What is the interbank foreign exchange market? This is a system of relations between banks and third parties (counterparties), which consist in selling and buying currency at current prices.
The interbank foreign exchange market is an important component of world economic relations. Interbank foreign exchange traders are more often called Forex.
How did the interbank foreign exchange market?
The creation of the foreign exchange market was dictated solely by the need for currency exchange between financial organizations of different countries. The volume of transactions grew steadily and over time began to have a significant impact on the volatility of the rates.
The next revolutionary step in the development of the foreign exchange market was made under the influence of financial globalization and the popularization of the Internet: private traders appeared on the market, whose interests are somewhat different from those of financial organizations. Since traders earn on currency fluctuations, they are primarily interested in high volatility.
Thus, Forex came to his modern mind when any major market player, be he a bank or a private trader acting in his own interests, is able to influence exchange rates.
How are trading in the interbank foreign exchange market?
Commercial banks and other currency providers (such as pension funds and brokers) are merged into ECN– member pooling systems. Among the current ECNs, the two largest are distinguished: Atriax and Currenex. At each moment, the system determines the best price for selling or buying a currency and shows it to bidders. Such a high frequency of price changes leads to fluctuations in spreads, which are called “floating” in Forex.
It is important to understand that currency prices for different brokers may vary slightly, albeit slightly. This does not mean that the broker is trying to deceive the trader. The price offered by the broker directly depends on the number of currency suppliers with whom it works. The more suppliers the broker has, the more advantageous the conditions he can offer the trader.