a social

leisure. Food, the main ingredient in mealtime, also shares this similar quality of

self-identity through development and socialization, making food another positive

form of social leisure.
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Billing and Settlement Plan

Billing and Settlement Plan (BSP) (also known as "Bank Settlement Plan") is

an electronic billing system designed to facilitate the flow

of data and funds between travel agencies and airlines . The advantage of such

an intermediary organization is that instead of each travel agency having an

individual relationship with each airline, all of the information is consolidated

through the BSP.

BSP's are organized on a local basis, usually one per country. However there are

some BSP's which cover more than one country (for example the Nordics ).

The International Air Transport Association states that at the close of 2009, there

were 86 BSP's covering more than 160 countries worldwide, while at the close of

2011, there were 88 BSPs, covering 176 countries and territories serving about

400 airlines, with gross sales processed amounting to USD 249 billion .[1]

Travel agents (TA) are usually required to be accredited by either Airlines

Reporting Corporation (ARC) , when they are located in the US, or BSP outside of

the US, in order to issue airline reservations through GDS .[2]

Billing settlement plan (BSP)The Billing Settlement Plan (BSP) is a standardised system for airlines and agents,providing them with a simplified approach to the selling, reporting and administration ofpassenger air transportation. It is established under the general jurisdiction of thePassenger Agency Conference (PAConf), delegated to the BSP Committee (BSPC) andco-ordinated by the Agency Administrator/Plan Management.Agents are able to:

Issue neutral Standard Traffic Documents (STD) on behalf of all BSP Airlines, in accordancewith their Sales Agency Agreements. Report with a minimum of effort, their sales made on behalf of BSP Airlines to a central EDP

Centre, which produces one billing for each Agent's sales in a given period, requiring onlyone remittance per Agent and per period.

Computes the division of the Agents' remittances to each BSP Airline, allowing one singlesettlement, within an agreed time frame.
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Benefits of the BSPSimplificationThe Agent is assured of a steady and pre-determined supply of neutral Standard TrafficDocuments. The Agent uses the same Standard Traffic Documents on behalf of all BSP

Airlines. The Agent issues one single sales report to one central point and effects onesingle remittanceSavingsTraining of Agents is simpler and shorter, due to one set of standard procedures.Centralisation of the processing and of the distribution of STDs reduces costs andallows for better control. Investigations by BSP Manager, who is empowered to takeimmediate action on behalf of BSP Airlines, allows for faster solutions to problems.ControlThe control system embodied in the BSP presents the following advantages: Billing andbilling analyses of uniform presentation for Airlines and for Agents are rapidly producedby a neutral billing/collection agency. Airlines and Agents benefit from having themonitoring of Irregularity and Default effected by a neutral BSP Manager.Automation Potential

Automation of back office functions is rendered by a single accounting system. BSPenables and encourages the use of the most modern automated ticket issuing devices,thereby economising in time and money, whilst presenting the customer with anattractive and legible ticket.How it worksIt is a strategic move for AirAsia to participate in the Billing Settlement Plan (BSP) andwe are proud to provide this facility as an additional payment option for travel agents.

Travel agents, who are already participating in BSP is encouraged to register with us asyou can further utilise this ultimate facility through our internet booking protocol Sky

Agent. The registration is a simple process. From the drop down menu of otherservices, go to travel agent choose register now and it will prompt you a registrationpage menu. Please fill up all the blanks and press submit button. AirAsia will verify thedata you have submitted. Once your application is successful, you will receive anappointment letter with a master user ID and password.

Travel agents, who are not participating in BSP, can still register with AirAsia and enjoythe benefits of Sky Agent. The payment options will be limited to credit card, direct debitand pre-payment AG only.

For those BSP travel agents that have registered with AirAsia need not to registeragain. However, you will have to advise us of your interest in the scheme and we willarrange for the cutover into the scheme with a pre set BSP allotment level for you toutilise. After cutover, you will be able to see the BSP Allotment option when you are inthe payment option mode. The BSP allotment amount will be set by our office and the


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amount will be based on your current bank guarantee against your sales performance.

