How the Forex market is regulated in Russia and in the world. The main participants in the forex market The mechanism for concluding transactions in the Forex market
It is impossible not to dwell on such an important point as the main bidders, since the current and future situation on the market depends on their actions. In addition to individuals who have the least influence on the state of affairs in Forex, market participants are banks, central and commercial, international funds and transnational companies, various currency exchanges and. All of them can be classified as either active or passive participants. The former, respectively, set their own quotes, while the latter follow the rules of the game imposed by the more influential party, making transactions at the set prices. Central banks - the relative stability of exchange rates in the market. The leader in the rating among them is the Federal Reserve System, that is, the US central bank, followed by the banks of Germany and Great Britain. Maintaining the exchange rate of the national currency at a certain level, that is, managing the currency reserves in the interests of their country, they use the following methods to accomplish their tasks: indirect influence and direct foreign exchange interventions to avoid sharp jumps in exchange rates and maintain an acceptable ratio of imports and exports. This may be a sharp release or withdrawal of a large amount of currency from circulation in the market, as well as a change in interest rates. Commercial banks simultaneously act as independent players in the Forex market (speculative or hedging transactions) and as intermediaries for their clients, of course, for a certain fee. Also, commercial banks collect up-to-date information about the needs of customers. Among the top three, the place is again occupied by the banks of the USA and Germany, as well as a fairly large volume of transactions falls on the share of the Swiss bank. Trading international companies provide stable supply and demand (exports and, respectively) for various foreign currencies. It is they who, most often, are the clients of commercial banks: they do not go directly to, but significantly change the situation on it. Just as often, such organizations use the service of storing temporary surpluses of foreign currency on short-term deposits. International investment funds, insurance companies, and trusts form the next category of participants. Their main type of operations - large investments, designed for the long term. It is thanks to this that the instruments support long-term trends for exchange rates. The purpose of such operations is to get the maximum possible profit by placing assets in or bank deposits in the territory of various countries, based on considerations of return on investment. Depending on the level of interest rates and the state of the economy of each country, the exchange of national and foreign currencies takes place and is also provided. This category also includes transnational companies that create joint ventures, branches and representative offices. Currency exchanges are another intermediary in the Forex market, providing services to many large financial institutions around the world. They create comfortable conditions for traders and regulate trading. Initially, it was they who formed, but are gradually switching to receiving income exclusively from intermediary activities. The stock exchanges of Tokyo, London and New York are rightfully considered the largest among such organizations. Brokerage firms act as intermediaries between buyers and sellers in the transaction. In fact, they are one step below the financial exchanges in the Forex world. They make payments, provide lines of credit and create conditions for financial transactions. The existence of brokers and the mechanism of leverage has allowed private individuals to enter the market, who pursue the sole purpose of making a profit through small-scale speculative transactions. This is not a complete list of Forex participants, only the main actors and their influence on changing the market situation were named.
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When tracking short-term fluctuations in currency pairs, it's just as easy to lose sight of general market trends as it is to overlook the broader trading ecosystem by focusing on minor fluctuations in open positions.
Forex Market is a complete world with the widest range of participants from private traders like you to interbank networks and . Acting as individual retail trader, you are at the bottom of the food chain, you are a small fish. Although you can buy and sell the same currency pairs as other participants, you still need to complete longer transaction chains than others to get liquidity, as you do not get the same prices as those above in the hierarchy of other market participants.
You cannot influence the market with your trades because they are too small to "make a wave". Your role here is to respond appropriately to what is happening on the market in general and with you in particular. While this may seem like a disadvantage, there are also advantages to this state of affairs. When you begin to understand exactly what events affect trends, how and why they happen, you will reach an important level as a trader. By understanding the broad structure of the market, you will be able to make the right choices and reduce the chances of random trading.
Participation of the Government and Central Banks
Central banks, such as the Fed, manage the money supply and interest rates, and oversee commercial banking systems. These are the blue whales of the foreign exchange market. As part of their remit to manage growth and currency stability, central banks provide huge impact on the forex market.
Through open market operations, central banks control money circulation and stabilize interest rates through repurchase agreements (REPO) with commercial banks (primary dealers). Repurchase agreements work effectively to increase the money supply in an economy when central banks lend funds (by buying T-bills from the banking sector) or in the case of reverse repos to take funds out of circulation during a contraction of funds (by selling T-bills to the banking sector). ).
When costs outstrip production (demand is higher than supply), prices rise, and this is called. Faced with inflation, banks also have the option of directly raising interest rates, which makes lending more expensive, as well as increasing the cost of servicing current loans, and the outlook for the lending sector becomes bleaker. When production outstrips costs (supply is higher than demand), prices fall, and this is called deflation. Faced with deflation, central banks may lower interest rates, reduce the cost of lending, which will reduce the cost of servicing current loans and brighten the prospects for lending.
