There are many participants in the foreign exchange market. To better understand the main activities of the foreign exchange market, we introduce the prominent participants in the foreign exchange market:
One 、Market maker (foreign exchange bank)
Commercial banks are market makers in the foreign exchange market. The price they quote is the exchange rate between currency and currency. Other participants in the foreign exchange market usually ask commercial banks about the exchange rates they can provide. Other participants in the foreign exchange market understand the prices quoted by different market makers through Reuters or other graphical data systems. Commercial banks that act as market makers are usually willing to take exchange rate risks and often engage in speculative transactions. The more prominent players include the following banks: Citibank, UBS, Bank of America, etc.
Including foreign exchange brokers (Broker) and foreign exchange traders (Dealer). A foreign exchange broker is an intermediary who specializes in introducing foreign exchange trading and facilitating transactions between buyers and sellers. There are two types of foreign exchange brokers. One is called general brokers. They use their funds to participate in trading intermediary activities and bear the profits and losses. The other is called street brokers, commonly known as brokers. They do not participate in foreign exchange trading activities and only collect commissions based on the information provided to buy and sell foreign exchange on behalf of their clients. Foreign exchange brokers mainly rely on delivering the latest, most reliable, and most beneficial information to their customers to survive. Therefore, they have vast knowledge and advanced communication networks and can capture and use the information to develop profitable channels. Foreign exchange brokers are a very active team in the foreign exchange market. Even if many large banks can independently conduct foreign exchange transactions, they are willing to trade through brokers because brokers can quote the most favorable price and large banks exempt them from trading. By exposing one's business activities, one can protect oneself and implement its market strategy smoothly.
A foreign exchange trader is a person specializing in foreign exchange transactions in foreign exchange banks. Traders make quotations to customers and conduct foreign exchange transactions on behalf of the bank. According to the different responsibilities of the work, traders can be divided into a chief trader, senior trader, trader, junior trader, and trainee trader. The top trader is generally responsible for trading several major foreign exchanges, and the transaction amount is not limited. Senior traders are responsible for more important foreign exchange transactions, and there are few restrictions on the transaction amount. Traders, junior traders, and trainee traders are accountable for transacting one currency and setting the trading limit based on experience. When the limit is exceeded, the senior trader or chief trader should be consulted.
Three 、General customers
Refers to enterprises, agencies, and organizations in the foreign exchange market other than foreign exchange banks. They are the initial supplier and final demanders of foreign exchange, such as companies engaged in import and export trade, companies that make cross-border investments, companies that repay foreign currency liabilities, and individuals who need remittances. General customers' foreign exchange trading activities reflect the substantial supply and demand in the foreign exchange market. Although this part of the transaction does not account for a large proportion of the foreign exchange market transaction, it impacts the national economy.
Four 、Foreign exchange speculators
Foreign exchange speculators are market participants who make use of the time difference of a specific currency exchange rate by predicting the rise and fall of the exchange rate, buying low and selling high, and making speculative profits. They have no actual demand for foreign exchange, such as adjusting positions or repaying debts. They participate in foreign exchange trading purely to find profit opportunities that may be used due to market barriers. These opportunities are hidden and challenging to be discovered.
Five 、Central Bank
The central bank is a particular participant in the foreign exchange market. It conducts foreign exchange transactions not to make profits but to supervise and manage the foreign exchange market, guide the direction of exchange rate changes, and make it conducive to implementing the country's macroeconomic policies or complying with the requirements of international agreements.