One of the oldest world markets
The exchange rate expresses a ratio between two currencies. It is an age-old market; people have been trading for millennia, and the ability to change one currency into another is an essential tool. The traders whom Jesus threw out of the Temple in Jerusalem were money-changers, or currency traders, as we would say today. In the Middle Ages, princes and free cities laid down the rates at which foreign coins were to be exchanged. Hand in hand with currency trading comes the need to record details about the various rates of exchange. For example, the records of the "proveditori degli cambiatori", the supervisors of the money-changers in Florence, contain revealing details about exchange rates in the Renaissance. Every day, at the closure of the "Mercato Nuovo", the New Market, these supervisors recorded the rates offered by the money-changers. The profit margin of the changers lay in the difference between the buying and selling price of gold and silver; the price for buying silver was higher than for selling it. Later, when currency trading had assumed international dimensions, international bankers made a profit out of variations in the rate from place to place and from time to time. Today, too, the currency-trader's profit resides in the gap between the buying and selling rates of currencies. The currency market has always been a market for out-and-out professionals. In the past, investors more or less had to be millionaires to enter the market; nowadays 100,000 is enough. It's an exclusive market, in which big investors have incomparably better chances than individuals.

20 dollars and you're in!
Michael Kishara lives in Africa. He takes tourists on safaris to see the magnificent landscape and wildlife of his country. For his services, he gets tips now and then, sometimes 10 United States dollars, sometimes $20. What should he do with the money, if he doesn't need it for everyday living? Banks hardly offer any interest, you need large sums to invest in any ordinary markets, and gambling is too risky. But Michael is smart and would like to make his money grow. And today, he can do just that - at oanda.com, the Internet firm of Olsen & Associates. With Internet access, Michael can open an account with his $20 at www.oanda.com, transfer the money with his credit card, and immediately be able to invest in the currency market up to a limit of $400. At oanda, Michael can work with 20 times as much money as he's got in his account. For example, he could put his $400 against the yen. Assuming interest of 5% for the dollar and 0.5% for the yen, Michael could make a profit of 4.5% on the difference in interest. Eighteen US dollars a year, for a stake of $20, would not be bad business at all. If the worst comes to the worst, Michael can only lose his initial investment; oanda closes his account as soon as the margin sinks below 2.5%. And he makes maximum profit from the interest, as oanda pays continuous interest whereas other firms only pay interest once per day. "Fantastic - at oanda I get the same conditions as professionals and big investors," says Michael. Oanda offers a product with small profit margins - thanks to the Internet and computerisation, it all runs automatically, cutting costs to a minimum. The more people trade in currencies through oanda - in other words, the larger the volume of trade - the smaller oanda can keep the spread (the gap between "ask" and "buy", between selling and buying price).

Making money without money?
"That sounds as if a poor lone fighter like me could get the same conditions as a big firm, as if I could buy my goods at the prices normally only supermarkets get offered," says Michael. But in fact oanda offers a platform that heralds a unique democratisation of currency trading. Anyone can join in here and make money. Someone who wants to invest $20 or $100 will find at oanda the same conditions as a big investor investing a million. That's a real revolution in a market that's always been more or less exclusively for professionals. And if Michael transfers money into his account at oanda by credit card, he can even invest initially without any money at all, since he only has to pay his credit-card account at the end of the month. In between, the unbelievable, fairytale dream of "making money without money" comes true. But investing in oanda is not a lottery. To make a profit, and to work with small sums of money, takes knowledge. And knowledge is just what oanda has to offer: the largest data bank on currencies, a forecasting service and other instruments to help investors to make the right decisions. But it's the investors themselves who have to make those decisions, including our friend Michael Kishara.

A vision with a scientific background
"Yesterday a man from Alaska transferred $200. And he gets a turnover of $150,000 one day, next day $100,000 - it's just fantastic!" says Richard Olsen when asked how things are going. He's a co-founder of the Olsen Group, the largest data bank in the currency-trading field and market leader in scientific research into currency markets, and has quite a story to tell about his vision, which is just in the process of turning into reality. With oanda.com, Olsen offers an instrument that enables anyone with Internet access to play an active part in the currency market. This is a terrific innovation with a solidly-researched background. Even while still at school, Richard Olsen was always someone who wanted to change things. At an early age he asked "Why do banks operate in such an unscientific way?" As a lawyer and economist, he was deeply dissatisfied with the way the markets worked, especially the currency market. In his view, despite the enormous globalisation of the market in the last few years, the currency market was still not liquid enough. As a currency specialist, he was unhappy about the fact that the range of participants in the market had decreased in recent years due to the many amalgamations of firms and banks, for example Allianz Insurance and the Dresdener Bank in Germany. For Richard Olsen, a liquid market is the core of a healthy economy. He sees the currency market as the heart of the economy: "Are we aware of the fact that a healthy heart, which we hardly notice at all, pumps 400 litres of blood an hour? That's liquidity for you!" he says. In his view, the health of the market is grounded in the variety of its participants and in maximum liquidity. His vision, and the platform he offers for realising that vision, in the form of oanda, is the result of a thoroughgoing analysis of the market. The Olsen Data Bank collects over 10,000 data points per currency per day. Its staff of 50, mostly mathematicians and physicists, carry out research into the laws of the currency market. "The market is not something God-given, but something that is formed by people." This philosophical attitude gives Olsen the energy to take the first step in the direction of an ideal currency market with oanda.

