Who Are The Participants In The Market
Synopsis
As in any platform, there are always a variety of players involved in the correlation of its makeup. The same concept applies to the workings within the participants of the forex markets.
The following is a breakdown of some of the more prominent participants usually featured within this platform:.
The Participants
Hedger or hedge fund managers – being one of the primary participants in the forex trading platform this participation in the currency exchange market consists of businesses and other organizations that actively participate in the international trading arena.
Charging performance fees these entities are designed to minimize the exposure to unwanted business risks while at the same time creating profits from its investments which consists of futures, derivative and swap contracts.
Banks are the other players on this platform and they function mainly as investment entities for the country. The style used contributes to the huge disparity between the bid and asking prices in this sector thus attributing to the majority turnover and speculative trading scenario.
Commercial companies are also important participants in the forex market, though as comparatively smaller players however none the less just as important in ensuring the long term trading flows, which is pivotal to the currency’s exchange rates.
The central bank of a country – this entity is crucial to the smooth functioning of the entire financial engine as it controls the money supply, interest rates and inflation of the country. Ideally having considerable amounts of foreign exchange reserves it can ensure the market is kept relatively stable. With the control percentage it yields the central banks will more often than not intervene in the forex market should such an act be called for. However is has been evident over time that some central banks have not been able to achieve the target rates due to some reason or another.