How To Trade News Events: Who Controls Forex Market? Interbanks, funds and corporations
1. At the center or first level of the market is something known as the
Interbank market. While technically any bank is part of the Interbank
market, when an FX Trader speaks of the interbank market he or she is
really talking about the 10 or so largest banks that make markets in FX.
These institutions make up over 75% of the over $3 Trillion dollars in
FX Traded on any given day.
Institutions with direct interbank access:
- Access to the tightest prices.
- Access to the best liquidity.
In contrast to individuals who make a deposit into their account to
trade, institutions trading in the interbank market trade via credit
lines. In order to get a credit line from a top bank to trade foreign
exchange you must be a very large and very financially stable
institution, as bankruptcy would mean the firm that gave you the credit
line gets stuck with your trades.
2. The next level of participants are the hedge funds, brokerage firms, and smaller banks who are not quite large enough to have direct access to the Interbank market.
3. The next one has traditionally been corporations and smaller financial institutions.
