To get to know a market more closely, you first need to understand who is working here. The Forex market is the world’s highest trading volume – exchanging a foreign currency at an average of $ 4 trillion a day. Unlike the stock exchanges where the shares of the companies are traded, the foreign exchange market is not controlled from a specific center. You can think of participants as steps like a wedding cake. The opportunities available to those dealing with large quantities in this market are slightly better than the other layers. However, the enormous depth of the market makes the manipulation very difficult. In the continuation of the article, we will examine the foreign exchange market participants from large to small.
Central banks are an official body of states; they guide important issues such as money printing and monetary policy. They are at the top of the food chain “. They can affect money supply and demand through various instruments such as interest rates. Central banks generally have very serious reserves and there are different assets such as currencies of other countries, gold and stocks. In short, a central bank can significantly affect the movement of the country’s currency. For example, in 2011 the Swiss Central Bank decided to fix the Swiss franc to 1.20 Euro. In 2015, after the Swiss Central Bank announced that it had quit this practice, some parity changed up to 30%. Interventions of central banks in the markets may not always be successful. The struggle of the Bank of England against the German mark in the past or the effort of the Central Bank of Japan to prevent the overvalued currency against the US dollar has not produced a permanent solution. Central banks have also taken on the task of controlling the liquidity in the market. If the financial institutions suffer, the central bank will also suffer.
The largest portion of the transaction volume in the market belongs to banks. The most important share in this volume is the inter-bank transactions rather than the transactions of the customers. The four major players in the interbank market constitute a significant portion of the volume: Citibank 12.9%, JP Morgan 8.8%, HSBC 8.8% and Deutsche Bank 7.9%. The banks also serve large professional players, apart from trading among themselves. The spread is received for the offered brokerage service.
Investment Institutions and Funds
Funds which show speculative activities and investment institutions are the most important customers of banks.
Protecting against future fluctuations or gaining profit from such movements constitutes the basis of transactions. Pension funds can also be evaluated in this category. Of course, the pension funds’ transactions are different than those pursuing speculative transactions. Speculative players take greater risks for greater profit.
Large firms and multinational corporations are also permanent customers of this market. Intermediary institutions can also be included in this group. Firms aim to take measures against excessive changes that may occur in parities in terms of term sales and loan payments. Similarly, producers can also deal with losses due to a change in parities. Options and long-term transactions as well as derivative products are also of interest. Another example that comes to mind is that multinational organizations transmit their earnings to other countries.
This group is naturally located at the bottom of the food chain. Because of that the amount of transactions by this group is less compared to other players, the service offered to this group is weakened. Individual investors generally carry out their transactions through intermediary institutions rather than large banks. The decrease in volume increases the spread of individual investors. Regardless, the number of individual investors reaches hundreds of thousands. According to a study conducted in 2014 individual operators:
-70% of the man, 30% of the lady. The highest proportion of women is Europe with 41%.
– The average age of 35 refers to a young group in general.
– 35% live in Europe, 40% in Asia and 14% in America.
-America has the highest average investment (6000 USD).
– Regarding the regional statistics, it is seen that the Middle East investors constitute 13% and the South American investors constitute 8%.
– 84% of investors believe that they can make a profit on a monthly basis in this market.
– The size of the money invested is directly proportional to the gain.