Forex Market Structure
Today, forex brokers come in a wide array of shapes and sizes and forex currency trading is not limited simply to individuals, but also includes corporations, banks and even governments. Unlike the traditional stock market, the forex is divided into various levels of access, with the highest tier being the inter-bank market, which is where commercial banks and securities dealers do business. Unless you happen to be one of the forex traders associated with the inter-bank market, the bid and ask prices are unavailable, because this information is kept completely secret. The highest level of inter-bank forex currency trades make up roughly 53% of all daily trades.
Below the major banks are the smaller banks, which rank slightly higher than the international corporations. Corporations work in a slightly different fashion given the fact that they have a higher risk and have employees in different countries, so they are actually dealing with various currencies at any given time. Hedge funds fall behind international corporations, with pension funds, insurance companies, institutional investors and mutual funds falling into the latter group, as well as the futures and exchange day traders. The top dogs are the international banks, which can sometimes trade billions of dollars on a given day and while these transactions are generally carried out on behalf of customers, there are inherent risks, as have been seen in recent years, with several of the major German banks falling prey to poor judgment on the part of traders who have received poor forex training.