FOREX Exchange Market Participants
Everybody can deal with as well as make money with FOREX.
In order to understand better the complete market situation you should know who in general terms trades on the market and what the way the major players affect the market situation is.
Besides private investors the professional market participants make money with FOREX:
- Central national banks
- Banks – market-makers
- Export/import companies
- Insurance companies
- Corporate investors
- Investment and hedging foundations
- Intermediary companies offering individuals and legal entities an access to the market.
The big banks namely are able to affect the market strongly so they can buy and sell currency in very big amounts. They generate the core liquidity and cash flows. That is why the news directly related to the policy of central banks in various countries and the largest international banks is rightfully considered to be very important market information.
Central banks — the major market participants who do not impose any formal limitations on price development. Nevertheless, they act as regulating authorities determining the level of main interest rates. Banks operate on the open market dealing with repurchase or sell securities meanwhile they express their preferences to the market participants and give assessment of the situation. In particular cases they reserve the right to effect direct currency interventions (purchase or sale of the national currency to prevent subsequent fall or rise in its cost).
Market-makers (literally – who make market) are the banks individually quoting currency prices for other participants in the market. They obtained the right to determine price quotations on the basis of their agreement to adhere to the international standards. Stability of services rendered by market-makers, as well as the code of laws and rules developed by the regulating institutions (for example, FSA in Great Britain, which activity, in its turn, is regulated by the Bank of England), plus the so-called ”honour code” established by market-makers themselves do secure their continuous operation of the FOREX market.
Export / import companies effecting currency exchange transactions in the market, do not set a goal to gain direct profit from such transactions but apply the international policies for currency exchange to carry out their economic activities instead.
Insurance companies are engaged in risk hedging (method of insuring transactions against the market risks) in the field of specialized transactions. For example, the company importing products from Germany bears a risk related to possible increase in cost of the European currency, and may offset such risks by means of buying euros in amounts assessed before for any other currencies.
Investment funds, corporate and private investors strive to gain profit from purchase and sale of currency, due to price differences at various time moments, and intermediary companies secure them access (entry) to the market meanwhile they receive market quotations from market-makers.
Private investors, who individually open and administer their accounts on the FOREX market or use services of professional intermediaries for such purpose.