Oanda Corporation

OANDA Corporation
Type Private
Industry Financial Services
Currency Trading
Founded 1995, incorporated 1996
Headquarters Toronto, Canada
Key people Richard Olsen, Chairman and Co-Founder
Michael Stumm, President and Co-Founder
Alan Fletcher, Head of FX Operations
Website www.oanda.com

OANDA Corporation is a financial services provider of currency conversion, online retail foreign exchange (forex) trading, online foreign currency transfers, and forex information. It is one of the non-bank Futures Commission Merchants (FCMs) specialized in spot forex trading. OANDA is a registered FCM with the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association (NFA).

Contents

History

OANDA is an outgrowth of the Swiss Olsen Group and was created to serve as an internet trading platform to automate techniques based on the group's 20 years' worth of research in foreign exchange trading.[1] Much of OANDA's technology is based on algorithms published in the book High Frequency Finance [2], which was co-authored by Dr. Richard Olsen, a principal of OANDA and co-inventor of these algorithms.

OANDA Corporation was incorporated in 1996 in the state of Delaware, and initially provided online access to live currency information that was previously inaccessible to the public at large. At its inception, OANDA.com offered free currency conversion tools, tables of historical data, news, and analysis through a multilingual interface [3].

In 2001, OANDA launched FXTrade, an online forex trading system. Some of its features included flexible trade sizes, 24/7 trading, instant settlement on all transactions, continuous interest payments calculated second-by-second throughout the day, and no lot size restrictions (that is, traders could buy and sell any number of units, all at the same rate).

In 2005, OANDA published The Forex Trader's Bill of Rights to outline its philosophy of what forex markets can and should offer to forex traders. In 2007, OANDA offered spot trading in an expanded list of currencies, including the Chinese yuan.[citation needed]

In 2008 OANDA launched FXGlobalTransfer, an automated online foreign currency transfer service designed to send funds globally. The same year, OANDA launched FXPedia, an online wiki of forex information and commentary, and FXConsulting, a consulting service for corporate hedging.

Ownership and regulatory information on OANDA are available from its NFA listing.[4]

Features

The site has an online trading platform (FXTrade), currency conversion tools, a foreign exchange wire service (FXGlobalTransfer), a corporate hedging consulting service (FXConsulting), discussion forums, tables of historical currency data, as well as forex news and analysis[5][citation needed]. OANDA provides many Foreign Exchange services besides FXTrade, their FOREX trading platform. They provide conversion tools and currency charts for businesses to integrate into their sites and indexes and information for travelers.[6] OANDA's founders published The Forex Trader's Bill of Rights to highlight what they describe as the fundamental right of foreign exchange traders to a free, open, and stable forex market, including technological efficiency and unfettered access to information.[citation needed]

One feature included in this Bill of Rights is the application of continuous interest, second-by-second, a feature of OANDA's FXTrade platform. When interest is applied only once a day on open positions (the typical broker's standard), there is an artificial bias toward shorting weaker currencies (with higher rates of interest), and, potentially, rewarding buyers of stronger currencies with lower rates of interest. The "Bill of Rights" asserts that this practice results in "distorted pricing flows that upset trends, create valuation havoc, and encourage speculation for its own sake." [7]

Mathematician Benoît Mandelbrot singles out OANDA's FXTrade technology as one example of how the foreign exchange market works when small investors and big investors are set on an equal footing, having removed the unfair commission structure.[8] The forex market, despite its vast size, can be vulnerable to periods of illiquidity. These periods pose a risk to an interconnected globalized economy that is increasingly dependent on foreign currency exchange for currency disintermediation and micro-hedging, along with everyday B2B and B2C cross-border transactions.

References

  1. ^ "Research-coming from a trading floor near you", Michael Halls, Global Finance, published June 2003, accessed December 30, 2006.
  2. ^ "An Introduction to High-Frequency Finance", Ramazan Gençay, Michel Dacorogna, Ulrich A. Muller, Olivier Pictet, Richard Olsen, 2001"
  3. ^ "Need some yen in a hurry? Try the Web; New services to let travellers order foreign; currencies on-line for overnight delivery", Salem Alaton, The Globe and Mail, published March 8, 2001.
  4. ^ NFA listing.
  5. ^ OANDA web site, plus Quick access: find statistical data on the Internet, Di Su, "Information Outlook", published May 1999, accessed December 30, 2006.
  6. ^ Oanda Review in Daily Forex - Forex Trading by DailyForex
  7. ^ http://fxtrade.oanda.com/learn/books/bill-of-rights/chapter-10
  8. ^ "The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward," Benoît Mandelbrot and Richard L. Hudson, page 257

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