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The Way The Banks Trade Forex

forex-banks.jpgWorld currency trading is no longer just a matter of banks exchanging currencies amongst themselves and now involves a variety of different players, including specialist Forex brokerage firms, with very diverse reasons for trading in currencies. Some players will have to exchange currencies to buy goods and services overseas, while others will simply wish to earn short term profits from exchange rate.

The commercial banks have been at the very hub of the Forex market for many years and their role has remained basically the same throughout this time. With the launch of Electronic Brokering Services or EBS, brought the ability to automatically match buy and sell quotes from dealers and this changed the very nature of the market.

Electronic trading systems allow dealers today to conduct several trades simultaneously and to trade with far greater efficiency, tighter spreads, lower costs and, most importantly, much greater transparency than was seen previously in telephone dealing systems. Perhaps the major advantage of electronic dealing however is that the accessibility of the system allows many more players to join the market alongside the commercial and investment banks.

The commercial and investment banks form the cornerstone of the foreign exchange market because, in addition to trading on behalf of their customers, they also provide the channel through which all other participants have to trade. In effect they are the main sellers within the foreign currency exchange market.

 

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