Despite the huge volumes that go through the interbank market, a large portion of Forex participants do not have direct access. A market maker would argue this aid to their trading strategy is a benefit that stems from the service they provide. The third point establishes that a market maker is a counterparty to a Forex trade. Royal Bank of Scotland.9. An alternative way that firms grant their clients access to the FX market is via Electronic Communications Networks, or ECNs. Therefore, we can say the institutions that comprise the interbank market are the primary market makers in the FX market.
To answer this question, we need to be careful with our terminology. When discussing market makers, the bottom line is that they are the pillar that the FX market is built upon. Before this standard came into play, some firms might have tweaked their price in order reflect their book position, but this cannot happen under best execution. Such flows may influence the short-term trend of FX prices. Pros and cons of market makers Forex prices Some people dislike the notion of a market maker, taking the view that they are somehow calling the market against them. The Forex market straddles the globe. It is a 24-hour market with no single central location of operation.
This would essentially be the best bid/offer that they have access to via the market making counterparties that they hedge with. A Forex market maker essentially does three things: sets bid and offer prices in a certain currency pair commits to accepting deals at these prices within certain constraints takes the resulting exposure on to their own book, at least initially. Retail clients now have access to very competitive Forex spreads and trading became extremely convenient. What are the constraints mentioned in the second point above?
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