Major Players in the Forex Market

Where the megabucks are, there is the home for all major players. And forex is a very special spot to be if that adage is true. It is no surprise that you will see all the big names of financial market of this forex world. The major players on forex trading are banks, central banks, interbank brokers, commercial companies, retail brokers and hedge funds.

Central Banks - The national central banks play a significant role in the forex markets and every bank has its own forex trading strategies. Ultimately, central banks try to control the money supply and often have official or unofficial target rates for their currencies. As some central banks have very significant foreign exchange reserves, their intervention power is significant. Among the most important duties of a central bank is the restoration of an orderly market in times of excessive exchange rate volatility and the control of the inflationary impact of a weakening currency.

Banks - The Interbank market caters to both the majority of commercial turnover as well as tremendous amounts of speculative trading. It is not uncommon for a big bank to trade billions of dollars everyday. Some of this trading activity is undertaken on behalf of corporate customers, but a banks treasury room also carries on a large amount of trading, where bank dealers are taking their own positions to make the bank profits. A large part of the banks’ trading with each other is occurring on electronic booking systems that have negatively affected traditional foreign exchange brokers. Banks always keep their employees up-to-date with latest forex trading techniques.

Interbank Brokers - Until recently, foreign exchange brokers were doing large amounts of business, helping Interbank trading and matching anonymous counterparts for relatively small fees. With the increased use of the Internet, a lot of this business is moving onto more effective electronic systems that are functioning as a closed circuit for banks only.

Commercial Companies - The commercial companies’ international trade exposure is the backbone of the foreign exchange markets. A multinational company has exposure in accounts receivables and payables denominated in foreign currencies. They can be protected against unfavorable moves with foreign exchange. That is why these markets are in existence. Commercial companies frequently trade in sizes that are insignificant to short term market moves, however, as the main currency markets can quite easily absorb hundreds of millions of dollars without any big affect.

Retail Brokers - The arrival of the Internet has added us a host of retail brokers. Retail brokers always use forex trading software for efficient forex trading and providing trading opportunities to their retail customers through their websites. There is a numbered amount of these non-bank brokers offering foreign exchange dealing platforms, analysis, and strategic proposal to retail customers. The fact is many banks do not attempt foreign exchange trading for retail customers at all, and do not have the essential resources or inclination to support retail clients adequately. The services of such retail foreign exchange brokers are more similar in nature to stock and mutual fund brokers and typically provide a service-orientated approach to their clients.

Hedge Funds - Hedge funds have earned a reputation for aggressive currency speculation in recent years. There is no doubt that with the increasing amount of money some of these investment vehicles have under management, the size and liquidity of foreign exchange markets is very appealing. The leverage available in these markets also allows such a fund to speculate with tens of billions at a time. It is also argued that hedge funds really perform a beneficial service to foreign exchange markets.

Investors and Speculators - In all effective markets, the speculator has a significant role taking over the risks that a commercial participant hedges. The boundaries of speculation in the foreign exchange market are ill-defined, because many of the above mentioned players also have speculative interests, even central banks.

The all above players play an important role in the forex trading system and each player leave a significant impact on the forex market.

Source: Forex Blog - Forex Training