Offer your thoughts or opinion on the input financial query or topic using your financial background.

how much of foreign exchange (forex/fx) “deep liquidity” is really just unbacked leverage and what is the effect?
First it is worth noting the two sided nature of the contracts (long one currency/short a second) make leverage in currencies over a diverse set of clients generally less of a problem.  In equities, since most margin investors are long "equities" making it more likely that large margin calls will all be made at the same time. Also, it's worth noting that high-frequency traders often highly levered make up a large portion of all volume in all liquid markets ~70% in equity markets for instance.  Would you call that grossly artificial?  What is that volume number really telling us anyway in that case? The major players holding long-term positions in the FX markets are large banks (non-investment arm), central banks and corporations and unlike equity markets which can nearly slow to a trickle currency markets need to keep trading just for many of those corporations/banks to do business.  This kind of depth allows these brokers to even consider offering 400-to-1 leverage.  I'm not suggesting that it is a good idea for these brokers, but the liquidity in currency markets is much deeper than their costumers.