Major player in the foreign exchange market

Major player in the foreign exchange market

A major player in the foreign exchange market. Who is them? The forex market is a very large market because it is not centralized, all transactions are carried out over the counter via electronic transactions.

The forex market is always needed by all countries, because they need each other when a transaction involves two countries, they will exchange currencies with other countries in buying and selling using exchange rates.

Forex market participants consist of many groups, including retail traders who seek profit from currency speculation by looking for opportunities from rising and falling prices.

The most Major player in the foreign exchange market, Government, Banks, and Financial Institutions, Multinational Companies, Speculators, Brokers, and forex traders or retail trader.

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Government as the one key players in the forex market

The government is the most influential forex market player. The government of a country is one of the most major players in the foreign exchange market because they have a very large expenditure. In a state budget involving billions of dollars every year. So do not be surprised if the government is one of the biggest market players.

And as we know, the budget of a country’s expenditure is a very big number, covering between countries and continents. So, the contribution of a state government is very influential in the forex market. Especially the government of superpowers, like the United States.

Central bank

And usually in each country has a central bank, which can be said is part of government institutions that regulate the banking and financial system.

The central bank is responsible for printing money, withdrawing money, or buying and selling supplies of foreign money.

Each central bank in each country has almost the same role, they can carry out policies to increase interest rates, or also intervene in the currency if needed.

So do not be surprised if the central bank makes new policies many investors will pay attention to how these policies affect market participants.

The most major Central Banks whose influence in the forex market is

  • The Federal Reserve (the Fed, the United States central bank),
  • Bank of England (BoE, UK central bank).
  • European Central Bank (ECB, the European Central Bank)
  • Swiss National Bank (SNB, Swiss central bank).
  • Bank of Japan (BoJ, Japan’s central bank).
  • Bank of Canada (BoC)
  • Reserve Bank of Australia (RBA, the central bank of Australia).
  • Reserve Bank of New Zealand (RBNZ, the central bank of New Zealand).
  • People’s Bank of China (PBOC, banks central China)

1. The Federal Reserve (FED)

Having a goal to maintain long-term price stability and economic growth of the United States. The FED is the strongest central bank in the world that has a huge impact on the value of currencies in many countries.

2. European Central Bank (ECB)

Having a goal to maintain annual growth at 2% of the consumer price, and to prevent excessive currency strengths to avoid risking exports, as European zone economies depend on exports.

3. Bank of England (BOE)

Having a goal to maintain monetary and financial stability, and have an inflation target of 2%.

4. Bank of Japan (BOJ)

Having a goal to maintain price stability, ensure the stability of the financial system, and prevent currency appreciation due to Japanese export dependence.

5. Swiss National Bank (SNB)

It is the Swiss central bank established in 1907 and has a role as a decision-maker only in the range of interest rates.

6. Bank of Canada (BOC)

It is a Canadian state central bank that began to be active in 1935. Aims to maintain the integrity and value of the currencies, having an inflation target of 1-3%.

7. The Reserve Bank of Australia (RBA)

Having a goal to maintain monetary stability, keeping the unemployment rate and economic growth, holding inflation of 2-3% per year.

8. The Reserve Bank of New Zealand (RBZ)

It is a New Zealand state central bank established in 1934. It aims to maintain price stability and to avoid production volatility, interest rates, exchange rates, and inflation targets of1.5%.

All central banks play a role in the forex market, but the central banks are typical because their currencies are major currencies and have large funds.

9. People’s Bank of China

It is the central bank of the People’s Republic of China which has the power to control monetary policy and regulate various financial institutions in mainland China. PBoC has greater financial assets than any other government financial institution in world history.

Commercial And Investment Banks

Banks and financial institutions are the most active participants in the forex market.

Inside are central banks that are representatives of the government, super large private banks, and ordinary commercial banks.

However, the most influential forex marketers are usually multinational banks.

There are major players in the forex industry including Citi, JP Morgan Chase, UBS, Deutsche Bank, Goldman Sachs, Barclays, HSBC, Morgan Stanley, and so on.

They deal with financial institutions or other banks to transact buying and selling currencies to meet their own needs and for the benefit of customers. Because of this, the exchange rate moves up and down in the forex market.

Banks are forex market players that are very dominant in currency trading, to create Interbank Market.

There, large banks transact. The price or deal that happens is what determines the exchange rate of the currency.

The end result, being as seen by traders like us in trading software. Because the forex market is not decentralized, it is only natural that one bank with another has a slight difference in exchange rates

Commercial Multinational Companies

They participate in the forex market because they need foreign currency for their trade-in in other countries.

For example, a China-based company needs to use the forex market to buy the currency they need to pay for their partner companies in another country that sell heavy equipment.

However, keep in mind that commercial companies also still need the help of banks in order to participate as forex market players.

Speculators

Speculators here can mean private entities or companies engaged in the financial sector (fund development) and they usually also have unlimited financial capabilities. So, these speculators are trying to get as much money as possible and as quickly as possible from the trade market.

