Forex market participants

The main participants of the foreign exchange market are commercial banks, currency exchanges, central banks, firms that conduct foreign trade transactions, investment funds, brokerage firms and individuals.

Basically, make operations like spot (spot), also called conversion or ongoing operations, the actual performance (value) that run on the second business day after the transaction.

Commercial banks. Spend the bulk of foreign exchange transactions. The banks maintain accounts of other market participants and carry with them the necessary conversion and deposit and lending operations. Banks like to accumulate (through transactions with clients) the aggregate market demand for currency conversions as well as participate in drawing / placement of funds in and out with them on the others. In addition to satisfying clients’ requests, banks can operate independently, using their own funds.

In the end, the foreign exchange market is a market of interbank transactions, and, speaking later on the motion of exchange rates and interest rates, one should bear in mind the interbank foreign exchange market.

In world currency markets have the biggest influence large international banks, the daily volume of transactions of billions of dollars. This banks such as Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank and others.

Their main difference is the large volume of transactions that may lead to a significant change in the quote or the price of the currency. Usually, the big players are divided into the bulls and the bears. Bulls — is market participants who are interested in increasing the value of the currency, the bears — it is the market participants who are interested in lowering the value of currency.

Normally, the market is in equilibrium between the bulls and the bears, and the difference in prices of currencies fluctuates in a fairly narrow range. However, when bulls or bears , quotes, exchange rates change quite dramatically and significantly.

Firms that conduct foreign trade. Stable demand for foreign currency (in the part of importers) and the supply of foreign currency (exporters), as well as locate and attract free currency balances in short-term deposits. In this case, these organizations direct access to the foreign exchange market, as a rule, do not have and spend conversion and deposit transactions via commercial banks.

Companies involved in foreign investment assets (Investment Funds, Money Market Funds, International Corporations, etc.) are the policy of diversified portfolio management, placing funds in securities of governments and corporations of different countries. The dealership just call them slang funds or funds; best known fund George Soros with successful currency speculation and a fund .

Firms of this kind are also large international corporations engaged in foreign manufacturing investment: the creation of subsidiaries, joint ventures and the like, such as, for example, XEROX, Nestle, General Motors, British Petroleum and others.

Central banks. Purpose is to exchange regulations in foreign markets — namely, to prevent abrupt changes of the exchange rates, in order to prevent economic crisis, maintaining the balance of exports and imports, etc. Central banks have a direct impact on the currency market. Their influence can be direct — in the form of intervention, and indirectly — through control of the money supply and interest rates.

They can not be attributed to the bulls or the bears, as they can play both on the rise, and in the fall because of the particular challenges facing them at the moment. Central Bank may act in the market alone to influence the national currency, or in concert with other central banks to conduct joint monetary policy at the international market or for joint interventions.

The greatest influence on world currency markets were: the U.S. central bank — the Federal Reserve System (US Federal Reserve or briefly FED), Germany’s central bank — the Bundesbank (Deutsche Bundesbank) and the UK — Bank of England (Bank of England, also known as the Old Lady).

Exchange markets. A number of countries with transitional economies currency exchange, functions include the exchange rates for businesses and the formation of a market exchange rate. The state usually actively regulates the exchange rate, using the compactness of the exchange market.

Individuals. Individuals carrying out a wide range of non-commercial operations of foreign tourism, remittances, pensions, royalties, buying and selling of currency. And in 1986 with the introduction of margin trading individuals have the opportunity to invest available cash in the FOREX market for profit.

The bulk (90-95%) in the FOREX market make the world’s largest commercial banks, making conversion operations in the interests of their clients and their own expense. However, advances in computer technology allowed in this area of ​​finance to find the area of ​​applications for private and often small investors. A growing number of brokerage firms and banks provide access to private investors in the market FOREX online.


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