Forex Marketplace
Presently, the foreign exchange market is one of the largest and most liquid financial markets in the world. Traders include large banks, central bank, currency speculators, corporations, governments, and other financial institutions.
According to the 2009 Euromoney FX Poll, total turnover has reached a record USD175.3 trillion. The market share for the top five banks remained steady, at a combined 61.5%. The combined share of the top ten banks rose, from 76.3% to 79.7%.
Unlike a stock market, where all participants have access to the same prices, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. The difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due to volume.
If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread. The levels of access that make up the foreign exchange market are determined by the size of the "line" (the amount of money with which they are trading). The top-tier inter-bank market accounts for 53% of all transactions. After that there are usually smaller investment banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail FX market makers.
|