Some famous speculators managed to make large amounts of money in forex is the following

  • George Soros A high-class currency speculator. Who bet against the Bank of England and caused the devaluation of the Pound Sterling.
  • Bill Lipschutz. A well-known forex speculator, mathematician, and financial expert has successfully made more than $ 300 million in one trading year.
  • Stanley Druckenmiller. He is also a currency speculator, who is a protege of Soros, Druckenmiller with his company Duquesne Capital Management engaged in currency trading.
  • Andrew Krieger. Forex speculators who are still fairly young. Former at Banker’s Trust, he bets a large amount against the New Zealand Dollar and earns $ 300 million for his bank.

 

Broker

Forex brokers are parties usually in the form of companies, institutions, agents, or individuals established to bring together sellers and buyers

Forex brokers are forex market players with strategic positions because they continue and manage trading requests with small volumes (retail) to larger financial institutions.

So that later, every trader demand can be accommodated in a more massive forex market.

With a broker, traders do not need to start trading with big capital.

The capital needed to become a forex market player or trader also decreases, while the profit potential remains the same as the leverage offered by the broker.

Retail Forex Trader

Who is the retail forex trader? It could be you, your brother, your neighbor, or anyone else who doesn’t have millions of dollars in the capital but wants to get a profit in the forex market.

These retail forex traders are numerous all over the world, and all of them transact through brokers.

In connection with technological developments, forex brokers are now online and even trading platforms for smartphones have also been widely used.

Traders like us can even trade from home using a forex brokerage service. With capital as low as tens to hundreds or thousands of dollars.

Most retail forex markets consist of individual speculators who take relatively small positions through their broker trading platform. The growth of the retail forex itself increased exponentially with the advent of online trading. Although their total trading volume only represents a small part of the total forex trading volume.

Retail forex trader included

Online Forex Brokers.

Online brokers have grown rapidly lately, there are even hundreds of thousands of forex brokers currently operating on the web all over the world. This broker operates in a free market, many of which are not subject to other financial rules. But brokers who meet the criteria and are registered through regulatory agencies are considered more secure than those without regulations.

Brokerage regulatory agencies include the Financial Conduct Authority in the UK and the Cyprus Securities and Exchange Commission or CySEC in the European Union has oversight of many online forex brokers based in Europe.

Introducing Broker

Introducing Broker or IB he is an agent who introduces new customers to forex brokers. This is also a part of the retail forex market that gets a commission from the broker if you get active clients through certain links online. In certain countries, this IB is regulated by law, for example in the United States. So because of this reason, some broker does not accept clients from US residents because restricted by law.

The goal is that if an Introducing Broker operates in the United States, it must be regulated by the National Futures Association to obtain business rights from U.S. residents.

Retail Forex Trader

Retail traders are traders either from individuals or companies who are clients of forex brokers. For example, you are a trader who uses the TenkoFX platform services, this includes as a retail forex trader.

Forex Market Structure

Basically, the forex market is a decentralized global market, where all currency traded, and as a trader getting an opportunity. Make profit from difference price movement.

The perpetrators of buying and selling in this market include various groups, including the Government, Banks and Financial Institutions, Multinational Companies, Speculators, Brokers, and forex traders from among the common people.

However, even if all forex traders do not have the ability to determine prices, not all actors are equal. Why is that? This is because the structure of the forex market is not centralized, unlike the centralized stock market. If described, the structure of the stock market is as follows.
forex market structure
As shown in the picture, stock trading is centralized. That is, all seller and buyer activities are centred on the stock exchange (Stock Exchange). Companies as stock issuers and investors as buyers were met by the exchange.

Although today’s stock trading has been done online, the system is still centralized on the stock exchange. However, forex trading does not have such a center and takes place outside the exchange (over-the-counter / OTC).
forex market structure
Look how each forex market participant deals directly with one another or through brokers and banks, without the exchange of certain exchanges.

At glance structure of the forex market that is not centralized seems to be disheveled. But actually, the forex trading players can be described in certain hierarchies.

Forex Market Hierarchy

The top box in the forex market hierarchy is occupied by networks formed by major bank transactions, called interbank. Major banks are for example Citi, JP Morgan Chase, UBS, Deutsche Bank, Goldman Sachs, Barclays, HSBC, Morgan Stanley, and so on.

Major player in the foreign exchange market

The Interbank network consists of world central banks, major banks, and several smaller banks. They all trade directly with each other or electronically via Electronic Brokering Services (EBS) or Reuters 3000-Spot Matching Dealing.

After going through several institutions such as retail market maker brokers, ECN retail brokers, and Hedge Funds, then the lowest are retail traders like us.

Retail traders like us seem to be grateful for the internet, trading platform technology. And retail broker because they giving the advantage to start trading with small capital

Final thought

Learning about the most major players in the foreign exchange market. It can provide an overview of the structure of the forex market and how it works.

An investor will also see the performance of the government in running the country’s economy. A clean and honest government will get sympathy from investors.

Not only the government, but retail traders should also learn the latest news about the policies of the central bank. And multinational companies, so it gets a clue on how best to act.

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