Categorized | Finance, Investing

The Role Of Commercial Banks In Trading Currencies Around The World

The currency trading world is no longer just a matter of banks exchange among themselves, and today involves a very large number of different players with a variety of reasons for those wishing to trade in currencies. Some, for example, you’ll need to exchange for the traditional purpose of purchasing goods and services abroad, but others will participate in the market simply earn profits from short-term movements in the market or to influence exchange rates.

Whatever the reason for the player’s participation in the market, this diverse group affect the supply and demand within the market, and therefore the exchange rates at any moment in time, and it is important to understand just who are the key players. Here, we look forward, the most important players – commercial banks.

Commercial banks account for a greater proportion than all trade of a commercial nature, speculation, and working within the framework of what is known as the interbank market. This is basically a market composed exclusively of trade and investment and the buying and selling of currencies from each other. There are strict trade relations between the member banks and the establishment of credit lines between these banks before they are allowed to trade.

Commercial banks and investment is an essential part of the foreign exchange market as they not only trade in their name to their customers, but also provide a channel must trade from which all other participants. They are, in essence, the main sellers in the foreign exchange market.

It is important to remember is that commercial and investment banks not only trade on behalf of their clients, but also trade on their behalf through the offices of the property, whose sole purpose of making a profit for the bank. Should always remember that commercial and investment banks exceptional knowledge of the market, and the ability to monitor the activities of other participants, such as central banks, investment funds and hedge funds.

Of course the commercial banks in the center of the forex market for many years now, and its role has remained essentially the same throughout this time. However, the arrival of the first electronic brokerage systems (‘service dealing monitor’ in the early eighties Reuters and Reuters ‘dealing 2000-1′ in 1989) began to change the face of the market. However, the arrival of the Reuters ‘Dealing 2000-3′ system in 1992, followed quickly the release of ‘electronic brokerage services (EBS)’ in 1993 with the ability to automatically match buy and sell quotations from the merchants that have changed the face of the foreign currency market, and the nature of market.

Now trading systems electronic allows dealers to conduct a number of transactions at the same time, trade with spreads much more stringent, greater efficiency, reduced costs and more importantly, transparency is much greater than was provided by the old phone, which means the system.

Advantages mail as clear for all to see, but it is the possibility of access to the system and the fact that it has been granted access much larger because it allowed many more players to enter the market along with commercial and investment banks.

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