Interbank Forex Market

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In this article we will see that it is and how the Interbank Forex market. Before reading further, I recommend reading the series of articles on the operation of the broker, if not all three at least the following two:

The foreign exchange market, as we all know as forex, is the world’s largest market with a distinctive feature to other financial markets: decentralization. In centralized markets, such as the New York Stock Exchange, every transaction is recorded with the execution price and volume traded and all operations can be traced. In the forex market, with its decentralization characteristic, there is no such central record of transactions on the contrary, each market maker registered their own operations and this information is his property.

 
The primary market makers in the foreign exchange market are the big global banks, which are primarily those generated by supply and demand prices with spread included. These primary market makers are constantly working each other, either on its own behalf or on behalf of their clients, hence their transactions are known as the interbank market.

In the interbank market exists, as in any other market, competition among participants. This competition results in a narrower spreads and price range. From here is where the brokers get the quoted price and where the brokers send their operations when they needed. If you wonder why you did not operate directly in the interbank market, skipping the spread of the brokers I regret to say that mere mortals are not allowed to, unless you have millions of dollars, if not billions, dedicated to foreign exchange as they the largest investment funds and multinational corporations.

The prices in the interbank market

Of the more than $ 3 trillion traded daily in Forex, most transactions will take you 10 banks, including Deutsche Bank, UBS SA (formerly known as Union Bank of Switzerland), Citigroup and HSBC (Hongkong and Shanghai Banking Corporation).

Without going into the structure of each bank, as private entities, may differ from each other, say that each has a foreign exchange trading department. This department is responsible for setting prices that the bank will use in offering its customers always compensating for assuming the risk on transactions that may come to perform with other banks. Similar to what can exist on a broker, albeit on a much larger scale, the foreign trade department has a bargaining table (the famous trading desk) responsible for taking orders from customers.

The negotiating table making the quoted price marked by the department, and this passes to the customer finally decides whether the operation performed at the price offered. This is very common process against it may seem though there is online trading for most large customers, who can operate million in a single transaction, they want to get a good deal and can get that deal directly with negotiating table rather than using the trading platform. In addition, trading platforms usually have a limit on the size of each transaction because the bank will always want to make sure you can assume the operation.

 

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