It's time for a rethink
Our economic thinking is stuck in the 18th century. At that time, the economist Adam Smith looked for arguments with which to attain a liberalisation of the markets in the British Empire, which were strictly controlled. The economic potential represented by Britain's overseas territories could only be utilised, he said, by freeing trade and the financial markets from restrictions. Smith argued that all participants in the market behave in basically the same way. We are now living in the 21st century. The age of colonies is long past, but business still thinks in Smith's categories. Richard Olsen proposes a different view of things. For example, one can also assume that there are groups on the world market that act and react in quite different ways, for example in respect of their time-scales. An investor with long-term interests acts differently from one who thinks in the short term. An analysis of the behaviour of different groups of market participants reveals a sequence of reactions which can form the basis of forecasting-models for the development of the market. A healthy market is characterised by the great variety of its participants. And variety brings great opportunities. If one currency enters a crisis, as did the Turkish lira recently, and if all market participants behave identically, that currency will collapse completely, because everyone will sell it and no one will buy it. But a market with a variety of participants is better protected, both against excessive rises and against panic selling and collapsing rates. The more varied the market, the smaller the fluctuations. A short-term crisis may be an opportunity for a long-term investor - but only for him.

Interest payments every second
Oanda's FX Trade Platform has introduced a further innovation. Interest is paid every second, as one would expect in this digital age. This is a sharp contrast to current practices of banks, who pay interest every 24 hours. For a typical bank account, in which the changes in balance are small and rates of interest low, it does not matter much whether interest is paid once a day or once a second. But things are quite different on the currency market. This practice of daily interest payments produces additional fluctuations in exchange rates. Since interest payments are made overnight, investors can only profit from differences in interest between currencies if they keep their positions open overnight. Shorter currency positions, such as those covering a few hours, receive no interest payments. For example, if the Turkish central bank wants to support the lira by raising exchange rates, only long-term investors, in other words those who keep their positions open overnight, can profit from that. Short-term investors, who hold their positions only for a few hours, and who account for over 90 per cent of the volume of trade, receive no interest payments. In a system with daily interest payments, interest-rate changes by the central bank can only influence long-term investors. On the oanda platform, things are quite different. Here, interest is calculated continuously. That makes it possible to profit from differences of rate over a matter of hours. In Turkey, the central bank had to raise interest rates in February 2001 to over 8000 per cent to support the currency. Nine banks went into liquidation. With a system of continuous interest payments, the distortions on the market would have been smaller and the economic damage less, since interest-rate changes would have affected all participants on the market.

So good that it's easy to get hooked!
What oanda.com offers individual investors sounds convincing. Among other things, it offers the chance to open an account with a small amount of money, to work with 20 times that amount, to pay for a small spread, and receive continuous interest payments - all without paperwork! And on top of that, lots of data that act as a weather forecast for the currency market. And in the near future, box options will be offered. With oanda, Richard Olsen offers his customers a high-tech product. "It's as beautiful, and it works as perfectly, as a Swiss watch!" he says ecstatically. The main danger in his product, as he sees it, is the temptation to get hooked on it: "People might want to spend all their time in oanda on the currency market, playing roulette in their everyday lives, with only limited risks." Olsen's vision for the future embraces a huge increase in the number of participants: from 1000 to 10,000, then 100,000. In five years it ought to be possible to trade through oanda by mobile phone, anywhere and any time - a fascinating prospect! And by the way, oanda is strictly not for money-launderers, as it's not subject to banking secrecy laws.

What the museum director thinks
Apart from being the abbreviation for the Olsen Group, "oanda", according to Richard Olsen, is also a Turkish word meaning "immediate response". "Is that coincidence, or is there a deeper meaning to it?" the director of the MoneyMuseum asks himself. Yet again experience has shown that innovations are most likely to be made by outsiders or individuals than by large systems, which are more cumbersome and thus unable to react quickly. Oanda offers a product that fulfils a long-expressed wish of buyers, and which has now become reality thanks to the innovative energy of Richard Olsen and his team. Oanda promotes democracy and individual initiative. And if you want to make money, almost without using any money - there's no better opportunity than oanda!