Liquidity Trap in FX Market Stokes Fears of Trading Turmoil

In the world’s busiest financial market, the one which sets the terms of trade between every economy on Earth, major players can sense a flaw with the potential to create a system-wide crisis.

The only trouble is they can neither see nor prove it — and likely won’t be able to until it’s too late.

The global arena for foreign exchange appears on the surface to be a giant pool of cash in constant churn, generating $7.5 trillion of transactions per day — more than all other major asset classes combined. But lately key names from the industry including the likes of Citigroup Inc., Deutsche Bank ...