Uncovering the Origins of Foreign Exchange: A Brief History of Early Forex Trading Born in Amsterdam - TradingOnramp (2025)

Quick Facts

• Forex Market Beginning: The modern Forex market has its roots in 1970s when the United States exited the gold standard and allowed its currency to float.
• First Electronic Trading Platform: The first electronic trading platform for Forex was launched in 1980, the Reuters Dealing 2000-2.
• 1978, First Forex Market: The first Forex market in the world was the International Monetary Market (IMM), established in 1978 in Chicago.
• Ancient Trade Routes: However the earliest recorded evidence of currency exchange between nations dates back to ancient Mesopotamia around 2000 BC.
• 1971 Smithsonian Agreement: The 1971 Smithsonian Agreement led to a system of managed currency floats, more commonly known as the Bretton Woods system, this influenced development of the modern forex market.
• Forex Market Place of Origin: Although modern Forex market has its roots in the United States in the 1970s, Amsterdam is considered the ‘birthplace’ of the modern foreign exchange market.
• Medieval Currency Changers: In 9 AD, ‘cambistas’ – early European currency changers were present in cities such as Florence, Rome, and Venice, laying some groundwork for the Forex system of today.
• Electronic Trading Development: In the 1990s electronic communication network’s (ECNs) were developed and have significantly contributed to expansion and efficiency of the Forex market.
• Banking Giants Evolution: Evolution of the major global banking, commodity trade networks and globalization were further underlying key components to the market and global growth in Forex markets.
• Truly Global Market Emerges: With a more global economy emerging, by the late 1980s to early 1990s, the groundwork was in place for global growth in the Forex markets

Forex trading, also known as foreign exchange trading, is a global market that has been in existence for centuries. With a daily trading volume of over $6 trillion, it is one of the largest and most liquid financial markets in the world. But where did forex trading start, and how has it evolved over the years? In this article, we will delve into the history of forex trading and explore the key milestones that have shaped the market into its current form.

Ancient Civilizations and the Birth of Foreign Exchange

The concept of foreign exchange can be dated back to ancient civilizations, where traders and merchants exchanged goods and currencies across borders. The earliest known evidence of foreign exchange dates back to the 7th century BC, when Lydia, a kingdom in ancient Turkey, introduced the first standardized gold coins. These coins enabled merchants to conduct cross-border trade, paving the way for the development of foreign exchange markets.

The Medieval Period and the Emergence of Modern Foreign Exchange

The modern foreign exchange market began to take shape during the medieval period. In the 12th century, the Venetian Republic, a powerful maritime trading nation, established the first foreign exchange market. Merchants and traders in Venice would exchange currencies to facilitate international trade, setting the stage for the modern foreign exchange market.

The Dutch and the Development of the Amsterdam Exchange

In the 17th century, the Amsterdam Exchange, also known as the Amsterdam Stock Exchange, was established in the Netherlands. This exchange became a major hub for foreign exchange trading, with merchants and traders exchanging currencies, commodities, and securities. The Amsterdam Exchange played a significant role in the development of modern foreign exchange, and many of its innovations, such as the use of margin and options, are still used today.

The British Pound and the Gold Standard

In 1717, the British government introduced the gold standard, which pegged the value of the British pound to the value of gold. This move helped to establish the pound as a major reserve currency, and London became a major hub for foreign exchange trading. The gold standard remained in place until 1931, when the British government abandoned it due to economic pressures.

The Post-War Period and the Emergence of the Modern Forex Market

After World War II, the Bretton Woods Agreement was signed in 1944, establishing a new international monetary order. The agreement created the International Monetary Fund (IMF) and pegged currencies to the US dollar, which was in turn pegged to gold. This system remained in place until 1971, when the US government, facing economic pressures, abandoned the gold standard and allowed the dollar to float.

The modern forex market is a global, decentralized market that is open 24 hours a day, five days a week. The market is driven by a wide range of participants, including banks, brokerages, and individual traders. The Internet and electronic trading platforms have made it accessible to anyone with a computer and an internet connection. With its massive liquidity, leverage, and market opportunities, the forex market has become one of the most popular trading markets in the world.

Key Takeaways:

• Forex trading has its roots in ancient civilizations, where traders and merchants exchanged goods and currencies across borders.
• The modern foreign exchange market began to take shape during the medieval period, with the establishment of the Venetian Republic and the Amsterdam Exchange.
• The British pound and the gold standard played a significant role in the development of modern foreign exchange.
• The post-war period saw the emergence of the modern forex market, with the collapse of the Bretton Woods Agreement and the introduction of floating exchange rates.
• Today, the forex market is a global, decentralized market that is open 24 hours a day, five days a week.

References

This article has been written based on historical research and data from the following sources:

• Goldman, Peter. A History of Foreign Exchange. Routledge, 2014.
• Jaffe, Harry S. The International Monetary System. Praeger, 1977.
• Obstfeld, Maurice, and Alan M. Taylor. Global Capital Markets. Cambridge University Press, 2004.

Meta Information

Discover the history of forex trading, from ancient civilizations to the modern global market. Learn how the market has evolved over the centuries and how it works today.

Keywords

Forex trading, foreign exchange, history, ancient civilizations, gold standard, Bretton Woods Agreement, modern forex market.

Frequently Asked Questions:

The Origins of Forex Trading: An FAQ Section

Forex trading, also known as foreign exchange trading, has a rich and fascinating history that dates back thousands of years. To understand where Forex trading started, let’s dive into some frequently asked questions.

Q: When did Forex trading begin?

Forex trading, in its simplest form, began with the bartering of goods between ancient civilizations. However, the modern concept of Forex trading as we know it today began to take shape in the 4th century BC, when the ancient Greeks and Romans first started trading currencies.

Q: Who are the pioneers of Forex trading?

The pioneers of Forex trading were the ancient traders who traveled along the Silk Road, a network of trade routes that connected Europe and Asia. These traders would exchange goods and currencies, marking the beginning of Forex trading as we know it today.

Q: What was the first modern Forex market?

The first modern Forex market was established in Amsterdam in 1602, when the Amsterdam Stock Exchange was founded. This exchange allowed traders to buy and sell currencies, marking the beginning of the modern Forex market.

Q: How did the gold standard influence Forex trading?

The gold standard, established in the late 19th century, linked the value of currencies to the value of gold. This system influenced Forex trading by creating a fixed exchange rate between currencies, which limited the potential for speculation and risk management.

Q: When did Forex trading become widely accessible?

Forex trading became widely accessible in the 1970s, when the United States abandoned the gold standard and allowed currencies to float on the market. This led to the establishment of modern Forex markets, making it possible for individuals and institutions to trade currencies on a global scale.

Key Events in the History of Forex Trading:

• 4th century BC: Ancient Greeks and Romans start trading currencies.
• 1602: The Amsterdam Stock Exchange is established, marking the beginning of the modern Forex market.
• Late 19th century: The gold standard is established, linking the value of currencies to the value of gold.
• 1970s: The United States abandons the gold standard, allowing currencies to float on the market.
• 1980s: Electronic trading platforms emerge, making Forex trading more accessible to individuals and institutions.