Forex Market Players

It is very essential for you that you understand the nature of the spot forex market and who are the main players in Forex  market.
Until the last 1990, only the "big guys" could play in this Forex game. The main requirement was that you could trade only if you had about ten to fifty million Dollar to start . Forex was originally intended to be used by bankers and large institutions, and not for little investors. However, because of the rise of the internet, online forex trading firms are now able to offer trading accounts to "retail" traders like us.
Here are the major market players:

1. The Big Banks

Since the forex spot market is decentralized, it is the largest banks in the world that determine the exchange rates. Based on the supply and demand for currencies, they are generally the ones that make the bid/ask spread that we all love .
These large banks, collectively known as the interbank market, take on a big amount of forex transactions each day for both their customers and themselves. A couple of these super banks include Barclays Capital ,UBS, Citigroup and Deutsche Bank. You could say that the interbank market is The foreign exchange market.

2. Large Commercial Companies

Many large Companies take part in the foreign exchange market for the purpose of doing business. For instance, Apple must first exchange its U.S. dollars for the Japanese yen when purchasing electronic parts from Japan for their products. Since the volume they trade is much smaller than those in the interbank market, this type of market player typically deals with commercial banks for their transactions.
Mergers and acquisitions (M&A) between large companies can also create currency exchange rate fluctuations. In international cross-border M&As, a lot of currency conversations happens that could move prices around.

 

3. Governments and Central Banks

Governments and central banks, such as the European Central Bank, the Bank of England, and the Federal Reserve, are regularly involved in the forex market too. Just like companies, national governments participate in the forex market for their operations, international trade payments, and handling their foreign exchange reserves.
Meanwhile, central banks affect the forex market when they adjust interest rates to control inflation. By doing this, they can affect currency valuation. There are also instances when 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 priced too high or too low, so they start massive sell/buy operations to alter exchange rates.

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