The participants in the forex market

After the forex market turned into a free market in 1971, based on supply and demand, there has been a lot of speculation in the currency market. Nowadays the currency market consists for about 80% of speculative purposes! In this article the different participants in the forex market will be discussed.

The most important participants in the forex market are: commercial banks, central banks, commercial companies, investing companies, forex brokers and individual forex traders.

Motives to participate in the forex market

The most important reasons why people should participate in the forex market, are the following:

  • Speculating on profits or losses of a currency (covering about 80% of the total currency trade).
  • Protecting price-losses by means of trading goods and/or services in another country. This is also being called hedging.
  • Taking advantage of the so-called rollover. That is to say that people are trying to make the most of the different interest prices.

The different participants in the forex market:

The commercial Banks

The commercial banks are by far the largest participants in the forex market. The most extensive transactions are being realized by these banks. This way these banks do not only attend to transactions in favor of their own interests, but also for the benefit of their clients.

The banks that are most active on the forex market are: the Deutsche Bank, the UBS AG, the Citibank, the Royal Bank of Scotland, the Barclays Capital, the Bank of America, the HSBC and the Goldman Sachs.

The Central Banks

The central banks are also leading participants in the forex market, but most of the time this has little to do with speculation. The central banks take part in the forex market to be able to supervise the money transfers of a country and consequently to strive for economic purposes.

In that case you should think of keeping the price of a currency being stable or take care that a price is not going to end up above or below important levels. Possible targets are controlling, inflation, economic growth etc. etc.

Especially the Bank of Japan regularly interferes on the forex market to take care that the price of the Yen isn’t going to increase too fast. As it happens Japan depends on its export and a too high priced Yen will definitely have harmful consequences for its export, because the products are getting more expensive for its customers.

The commercial companies

These are mainly companies that sell goods and offer services in other countries. However they often do prefer to be paid in their own currencies or in American dollars. As a consequence they’ll have to exchange these currencies and this has to be carried out by commercial banks.

Another reason why companies are participating in the forex market is caused by hedging. An example for this phenomenon is an European company doing business abroad and is getting paid in American dollars. When the value of the American dollar is declining and it is expected that this downward trend will be going on for quite a while, they consequently can sell the dollar and buy the other currency, as a result of which they will not really be going backwards from a nett point of view.

The investing companies

These are for instance pension companies which are active in the forex market to speculate or to hedge.

Forex Brokers

The forex brokers are active on the forex market to bring buyers and sellers together.


These could be people who change money for a holiday, but also private forex traders who are speculating on the forex market.

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