As AirAsia is a low fare, ticket-less airline, we will not be utilising the STD and CIP asprovided for in BSP. Our participation will be confined to the billing and settlement partof the BSP scheme. Once a reservation and payment has been made through ourSkyagent system with the BSP payment option, the transaction will be captured by oursystem and at the end of each day, an electronic file will be generated and sent to BSPdata processing centre for their processing. In accordance to the respective billingcycle, the travel agent will receive their billing and payment will be made to the clearingbank accordingly by the travel agent. For AirAsia sales, the transaction will be capturedby BSP as an Agency Debit Memo (ADM) and not as a ticket issue in the conventionalway. The data that will be available in the ADM field will be an ADM number, totalpayable amount and PNR reference.

Sabre Travel Network (STN) is a travel technology company, serving travelagencies and corporations. It is a division of Sabre Holdings . Sabre Travel

Network began when the Sabre computer reservations system , also known as

a Global Distribution System (GDS) was installed in Briarcliff Manor , New York in

1960. It began as the reservations system for American Airlines . Its parent

company, Sabre Holdings, spun off from American as The Sabre Group on

March 15, 2000. Today, Sabre Travel Network software connects more than

370,000 travel professionals to more than 400 airlines, 100,000 hotels, 25 carrental brands, 50 rail providers, 13 cruise lines and other global travel suppliers.

More than 300 million people purchase airline tickets through this channel

annually.

Sabre Travel Network brands:
http://en.wikipedia.org/wiki/Sabre_Holdingshttp://en.wikipedia.org/wiki/Sabre_Holdingshttp://en.wikipedia.org/wiki/Sabre_Holdingshttp://en.wikipedia.org/wiki/Sabre_(computer_system)http://en.wikipedia.org/wiki/Sabre_(computer_system)http://en.wikipedia.org/wiki/Computer_reservations_systemhttp://en.wikipedia.org/wiki/Computer_reservations_systemhttp://en.wikipedia.org/wiki/Computer_reservations_systemhttp://en.wikipedia.org/wiki/Global_Distribution_Systemhttp://en.wikipedia.org/wiki/Global_Distribution_Systemhttp://en.wikipedia.org/wiki/Global_Distribution_Systemhttp://en.wikipedia.org/wiki/Briarcliff_Manor,_New_Yorkhttp://en.wikipedia.org/wiki/Briarcliff_Manor,_New_Yorkhttp://en.wikipedia.org/wiki/Briarcliff_Manor,_New_Yorkhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Briarcliff_Manor,_New_Yorkhttp://en.wikipedia.org/wiki/Global_Distribution_Systemhttp://en.wikipedia.org/wiki/Computer_reservations_systemhttp://en.wikipedia.org/wiki/Sabre_(computer_system)http://en.wikipedia.org/wiki/Sabre_Holdings


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Definition of 'Foreign Exchange'

The exchange of one currency for another, or the conversion of

one currency into another currency. Foreign exchange also refersto the global market where currencies are traded virtuallyaround-the-clock. The term foreign exchange is usuallyabbreviated as "forex" and occasionally as "FX."

Investopedia explains 'Foreign Exchange'

Foreign exchange transactions encompass everything from the

conversion of currencies by a traveler at an airport kiosk tobillion-dollar payments made by corporate giants andgovernments for goods and services purchased overseas.Increasing globalization has led to a massive increase in thenumber of foreign exchange transactions in recent decades. Theglobal foreign exchange market is by far the largest financialmarket, with average daily volumes in the trillions of dollars.

Foreign exchange market

The foreign exchange market (forex , FX , or currency market ) is a global

decentralized market for the trading of currencies . The main participants in this

market are the larger international banks. Financial centers around the world

function as anchors of trading between a wide range of multiple types of buyers

and sellers around the clock, with the exception of weekends. The foreign

exchange market determines the relative values of different currencies .[1]

The foreign exchange market works through financial institutions, and it operates

on several levels. Behind the scenes banks turn to a smaller number of financial

firms known as dealers, who are actively involved in large quantities of foreign

exchange trading. Most foreign exchange dealers are banks, so this behind-the-
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scenes market is sometimes called the interbank market, although a few

insurance companies and other kinds of financial firms are involved. Trades

between foreign exchange dealers can be very large, involving hundreds of

millions of dollars.[citation needed ]

Because of the sovereignty issue when involvingtwo currencies, Forex has little (if any) supervisory entity regulating its actions.