What is really worth realizing is that the free market exists within a very fragile ecosystem that keeps its balance through periodic intervention from central banks. There are several reasons why central banks are at the top of the Forex food chain. Only they in the financial system can create and withdraw funds, set interest rates, influence market expectations and hold impressive foreign exchange reserves (the most popular are the US dollar and the euro). The impact that central banks can have on the Forex market as part of adjustments to their own foreign exchange reserves can be quite impressive due to the volume of transactions.
Participation of institutional dealers in the Forex market
These are banks and financial institutions; institutional dealers provide liquidity to the foreign exchange market. Dealers trade with each other in an interbank market backed by lending between participating institutions. Generally speaking, the interbank market is a chain of institutional forex dealers trading currencies with each other to maintain liquidity in the banking system. According to data collected by the Bank for International Settlements in 2013, the interbank network forms about 40% of the daily turnover of the Forex market, that is, 5.3 trillion dollars. 
Banks and large financial institutions trade with each other to make sure they have enough liquidity to meet the needs of their clients. Their clients include smaller banks without the credit relationships required to participate in the network, companies that require foreign exchange as part of their import and export cycles, forex brokers acting as intermediaries between large banks and retail traders, private clients who need access to funds and credit services. These institutions can borrow directly from central banks at wholesale prices, allowing them to access liquidity at better prices than other market participants further down the chain. Their profit comes from liquidity premiums paid by smaller institutions, companies, brokers and private clients.
prime dealers set exchange rates for traded pairs. Forex is a completely decentralized market, where there is no single price for any currency pair, and each institution has quotes that are somewhat different from others, depending on the dynamics of supply and demand. When we announce prices to our clients, we find the best bid/bid difference from our liquidity providers and fill your orders at the weighted average price after charging cTrader fees or adding a small mark-up to the spread (MT4).
As part of their monetary policy, central banks set overnight interest rates(known as the main refinancing rate in Europe and the federal funds rate in the US). Institutional dealers use these rates to borrow and lend to each other. In practice, the complex needs of the global economy mean that these rates are constantly changing. Due to varying supply and demand conditions, the actual rates for such transactions are constantly changing. This rate is known as Libor.
The difference between overnight and the target rate set by the Central Bank of a country or region indicates the amount of liquidity available in the market. A lower Libor rate indicates more liquidity than required and may cause the said currency to decline; the Libor rate above the target rate of the Central Bank indicates high demand, low liquidity and may cause the growth of the specified currency.
The open market operations mentioned above are a tool used by central banks to control the amount of liquidity in the economy, as well as the real overnight rates charged at the time of the discrepancy between them and the rates set by the central bank, which threaten the course of monetary policy of the Central Bank.
Participation of multinational companies
Being two steps away from the liquidity of central banks, we see that there are companies that also need access to the foreign exchange markets. Business is the largest client for institutional dealers. This is due to the fact that the currency has an important influence on international trade. Any international transaction involving the sale of products or services to customers or purchases from suppliers requires the purchase and sale of foreign currencies. Globalization has made currency transactions an integral part of business cycles. 
For example: An American consumer electronics manufacturer is ordering components for its new product line from Japan. From the moment of the order, after six months, he must pay for the order in Japanese yen. The company needs to buy a huge amount of yen with US dollars in order to make a payment. Such purchases can have a significant impact on the USD/JPY pair at the time of the transaction. However, by the time payment is made, the yen may rise against the dollar, making the order more costly for the US company and lowering profits. The company may decide to exchange dollars for yen in advance to be sure of the final price of the transaction, however, since this is a large order, it is unlikely that the company has enough reserve funds to buy the required amount of yen and hold them until payment.
To insure against the risks of adverse exchange rate changes, the company may decide to conclude with the second party. This is done in order to protect itself from market volatility and to ensure that in six months the company will be able to buy the necessary amount of yen to fulfill its obligations.
Another reason why Forex is so important for international companies is that when doing business in the foreign exchange markets, they regularly need repatriate funds. Depending on the size of the company, these can be very large currency transactions, which are divided into separate orders, increasing the value of the respective currencies.
Traders: the junior link in the Forex market
Traders are probably the most diverse group of market participants. Their influence depends on the capital they have at their disposal and how high they are in the hierarchy of liquidity they receive from providers. In fact, this can place a trader anywhere in the food chain. However, one thing unites all traders: Forex is not a business tool, Forex is business for them. Traders are not interested in using Forex to hedge the risks of future purchases, or the acquisition of traded currencies. Traders are only concerned profit from price fluctuations, and market conditions that allow them to trade in the largest and most liquid market in the world. 
hedge funds are the most influential groups of currency speculators and can easily influence the value of currencies due to the sheer size of transactions that are regularly made. They are also the most knowledgeable and experienced market participants. Hedge funds invest on behalf of individuals, pension funds, companies and even governments. They use a number of different techniques, including situational trading, algorithmic trading, a combination of both techniques, and fully automated high-frequency trading. They have very deep and powerful tools to create tangible waves in the market.
