MEMBERS OF THE FOREX MARKET

The forex market is made up of different members, with varied needs and interests, which operate directly. 

These participants can be divided into two groups, the interbank market and the retail market.

The interbank market

Interbank Forex trading involves that occur between central banks, commercial banks and financial institutions.

Central banks: the national central banks (such as the US Federal Reserve or the European Central Bank) play an important role in the Forex market. As monetary authority, their role is to achieve price stability and economic growth. To achieve this, these entities regulate the money supply in the economy through the imposition of interest rates and bank reserve requirements or lace. They also manage foreign currency reserves that can be used to influence the market conditions and the price of currencies.

Commercial banks: Commercial banks (such as Deutsche Bank and Barclays) provide liquidity to the Forex market due to the volume of commercial transactions handled daily. These operations include the translation of foreign currencies according to the needs of customers while some are held for speculative purposes by negotiating table ownership of banks.

Financial Institutions: Financial institutions, such as mutual funds, pension funds and brokerage firms operating with foreign currencies as part of their obligations in order to find the best investment opportunities for its clients.

The retail market

The retail market transactions involving small speculators and investors. These transactions are executed through Forex brokers or agents who act as intermediaries between the retail market and the interbank market. The members of the retail market are hedge funds, corporations and individuals.

Hedge Funds: Hedge funds are private investment funds that speculate in various assets classes using leverage. Hedge funds aim to seek business opportunities in the Forex market and design and execute operations after making a macroeconomic analysis that reviews the challenges affecting a country and its currency. Because of their high liquidity and their aggressive strategies, they are considered a major contributor to the dynamic Forex market.

Companies: These represent companies engaged in the import and export activities with their counterparts in foreign currencies. Its core business requires the purchase and sale of foreign currency in exchange for goods, exposing them to risks. Through the Forex market, they convert currencies and are covered against future fluctuations.

Individuals: Individuals operators or investors operate Forex with its own capital to profit from speculation on future exchange rates.