The foreign exchange market assists international trade and investments by

enabling currency conversion . For example, it permits a business in the United

States to import goods from the European Union member states,

especially Eurozone members, and pay euros , even though its income is

in United States dollars . It also supports direct speculation and evaluation relative

to the value of currencies, and the carry trade , speculation based on the interestrate differential between two currencies .[2]

In a typical foreign exchange transaction, a party purchases some quantity of one

currency by paying for some quantity of another currency. The modern foreign

exchange market began forming during the 1970s after three decades of

government restrictions on foreign exchange transactions (the Bretton Woods

system of monetary management established the rules for commercial and

financial relations among the world's major industrial states after World War II ),when countries gradually switched to floating exchange rates from the

previous exchange rate regime , which remained fixed as per the Bretton Woods

system.

The foreign exchange market is unique because of the following characteristics:

its huge trading volume representing the largest asset class in the world

leading to high liquidity;

its geographical dispersion;

its continuous operation: 24 hours a day except weekends, i.e., trading from

22:00 GMT on Sunday (Sydney ) until 22:00 GMT Friday (New York);

the variety of factors that affect exchange rates ;
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the low margins of relative profit compared with other markets of fixed

income; and

the use of leverage to enhance profit and loss margins and with respect to

account size. As such, it has been referred to as the market closest to the ideal of perfect

competition , notwithstanding currency intervention by central banks .

According to the Bank for International Settlements ,[3] the preliminary global

results from the 2013 Triennial Central Bank Survey of Foreign Exchange and

OTC Derivatives Markets Activity show that trading in foreign exchange markets

averaged $5.3 trillion per day in April 2013. This is up from $4.0 trillion in April

2010 and $3.3 trillion in April 2007. Foreign exchange swaps were the mostactively traded instruments in April 2013, at $2.2 trillion per day, followed by spot

trading at $2.0 trillion.

According to the Bank for International Settlements ,[4] as of April 2010, average

daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a

growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.

Some firms specializing on foreign exchange market had put the average daily

turnover in excess of US$4 trillion .[5]

The $3.98 trillion break-down is as follows:

$1.490 trillion in spot transactions

$475 billion in outright forwards

$1.765 trillion in foreign exchange swaps

$43 billion currency swaps

$207 billion in options and other products

Contents[hide ]

1 History o 1.1 Ancient o 1.2 Medieval and later
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o 1.3 Early modern o 1.4 Modern to post-modern

1.4.1 After WWII 1.4.2 Markets close 1.4.3 After 1973

2 Market size and liquidity 3 Market participants o 3.1 Commercial companies o 3.2 Central banks o 3.3 Foreign exchange fixing o 3.4 Hedge funds as speculators o 3.5 Investment management firms o 3.6 Retail foreign exchange traders o 3.7 Non-bank foreign exchange companies o 3.8 Money transfer/remittance companies and bureaux de change

4 Trading characteristics

5 Determinants of exchange rates o 5.1 Economic factors o 5.2 Political conditions o 5.3 Market psychology

6 Financial instruments o 6.1 Spot o 6.2 Forward o 6.3 Swap o 6.4 Futures o 6.5 Option

7 Speculation

8 Risk aversion 9 Carry trade 10 Forex signals 11 See also 12 References 13 External links

History [edit ]

Ancient [edit ]

Currency trading and exchange first occurred in ancient times .[6] Money-changing

people, people helping others to change money and also taking a commission or

charging a fee were living in the times of the Talmudic writings ( Biblical times ).

These people (sometimes called "kollybists") used city -stalls, at feast times the

