The Duty of A Forex Market Maker
Dave Lavinsky
The investor in the currency market takes for granted that a pair of currencies can be bought or sold at a moment’s notice. Once an order is placed with a broker, the trade is executed within seconds. It is, of course, not as easy as that.
Whenever a pair of currencies is bought or sold, there must be someone at the other end of the transaction. It is very unlikely that the investor will always find someone who is interested in buying and selling the same two currencies at the same amount, and at the same time. Hence, the question remains, “How is it possible that the forex investor can buy or sell at any time?” This is where the forex market makers come in.
The forex market maker is a bank or brokerage company that stands ready, every second of the trading day with a firm bid and ask price. This is good for the investor because when the investor chooses to buy and sell a pair of currencies, the market maker will purchase from and sell to the investor, even if they do not have a buyer and seller lined up. In doing so, they are literally “making a market” for the currencies.
Forex market makers ensure that the market is always functional and that the currencies in it will always fetch the market rate. Forex market makers do so by updating their prices at intervals of at least 30 seconds and undertaking to trade if this is requested. Forex market makers must fulfill their obligations irrespective of whether the economic situation is favorable or unfavorable, or whether they lose or profit by doing so.
Typical forex market makers include Gain Capital, CMS Forex, Forex Capital Markets (FXCM), and Global Forex Trading, all of which are regulated by the Commodity Futures Trading Commission (CFTC) of the USA. Another prominent forex market maker is Saxo Bank, which is regulated by the Financial Services Authority (FSA) of Denmark.
Until recently, central banks, commercial banks and investment banks dominated the forex market. Due to the entry of forex market makers, other market players like international money brokers, large multinational companies, registered dealers, global money managers, and private speculators have entered the market in large numbers.
ABOUT THE AUTHOR
Forex Brokers provides detailed information on forex brokers, forex trading and market makers, and other forex-related topics. For more information go to Forex Brokers and/or visit its sister site at Incorporating in Florida Web for related information.
The latest information and news on Forex:
WORLD FOREX: Dollar Gains Ground After Strong US Retail Sales - Wall Street J...
Reuters
WORLD FOREX: Dollar Gains Ground After Strong US Retail Sales
Wall Street Journal
"The data was dollar positive," said Jacob Oubina, a currency strategist at Forex.com in Bedminster, NJ "It's going to raise [US's] first quarter GDP up ...
Forex: Euro and pound extend 3-day...
Forex: US Retail Sales and Consumer Sentiment - InvestorGuide
BBC News
Forex: US Retail Sales and Consumer Sentiment
InvestorGuide
Two US figures will be in the limelight today: retail sales and consumer sentiment. In addition, we have employment figures from Canada and other events. ...
Forex Trading Prepares for US Retail Sales DataForexyard (blog)
all 801 news a...
Forex: Euro plods in range - NASDAQ
FXstreet.com The Forex Market
Forex: Euro plods in range
NASDAQ
FXstreet.com (London) - Euro has slipped into a sleepy sideways channel as players wind-down for the weekend. EUR/USD is plodding along in a tight 10 pip ...
Daily GVI Forex Forex ViewForex Hound
Forex: USD/JPY eases below 91.00 after consum...
FOREX-Dollar little changed vs majors in volatile trade - Reuters
FOREX-Dollar little changed vs majors in volatile trade
Reuters
... and there's concern that there could be problems in Portugal, Spain, Ireland," said Michael Malpede, market analyst at Easy Forex in Chicago. ...
and more »
Friday Currency Wrap-Up: The US Economy Is Still Trending Higher - Forexrazor
Friday Currency Wrap-Up: The US Economy Is Still Trending Higher
Forexrazor
High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work ...
and more »
foreign exchange - Google News
Pound foreign exchange rates: Friday 12 March - Economy News
Reuters
Pound foreign exchange rates: Friday 12 March
Economy News
Pound Euro exchange rate is lower while Pound Dollar exchange rate is higher in morning trade in London. The GBPEUR os lower by 0.025% with 1 GBP = 1.1015 ...
WORLD FOREX: Dollar Weakens Slightly On Euro After Trade DataWall Street Journ...
? Foreign Exchange Intervention at Issue in Japan - Seeking Alpha (blog)
RTE.ie
? Foreign Exchange Intervention at Issue in Japan
Seeking Alpha (blog)
Deflation has been persistent in Japan for two decades due to very low unemployment rate in Japan for the very low GDP growth rate. ...
Pressure mounts on BOJ for policy loosening next weekReuters
BOJ Shirakawa: Easy Credit Pol...
CHINA NPC: SAFE: Views Differ Within China On Yuan Exchange Rate - Wall Stree...
Telegraph.co.uk
CHINA NPC: SAFE: Views Differ Within China On Yuan Exchange Rate
Wall Street Journal
Yi Gang, the director of the State Administration of Foreign Exchange and a vice governor of the People's Bank of China, reiterated China will continue to ...
Gold Has Less Luster in ChinaWall Street...
Foreign Exchange - Market News International
Foreign Exchange
Market News International
Speculative accounts built a new record net euro short position and trimmed their net yen long position as per March 9, according to data released late ...
and more »
China's Golden Plans and Silver's Long- and Short-Term Trends - Before It's News
Forex Flash
China's Golden Plans and Silver's Long- and Short-Term Trends
Before It's News
This Tuesday China's chief foreign exchange regulator, Yi Gang, told reporters that China is not interested in increasing its gold reserves. ...
Gold: 'Not A Bad Asset', IndeedGold Seek
The Ins ...