Oligopoly Currency System
Goldfish is free to float within its bowl.
Until 1971, currency rates were fixed under Bretton Woods. Governments set the rates. When Nixon ended dollar-to-gold convertibility, currencies were supposed to float freely based on market forces. At least, that is what everyone was told. Initially, USD was under pressure but USA rushed to gulf and created artificial demand through investments. It is discussed in detail in the chapter titled “Oil Wars”.
Till 1985, currency trading happened on phone lines. A trader at a major bank would call banks around the world asking for rates. “What is your rate on dollars to yen?” Each bank gave slightly different quotes. You negotiated, haggled, made deals. It was messy but every major bank and central bank had a voice. No single entity controlled the entire conversation.
Electronic trading
Then came computers. In the late 1980s, Thomson Reuters put currency trading on computers. Instant quotes. Faster transactions. Real-time pricing. Banks loved it. Everyone wanted in. Nobody fully grasped what they were trading away: democracy for efficiency. The old phone system was slower but more democratic. Each country's central bank could directly influence their currency's trading. Multiple banks could offer different rates. There was not a single choke-point.
By 1990, major banks created EBS, Electronic Broking Services. It was presented as a healthy competition to Thomson Reuters. Two systems competing for business. Except they did not really compete. They divided the market instead.
EBS took control of the major currency pairs. EUR/USD, USD/JPY, these went to EBS. Thomson Reuters handled AUD/USD, NZD/USD, and emerging market currencies. Not competition. Market segmentation. Each platform became a monopoly for its assigned currencies.
Here's what that means. When you want to trade euros against dollars, EBS is where that happens. When you want to trade Australian dollars, Thomson Reuters is where that happens. There is no real choice between platforms. You go to whoever controls your currency pair. You take their price or you do not trade.
In the 2010s, both platforms got sold to appear more independent. Thomson Reuters' platform went to the London Stock Exchange Group. EBS went to CME Group in Chicago. Now it looked like British and American companies were competing. But the shareholder lists told a different story.
Conflict of Interest
BlackRock appears as a major shareholder in both. Vanguard appears in both. State Street appears in both. The same institutional investors who control the platforms manage trillions in assets that benefit from currency movements. They are the referee, the players, and the scorekeeper all at once.
Currency spot trading is only about one-third of the total currency market. The rest is derivatives, futures, options, swaps. But spot trading determines the base prices. It is the foundation. Everything else sits on top of it. Those same two platforms handle the vast majority of the roughly $2 trillion in daily spot trading.
The problem is obvious. The platforms set the prices that all derivatives are built on. The same companies that own the platforms also trade those derivatives. They know what prices will beset before anyone else does. They have first access to that information. In any other industry this would be called fraud. In currency trading, it is just how things work.
It is also argued that an institution like London Stock Exchange is managed by professionals and not by shareholders who are mere investors. The same logic can be applied to the countries under dictatorships. They too have institutions but neither the dictator nor the institutions are trusted. The problem is that for fairness the doubt of conflict of interest must also be eliminated.True legitimacy demands visible impartiality, not merely procedural competence.
When Trump threatens tariffs against countries moving away from the dollar, he's protecting this oligopoly system. Alternative trading systems don't just hurt the dollar. They threaten the control these financial institutions have over global currency pricing. If countries build independent systems that work, the two-platform monopoly loses its power. The institutional investors lose their choke-hold on global finance.
The numbers show the trend. About 54% of world trade happens in US dollars. 57% of global currency reserves are held in dollars. Nearly 90% of currency trades involve the US dollar. But those numbers are slowly declining. After World War II, over 70% of reserves were in dollars. Countries are diversifying. They'rebuilding alternatives. The trend is clear.
Technological progress was supposed to make things more efficient. It did. But efficiency came at a cost. The phone-based system wasn't perfect but it was distributed. Power was spread across multiple players. The electronic system is faster but centralized. Power concentrated in two platforms controlled by the same handful of investors. The conflict of interest is impossible to ignore. If asked it will be explained that it is not a conspiracy but a structural event. These groups in their portfolio have investments in all large corporations.
The same entities that control pricing also hold massive positions in those currencies. They manage trillions in assets that benefit from currency movements. They have first access to trading data before it becomes public. They can see what's happening in the market before anyone else. They can trade on that information. In any other market this would be illegal. In currency trading, it's standard practice.
Whether you're a business dealing with international suppliers or someone filling a gas tank, this matters. Currency rates affect everything. The “free market” for currencies isn't free. It's controlled by a small group. Geopolitical tensions around currency often trace back to this control structure. Wars have been fought over it. Sanctions have been imposed through it. Countries have been bankrupted by it.
The question now is whether alternatives will create more democratic currency trading or just shift control from one oligopoly to another. Will China's digital yuan be more open or just replace Western control with Chinese control? Will BRICS create a unit backed by gold and member contributions? The technology exists for truly decentralized systems. Whether the political will exists is another question.
The next time someone talks about free market currency rates, remember this: two platforms controlled by the same financial institutions determine prices for most of the world's trading. Add SWIFT and you have a complete bottleneck over global finance. It's not a free market. It'san oligopoly that emerged from what was sold as progress but resulted in unprecedented concentration of financial power. That's what the real fight is about.
Oil prices matter because most oil trades in US dollars. This created the petrodollar system where countries need dollars not just for trade but for basic energy needs. Every time you fill your car or pay an electricity bill, you're feeling this currency control system. Iraq switched to euros for oil sales in 2000. Libya was planning a gold-backed African currency. Iran tried selling oil in other currencies. Notice what happened to those leaders. The real currency wars were called Oil Wars and that we will analyze in the next chapter.
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