Forex market is a source of income to many people. It is also the biggest financial trading so far in the market. The trading value per day is more than that of the stock market. It independent, this means it is not tied to any form of stock exchange. It is usually referred to as Over the Counter market (OTC). It helps investment and also international trade.
The first common participant in the forex market is banks. Commercial banks are the main heart of any foreign exchange that is taking place in the market. Any transactions that are taking place in foreign exchange in takes place indirectly or directly through commercial banks. Whether it involves swaps, exports, futures or options banks should be involved. The bank should be involved because it involves debit or credit of accounts in commercial banks. Commercial banks should work on behalf of customers by bringing together their supplies and demand.
Another market participants are commercial companies and firms. Commercial companies and firms are involved in the foreign exchange of services and goods across the world. The goods and services may be intermediate goods, raw materials or finished products. All these will involve a pair of currencies between two parties in the market through exchange mechanism and also exchange rates.
Central banks are also market participants in the field of forex trading. Each central bank of each country plays a crucial role in the forex market. The function of a central bank is to control the money supply by adopting several measures depending on different factors. The factors include the rate of employment, inflation, government policies and economic growth in the country. They can use their own forex in stabilising markets.
Investment management firms are also important participants in the forex market. They play an essential role in managing the large account on behalf of their clients. They also use forex market to invest in available foreign securities. They trade using currency pairs to pay for investments internationally.
The investors should also know that in the market there are many retail forex brokers. Retail traders are those that deal with the small amount of money in forex market. This kind of trades participate only through banks or brokers. The retail brokers are controlled by NFA (National Futures Association) and Commodity Futures Trading Commission (CFTC).
Also, Nonbank Foreign Exchange Companies are involved in the forex market. These firms only offer a foreign exchange to private companies and individuals. There are also known as fore brokers. Non-banking Financial institutions also fall into this category. These mainly involve large amount of pension funds.
Remittance companies or money transfers are also involved in the forex market. These are where they assist in remitting money that is earned abroad by forex markets. They convert home foreign currency to home currency. There always have certain rates that charged clients. Hedge funds act also as speculators in the market. Speculations take place also in forex marker as in the stock market. In forex market transaction only takes place depending on the movement of currency in the market.