Members of 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
The interbank market Forex involves operations that occur between central banks, commercial banks and financial institutions.


Central Banks - 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 consists in achieving 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 operations that handle day. These operations include the conversion of foreign currency based on the needs of customers while some are held for speculative purposes negotiating table owned by 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. For example, a manager of a securities portfolio and international actions will have to engage in foreign exchange transactions for the purchase of foreign shares.



The retail market
The retail market involves transactions between small speculators and investors. These transactions are executed by brokers or Forex brokers 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 main business requires buying and selling foreign currency in exchange for goods, exposing them to risks. Through the Forex market, they convert currencies and cover themselves against future fluctuations.


Individuals - Individuals operators or investors operate Forex with their own capital to profit from speculation on future exchange rates. Mainly they operate through Forex platforms that offer accounts with low spreads, immediate execution and highly leveraged margin.