I would like to know what happens to the market when the following situation arises on the GBP/USD currency pair:

-Say some big investor sells 100 million pounds but current liquidity in the market is only about 50 million for argument sake, which way will the market move to fill the big investors order?

Please explain why? Thank you

  • you mean attempt to sell? :P Also, is the trade priced above or below the spot price? There are several other variables as well: fill-or-kill, limit order, market order?
    – Ross
    Oct 13, 2015 at 12:43
  • @Ross thanks, yes say if a large bank sell 100 million pounds. Well i am not sure what you mean by above or below spot price? Sorry i am new to this. yes its a market order.
    – Hishalv
    Oct 13, 2015 at 12:49
  • 3
    @Dheer, Why was this question closed on the basis of being on economics? It has nothing to do with economics, it is about trading currencies and liquidity of the markets.
    – user9822
    Oct 13, 2015 at 21:15
  • 1
    This is economics of Demand and Supply applied to Fx. The question does not show any relevance to personal finance, i.e. use of 100 Million. Further the entire question is framed with some hypothetical situation.
    – Dheer
    Oct 14, 2015 at 3:43
  • 2
    @Dheer, it has nothing to do with economics, it has to do with liquidity of the FX markets. If we took your point of view half the questions on investing and trading should then be closed as well.
    – user9822
    Oct 14, 2015 at 5:25

1 Answer 1


Liquidity works very similarly in currencies to how it works for equities. A large sudden order will move the price of the product and correspondingly its derivatives. In this case the value of the pound will drop against the dollar and all the related forwards/futures and options.

The main confusion with currencies however is how they are quoted. The pound is generally quoted as some number of dollars per pound. In this case for the value of the pound to drop the "price" in dollars per pound would drop as well as a pound will get you fewer dollars. Some currencies pairs are generally quoted the other direction though.

There is however tons of liquidity in major currencies and the market should be able to absorb $100MM pounds during London hours without too much issue. $500MM starts to be troublesome.

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