Who are the main Forex Exchange Market Participants ?

[TheCapitalManager]

I have been looking around the forum, and I have not come across any sort of basic education of Foreign Exchange for beginners and who are looking for answers.

 

So I have decided, that I should talk about something very basic about main Forex Exchange's market participants ?

 

INVESTMENT BANKS

 

Banks are the biggest and most important players in the foreign exchange market. They conduct transactions with each other but also trade on their own behalf. They also do transactions on behalf of their clients. These clients are for example export or import oriented companies which have an interest in hedging their exposure in foreign currencies.

 

Banks do have the biggest influence on the foreign exchange market. These were the biggest players in 2013 among the investment banks according to Greenwich Associates, a Connecticut based Research Company. As you can see there are six major investment banks accounting for more than 50 % of the market share.

 

http://theforexchampionship.com/wp-content/uploads/2014/03/H-Market-participant.jpg

 

 

CENTRAL BANKS

 

Central banks – like the Bank of Japan or the Reserve Bank of Australia – participate in the foreign exchange market in order to influence their currencies, in this case the Japanese yen and the Australian dollar. In this case the market speaks of an “intervention” in the market. Especially the Bank of Japan is known for their interventions. They do not intervene on a regular basis but they do so when they consider it appropriate.

 

Central banks and investment banks are active in the so called „interbank market“. They conduct their transactions with each other via “EBS” (Electronic Brokering Services) or “Reuters Dealing”. Lately Bloomberg tried to get some of the market share as well but EBS and Reuters are the most important interbank platforms.

 

BROKERS (MARKET MAKER or ECN BROKER)

 

The main function of a broker is to bring buyers and sellers of currencies together. They are an intermediary between different banks as well as an intermediary between banks and private investors. For their service they charge a commission or simply charge the spread between BID and ASK.

 

ECN brokers (electronic communications network) usually have a smaller spread between BID and ASK but do charge a fixed commission for that. Market makers usually charge no commission but do have a slightly bigger spread. Whether you would want to trade via an ECN broker or a Market Maker depends on your trading style.

 

If you tend to trade smaller position sizes and like to build up your position gradually a market making broker is the more attractive solution for you. Via an ECN Broker you would have to pay the minimum commission for each part of your eventual position.

 

http://theforexchampionship.com/wp-content/uploads/2014/03/Market-participants.png

 

INVESTMENT FUNDS/PROPRIETARY FIRMS

 

These entities trade in the foreign exchange market in order to generate a return on investment for their clients. To this group of market participants belong hedge funds, pension funds, investment fund and proprietary trading firms (companies which speculate with their own money).

 

PRIVATE INVESTORS/TRADERS

 

These are private traders who participate in the foreign exchange market for speculative purposes. If you read this you are probably part of this group.

[orni308]

its a nice bit of information you have shared, thanks.

[suryalesmana]

Good thread, those are the main factor of forex and we can making money in forex.

Without them, its impossible to trade in forex..

[gacha]

this where we called time prime brokers :), as we all know all forex broker platform connected to interbank quotes price, thus are comes from listed participant above.

[vic84]

There has been considerable increase in forex market trader recently due to increase in technology in many developing countries.

[binaryowner]

I have been looking around the forum, and I have not come across any sort of basic education of Foreign Exchange for beginners and who are looking for answers.

 

So I have decided, that I should talk about something very basic about main Forex Exchange's market participants ?

 

INVESTMENT BANKS

 

Banks are the biggest and most important players in the foreign exchange market. They conduct transactions with each other but also trade on their own behalf. They also do transactions on behalf of their clients. These clients are for example export or import oriented companies which have an interest in hedging their exposure in foreign currencies.

 

Banks do have the biggest influence on the foreign exchange market. These were the biggest players in 2013 among the investment banks according to Greenwich Associates, a Connecticut based Research Company. As you can see there are six major investment banks accounting for more than 50 % of the market share.

 

http://theforexchampionship.com/wp-content/uploads/2014/03/H-Market-participant.jpg

 

 

CENTRAL BANKS

 

Central banks – like the Bank of Japan or the Reserve Bank of Australia – participate in the foreign exchange market in order to influence their currencies, in this case the Japanese yen and the Australian dollar. In this case the market speaks of an “intervention” in the market. Especially the Bank of Japan is known for their interventions. They do not intervene on a regular basis but they do so when they consider it appropriate.

 

Central banks and investment banks are active in the so called „interbank market“. They conduct their transactions with each other via “EBS” (Electronic Brokering Services) or “Reuters Dealing”. Lately Bloomberg tried to get some of the market share as well but EBS and Reuters are the most important interbank platforms.

 

BROKERS (MARKET MAKER or ECN BROKER)

 

The main function of a broker is to bring buyers and sellers of currencies together. They are an intermediary between different banks as well as an intermediary between banks and private investors. For their service they charge a commission or simply charge the spread between BID and ASK.

 

ECN brokers (electronic communications network) usually have a smaller spread between BID and ASK but do charge a fixed commission for that. Market makers usually charge no commission but do have a slightly bigger spread. Whether you would want to trade via an ECN broker or a Market Maker depends on your trading style.

 

If you tend to trade smaller position sizes and like to build up your position gradually a market making broker is the more attractive solution for you. Via an ECN Broker you would have to pay the minimum commission for each part of your eventual position.

 

http://theforexchampionship.com/wp-content/uploads/2014/03/Market-participants.png

 

INVESTMENT FUNDS/PROPRIETARY FIRMS

 

These entities trade in the foreign exchange market in order to generate a return on investment for their clients. To this group of market participants belong hedge funds, pension funds, investment fund and proprietary trading firms (companies which speculate with their own money).

 

PRIVATE INVESTORS/TRADERS

 

These are private traders who participate in the foreign exchange market for speculative purposes. If you read this you are probably part of this group.

This banks also act as a liquidity providers for many retail brokers like hotforex. This broker has fastest platform cuz their servers are located almost on every important zone - eu, China, Asia etc

[seantrade]

The major participates of the trillion dollar forex market are the investment banks, the broker and the traders that do the buying and selling of the currencies.