Who are the biggest players in the Forex market?

Who are the biggest players in the Forex market?

To know more over the overall structure of the forex market, let’s dig in a little deeper to learn about who exactly the big people in the ladder of successful forex trading.

It is vital for you that you comprehend the nature of the spot forex market and who are the main forex market players.

Until the late 1990s, only the “big guys” could play this game.

The initial condition was that you could trade only if you had about ten to fifty million dollars to start with. 

Forex was originally meant to be used by bankers and large institutions, and not by “little guys.”

However, because of the growth of the internet, online forex brokers are now capable to extend trading accounts to “retail” traders like us.

Knowing who you are doing business with is essential in any competition. The currency Markets are no different.

Moreover, understanding how the major Forex market players use the markets can help out for you to find all the important niche and trading edge.

To start with, here are the major forex market players:

The Super Banks

Bottom view of Deutsche Bank Twin Towers

The largest banks in the world served and determine the exchange rates. It was since the forex spot market is reorganized.

Based on the supply and demand for currencies, they are normally the ones that make the bid/ask spread that we all appreciate.

These large banks, mutually known as the interbank market, take on an absurd amount of forex transactions each day. This is for both their customers and them.

A couple of these super banks consist of Citi, JPMorgan, UBS, Barclays, Deutsche Bank and HSBC.

TRIVIA: You could say that the interbank market is the foreign exchange market.

Large Commercial Companies

Companies take part in the foreign exchange market for the objective of doing business.

For instance, Apple must first exchange its U.S. dollars for the Japanese yen when acquiring electronic parts from Japan for their goods.

This type of market player typically transacts with commercial banks for their transactions.

It is because the volume they trade is much smaller than those in the interbank market.

Meanwhile, mergers and acquisitions (M&A) between large companies can also establish currency exchange rate fluctuations.

In international cross-border M&As, a lot of currency discussions happen. This discussion sometimes could move prices around.

Governments and Central Banks

Bank of Russia

Governments and central banks, such as the European Central Bank, the Bank of England, and the Federal Reserve, are frequently involved in the forex market too.

Just like companies, national governments also take part in the forex market.

This is for them to continue operations, international trade payments, and handling their foreign exchange reserves.

Meanwhile, central banks have an effect on the forex market when they alter interest rates to control inflation.

By doing this, they can also affect currency valuation.

There are also cases when the central banks intervene, either directly or verbally, in the forex market when they want to realign exchange rates.

Sometimes, central banks think that their currency is valued too high or too low. This is when they start massive sell/buy operations to adjust exchange rates.

Hegde Funds

Hedge funds are actively managed financial partnerships. Investors combine their money into one portfolio managed by a fund manager who aims to generate high returns.

There are various types of hedge funds. Some focus more on FX markets, like currency funds that track FX movements. Others, investing in foreign assets, need to manage their currency risk.

Hedge funds control large sums of money. Their decisions to hedge or speculate can significantly influence FX rates.

The Speculators

The statement “In it to win it!” captures their mindset perfectly as they give their all to win in trading. This likely reflects the mindset of speculators.

Speculators make up nearly 90% of all forex market trading volume and come in various forms.

Some speculators have deep pockets, possessing a lot of money and a readiness to risk it in the trading session. Others operate with less.

However, they all engage in the forex market with the goal of making substantial amounts of money.

Banks, investment companies, other companies, and individuals use the foreign exchange market. They either want to protect themselves against the risk of currency fluctuations or speculate in hopes of profiting.

In essence, anyone engaging in transactions in the forex market qualifies as a player.