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A Look At Forex Market Makers
By: Eddie Tobey
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
http://www.e-forexbrokers.com and/or visit its sister site at http://www.e-incorporatinginflorida.com
for related information.
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