Participants of Foreign Exchange Market

Forex trading does not exist without the participants. Participants are the parties which do trading in the foreign exchange market. The exchange of currencies take place between them. These are responsible for creating high volumes of trading in the markets.

The participants in the market may trade due to variety of reasons, such as, to earn long term or short term profits, to protect themselves from losses occurring due to fluctuations in exchange rates, to purchase foreign currency in order to buy goods and services from foreign countries.

The participants in the foreign exchange market are:

Banks and financial institutions: These are taunted as the big players in the market as they are found to do trading in huge volumes. The large banks usually conduct transactions in the interbank markets. The transactions made by these banks decide the price of the currency on which individual traders trade.

Central banks: These banks trade in the forex market on behalf of the Government. They influence the value of the currencies.

Commercial Companies: Commercial companies trade amounts next to banks. But some of the multinational companies are found to trade in huge amounts. These are found to have short term impact on the currency rates.

Speculators: This class of participants do not follow the conventional way of international trading, instead they tend to take advantage of the fluctuating exchange rates. They do not have regulated funds and do follow unconventional investment strategies.

Brokers: Brokers are the parties which trade on behalf of the individual or retail traders. They operate the trading accounts of the individual traders. After each and every transaction they are paid the service fees by the trading.

Money transfer or remittance companies: This class of participants perform transaction of low levels in huge amounts.

Investment management companies: This class of participants do transactions on behalf of participants who want to buy/sell goods, from/to different countries. Since foreign exchange market facilitates exchange of currency, the trading is done here.

The above are the various participants in the foreign exchange market.


Related Links:

Related posts

Leave a Comment