You may be surprised, but the most famous currency speculation of all time was carried out by a private trader. In 1992 George Soros, the investor who became known as the “man who brought down the Bank of England,” bet $1 billion (the entire volume of his fund) with a leverage of 1:10, that is, $10 billion, to depreciate the pound against the German mark. The logic of the deal was that the pound was overvalued, as the Bank of England refused to devalue the currency after joining the Exchange Rate Management Mechanism (ERM) in 1990. Within 24 hours, the pound fell by about 5,000 points. Soros closed his position a month later, benefiting from an appreciation in the German mark, and walked away with more than $2 billion. Of course, as a retail trader, you are very far from the level of George Soros. Even with maximum leverage, your participation in the market is very far from the volumes that investors like Soros can afford.
If you are dealing with , then your buy orders are offset by identical sell orders from other clients. By forming orders in this way, brokers can maintain the balance of risks they need. However, in practice, market maker accounts rarely correspond to this state of affairs, which creates the need to hedge risks by making one's own opposite positions in the real market. At this point, a conflict arises when the broker plays against your orders, and your profit becomes a loss for the broker, and vice versa, the broker's losses become your profit. Brokers do not seem to work on the model of a market maker, without taking risks; client orders go directly to the dealing of institutional dealers - sources of liquidity. When you work with real STP/ECN brokers, you get the best price offers from a range of liquidity providers and your orders are filled at a weighted average price.
Victoria Victoria, Mahe, Seychelles +7 10 248 2640568The FOREX currency market is the world's largest over-the-counter stock market, with daily trading volumes of hundreds of billions of dollars, while all trading volumes are achieved due to the variety of entities involved in transactions. Most Significant forex market participants listed below.
1. Commercial banking structures
Due to the fact that this category of participants is the largest among others, the Forex market is actually considered a market for interbank transactions, because it is through Commercial Banks that the main exchange and credit and deposit operations of most large firms pass.
The most influential banking structures are Barclays Bank, Deutsche Bank, Citibank, Union Bank of Switzerland and others.
Actually, through them, exporters and importers bring national currencies into the currencies of those countries with which they have foreign trade relations, in addition, the banks themselves carry out profitable transactions with their own funds. All this creates a huge cash flow, allowing you to call this segment the largest in the world.
2. Companies trading internationally
From paragraph one, paragraph two follows - these are organizations that are importers and exporters and conduct their business activities, including outside their own country (that is, subjects of international trade).
These forex market participants directly create supply and demand for foreign currency, and also keep money resources in deposits denominated in various world currencies. As a rule, they make all transactions through Banks.
3. Central Banks
Central banks, entering Forex, do not pursue the goal of making a profit from the currency transactions carried out. The main task of the state monetary structures lies in stabilizing the exchange rate of the national currency, adjusting the balance of export-import operations and maintaining their own economy in accordance with the chosen direction.
To achieve their goals, they carry out (direct impact), regulate, in circulation, and also change interest rates, which is reflected in the quotes of currencies indirectly. The most significant State Bank for the world economy is, and the Bank of England and Germany also plays an important role.
4. Funds investing in foreign assets
These forex market participants are represented by international investment funds that specialize in investments in securities, derivatives and currencies of different countries of the world. By accumulating significant funds of investors, such funds sometimes have a significant impact on the quotes of the foreign exchange market.
5. Dealing centers
In other words, these are foreign exchange brokers that provide access to the foreign exchange market to ordinary individuals (private traders). The share of trading operations (compared to those listed earlier) is not at all significant, however, in aggregate, traders of dealing centers create a good layer in this segment.
6. Individuals
Individuals as participants in the forex market mainly carry out non-trading operations related to the tourism business, the purchase and sale of foreign currency, the transfer of wages and other payments. The share of such transactions is negligible on the scale of the foreign exchange market as a whole, therefore, it practically does not affect the quotes of foreign currencies.
When studying the Forex currency market, trading strategies and methods of technical and fundamental analysis, it is imperative to pay attention to such a factor as the Forex participants themselves. This will allow you to understand the structure of the financial market and understand your role in this structure. Currently, there are approximately seven main participants in the Forex market. Among them: commercial banks, currency exchanges, central banks, foreign trade companies, investment funds, brokerage companies, as well as individuals.
Now let's take a closer look at each of the participants.