temples Court of the Gentiles instead .[7] Money-changers were also in more

recent ancient times silver-smiths and/or gold-smiths .[8]
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on=2http://en.wikipedia.org/w/index.php?title=Foreign_exchange_market&action=edit&section=2http://en.wikipedia.org/w/index.php?title=Foreign_exchange_market&action=edit&section=2http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-6http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-6http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-6http://en.wikipedia.org/wiki/Talmudichttp://en.wikipedia.org/wiki/Talmudichttp://en.wikipedia.org/wiki/Talmudichttp://en.wikipedia.org/wiki/Court_of_the_Gentileshttp://en.wikipedia.org/wiki/Court_of_the_Gentileshttp://en.wikipedia.org/wiki/Court_of_the_Gentileshttp://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-7http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-7http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-7http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-8http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-8http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-8http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-8http://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-7http://en.wikipedia.org/wiki/Court_of_the_Gentileshttp://en.wikipedia.org/wiki/Talmudichttp://en.wikipedia.org/wiki/Foreign_exchange_market#cite_note-6http://en.wikipedia.org/w/index.php?title=Foreign_exchange_market&action=edit&section=2http://en.wikipedia.org/w/index.php?title=Foreign_exchange_market&action=edit&section=1http://en.wikipedia.org/wiki/Foreign_exchange_market#External_linkshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Referenceshttp://en.wikipedia.org/wiki/Foreign_exchange_market#See_alsohttp://en.wikipedia.org/wiki/Foreign_exchange_market#Forex_signalshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Carry_tradehttp://en.wikipedia.org/wiki/Foreign_exchange_market#Risk_aversionhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Speculationhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Optionhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Futureshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Swaphttp://en.wikipedia.org/wiki/Foreign_exchange_market#Forwardhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Spothttp://en.wikipedia.org/wiki/Foreign_exchange_market#Financial_instrumentshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Market_psychologyhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Political_conditionshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Economic_factorshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Determinants_of_exchange_rateshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Trading_characteristicshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Money_transfer.2Fremittance_companies_and_bureaux_de_changehttp://en.wikipedia.org/wiki/Foreign_exchange_market#Non-bank_foreign_exchange_companieshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Retail_foreign_exchange_tradershttp://en.wikipedia.org/wiki/Foreign_exchange_market#Investment_management_firmshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Hedge_funds_as_speculatorshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Foreign_exchange_fixinghttp://en.wikipedia.org/wiki/Foreign_exchange_market#Central_bankshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Commercial_companieshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Market_participantshttp://en.wikipedia.org/wiki/Foreign_exchange_market#Market_size_and_liquidityhttp://en.wikipedia.org/wiki/Foreign_exchange_market#After_1973http://en.wikipedia.org/wiki/Foreign_exchange_market#Markets_closehttp://en.wikipedia.org/wiki/Foreign_exchange_market#After_WWIIhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Modern_to_post-modernhttp://en.wikipedia.org/wiki/Foreign_exchange_market#Early_modern


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During the fourth century, the Byzantium government kept a monopoly on the

exchange of currency .[9]

Currency and exchange was also a vital and crucial element of trade during the

ancient world so that people could buy and sell items like food, pottery and rawmaterials .[10] If a Greek coin held more gold than an Egyptian coin due to its size

or content, then a merchant could barter fewer Greek gold coins for more

Egyptian ones, or for more material goods. This is why, at some point in their

history, most world currencies in circulation today had a value fixed to a specific

quantity of a recognized standard like silver and gold.

Medieval and later [edit ]

During the fifteenth century the Medici family were required to open banks atforeign locations in order to exchange currencies to act on behalf

of textile merchants .[11][12] To facilitate trade the bank created the nostro (from

Italian translated "ours") account book which contained two columned entries

showing amounts of foreign and local currencies, information pertaining to the

keeping of an account with a foreign bank .[13][14][15][16] During the 17th (or 18th )

century Amsterdam maintained an active forex market .[17] During 1704 foreign

exchange took place between agents acting in the interests of the nations ofEngland and Holland .[18]

Early modern [edit ]

Alex. Brown & Sons traded foreign currencies exchange sometime about 1850

and was a leading participant in this within U.S.A .[19] During 1880, J.M. do

Esprito Santo de Silva (Banco Esprito Santo ) applied for and was given

permission to begin to engage in a foreign exchange trading business .[20][21]

The year 1880 is considered by at least one source to be the beginning ofmodern foreign exchange, significant for the fact of the beginning of the gold

standard during the year .[22]
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Prior to the first world war there was a much more limited control of international

trade. Motivated by the outset of war countries abandoned the gold standard

monetary system .[23]

Modern to post-modern [edit ] From 1899 to 1913, holdings of countries' foreign exchange increased at an

annual rate of 10.8%, while holdings of gold increased at an annual rate of 6.3%

between 1903 and 1913 .[24]

At the time of the closing of the year 1913, nearly half of the world's foreign

exchange was conducted using the Pound sterling .[25] The number of foreign

banks operating within the boundaries of London increased in the years from

1860 to 1913 from 3 to 71. In 1902 there were altogether two London foreignexchange brokers .[26] In the earliest years of the twentieth century trade was most

active in Paris , New York and Berlin, while Britain remained largely uninvolved in

trade until 1914. Between 1919 and 1922 the employment of foreign exchange

brokers within London increased to 17, in 1924 there were 40 firms operating for

the purposes of exchange .[27] During the 1920s the occurrence of trade in

London resembled more the modern manifestation, by 1928 forex trade was

integral to the financial functioning of the city. Continental exchange controls,plus other factors, in Europe and Latin America , hampered any attempt at

wholesale prosperity from trade for those of 1930's London .[28]

