Understanding the Interbank Forex Market

More than 50% of the trading volume in Forex is contributed by the interbank Forex  market . This percentage and the talk that surrounds the participation of banks in the forex market are bound to make one wonder about this whole phenomenon. This piece will hopefully put some of the curiosity around the interbank market to rest. We are going to touch upon all the main aspects of interbank trading and also discuss the further types within the category of these huge forex players. Let’s start at the beginning. What is the Interbank Market? The interbank market is a trading network that comprises of banks and big trading institutions. Through this network, banks trade with each other and with some big fund managing institutions and organizations. Banks also trade on behalf of their clients. As stated above, the interbank market contributes more than half of the volume to the forex market daily. By extension then this also goes to show that banks are the biggest market makers in forex.Forex as a decentralized market In all other kinds of trading there is always a center, a place where all trades can be traced back to. This center will then also be the main market maker and regulatory body. That’s not how it is with forex though. There is no regulatory authority. This means that there is not one market maker here but many. In reality, all the participants of the market together drive the price up or down.


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