Commercial banks
As a rule, Forex participants open their accounts in banks that carry out conversion operations on these accounts that are necessary for customers. Through operations with clients, the aggregate needs of the market are accumulated through currency conversions, attraction and placement of funds with which the bank enters other banks. In this case, banks can use their own or borrowed funds for transactions. Due to the fact that the foreign exchange market mainly consists of interbank transactions on the movement of exchange rates, in its essence it is actually an interbank foreign exchange market. International banks have the greatest influence on forex, among which the largest are Barclays Bank, Citibank, Chase of Switzerland, etc. The daily turnover of such banks reaches billions of dollars.
Currency exchanges differ in that they do not require a separate building and do not have specific opening hours. Thanks to modern telecommunication technologies, Forex participants can enter the stock exchange directly at any time of the day. The world's largest exchanges include the Tokyo, New York and London Currency Exchanges.
Central banks mainly perform the functions of managing foreign exchange reserves and conducting foreign exchange interventions, which affect the level of the exchange rate. They also regulate the level of basic interest rates on deposits and investments in the national currency. The United States Federal Reserve System, the European Central Bank and the Central Bank of Great Britain have the greatest influence on the world currency market.
FEA companies
Companies that conduct international trade act as importers and exporters of foreign currency. As a rule, these enterprises do not have direct access to the foreign exchange market, so all deposit and conversion operations are carried out through commercial banks. As forex participants, companies engaged in foreign trade operations do not seek to profit from fluctuations in exchange rates, but are aimed at minimizing the losses associated with this.
These include various international investment, mutual and pension funds, insurance companies and trusts. They engage in diversified asset portfolio management. At the same time, funds are placed in the form of securities of corporations and governments of various countries. The most famous is the Quantum fund, distinguished by successful currency speculation. This type of market participants also includes large international corporations that carry out foreign production investments through branches and joint ventures.
Brokerage companies are mainly engaged in bringing together the buyer and seller of foreign currency and ensure the conversion operation between them. Brokers receive profit in the form of a commission for mediation. At the same time, in the foreign exchange market, it is not presented as a percentage of the transaction or as a predetermined amount. These forex participants quote the currency with a spread that contains commissions. The brokerage firm has all the information about the requested rates and forms the real exchange rate for completed transactions. The current level of the course comes to commercial banks from brokerage firms. The most famous foreign exchange brokers are such companies as Lasser Marshall, Tullett and Tokio, Harlow Butler, Coutts, Tradition, etc.
Recently, an increasing number of private investors have entered the foreign exchange market, who conduct a wide variety of non-trading foreign exchange transactions related to foreign tourism, the transfer of wages, fees or pensions, as well as the sale and purchase of foreign currency. These participants represent the largest group, which is mainly engaged in foreign exchange transactions for speculation.
The forex participants listed above are the main ones in the modern foreign exchange market, but far from being the only ones. However, this information is quite enough to get an idea of the structure of the foreign exchange market.
The main participants in the Forex market are commercial and central banks, brokerage companies, private investors, corporate speculators and hedgers.
Commercial banks account for the bulk of their operations. They carry out tasks set by clients, including importers and exporters, insurance companies, investment institutions, individuals and legal entities. All transactions are carried out from the funds of these banks, which defines the Forex market, whose participants regularly monitor quotes, as an interbank market. This definition can be confirmed by concluded interbank transactions, or rather their number. Strong pressure on this whole process is exerted by such large banks of the world as Citibank or Union Bank of Switzerland.
Central banks, on the other hand, are engaged in checking the safety of the national currency, which consists in regularly checking its stability, course correction and necessary support.
The role of intermediaries is assigned to brokerage companies that help in the implementation of transactions between other market participants. For example, between an investment fund and a private investor. Thus, there is a "meeting" of the real buyer with the seller of the currency. It is in brokerage companies that the real exchange rate is formed, and the main income is made up of the interest received from each transaction. The main advantage of working through such intermediaries is anonymity, the ability to participate in setting quotes for a particular currency, as well as the continuity of this process.
A special place among market participants is occupied by currency dealers or speculators - legal entities that carry out all operations at their own expense, taking all possible risks associated with transactions. In contrast, all bidders can be hedgers if they enter into futures contracts.
The last market participants are private investors, or, more simply, individuals whose main income is made up of speculative activities - working with currency fluctuations.
Active and passive participants in the Forex market
The Forex market and its participants involve active or passive participation in the trading of all parties to ongoing transactions. The main role in trading is played by active participants or market makers, who determine the current prices for the currency. However, they are the minority in Forex.
A greater number of those who participate in the auction and monitor the fluctuations in the value of currencies are passive market participants.
They also include traders - those who make money on regular changes in the price of currency pairs. Also passive participants include pension, investment and hedge funds. Large companies, whose task is to carry out export-import operations as profitably as possible, conclude transactions with commercial banks through the exchange and are also passive players in Forex. This also includes transnational corporations.