During the 1920s, the Kleinwort family were known to be the leaders of the

foreign exchange market; while Japheth, Montagu & Co., and Seligman still

warrant recognition as significant FX traders .[29]

Aft er WWII [ edit ]

After WWII, the Bretton Woods Accord was signed allowing currencies to

fluctuate within a range of 1% to the currencies par .[30] In Japan the law was

changed during 1954 by the Foreign Exchange Bank Law, so, the Bank of Tokyo

was to become, because of this, the centre of foreign exchange by September of
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million Dmarks" Brawley states "... Exchange markets had to be closed. When

they re-opened ... March 1 " that is a large purchase occurred after the

close) .[46][47][48][49]

Aft er 1973 [ edit ]

The year 1973 marks the point to which nation-state, banking trade and

controlled foreign exchange ended and complete floating, relatively free

conditions of a market characteristic of the situation in contemporary times began

(according to one source) ,[50] although another states the first time a currency

pair were given as an option for U.S.A. traders to purchase was during 1982, with

additional currencies available by the next year .[51][52]

On 1 January 1981, as part of changes beginning during 1978, the People's

Bank of China allowed certain domestic "enterprises" to participate in foreign

exchange trading .[53][54]Sometime during the months of 1981 the South Korean

government ended forex controls and allowed free trade to occur for the first

time. During 1988 the countries government accepted the IMF quota for

international trade .[55]

Intervention by European banks especially the Bundesbank influenced the forex

market, on February the 27th 1985 particularly .[56] The greatest proportion of all

trades world-wide during 1987 were within the United Kingdom, slightly over one

quarter, with the U.S. of America the nation with the second most places involved

in trading .[57]

During 1991 the republic of Iran changed international agreements with some

countries from oil-barter to foreign exchange .[58]

See also: History of Retail foreign exchange platform
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Market size and liquidity [edit ]

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

The foreign exchange market is the most liquid financial market in the world.

Traders include large banks, central banks ,institutional investors ,

currency speculators , corporations, governments , other financial institutions , and

retail investors. The average daily turnover in the global foreign exchange and

related markets is continuously growing. According to the 2010 Triennial Central

Bank Survey, coordinated by the Bank for International Settlements, average

daily turnover was US$3.98 trillion in April 2010 (vs $1.7 trillion in 1998) .[4] Of this

$3.98 trillion, $1.5 trillion was spot transactions and $2.5 trillion was traded in

outright forwards, swaps and other derivatives .

In April 2010, trading in the United Kingdom accounted for 36.7% of the total,

making it by far the most important centre for foreign exchange trading. Trading

in the United States accounted for 17.9% and Japan accounted for 6.2% .[59]

In April 2013, for the first time, Singapore surpassed Japan in average daily

foreign-exchange trading volume with $383 billion per day. So the rank became:the United Kingdom (41%), the United States (19%), Singapore (5.7)%, Japan

(5.6%) and Hong Kong (4.1%) .[60]

Turnover of exchange-traded foreign exchange futures and options have grown

rapidly in recent years, reaching $166 billion in April 2010 (double the turnover
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recorded in April 2007). Exchange-traded currency derivatives represent 4% of

OTC foreign exchange turnover. Foreign exchange futures contracts were

introduced in 1972 at the Chicago Mercantile Exchange and are actively traded

relative to most other futures contracts.Most developed countries permit the trading of derivative products (like futures

and options on futures) on their exchanges. All these developed countries

already have fully convertible capital accounts. Some governments of emerging

economies do not allow foreign exchange derivative products on their exchanges

because they have capital controls . The use of derivatives is growing in many

emerging economies .[61] Countries such as Korea, South Africa, and India have

established currency futures exchanges, despite having some capital controls.Top 10 currency traders % of overall volume, May 2014

Rank Name Market share

1 Citi 16.04%

2 Deutsche Bank 15.67%

3 Barclays Investment Bank 10.91%

4 UBS AG 10.88%

5 HSBC 7.12%

6 JPMorgan 5.55%

7 Bank of America Merrill Lynch 4.38%

8 Royal Bank of Scotland 3.25%

9 BNP Paribas 3.10%
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