Transactions in foreign exchange can be done by two-way in
taking advantage. A person can buy in advance ( open buy ), and conclude with
selling ( sell ) or otherwise, to sell first, then covered with a purchase.
Unlike the stock market where brokers have equal access to
the stock price, foreign exchange market is divided into several levels of
access.
At the highest level of access is the inter-bank money
market (interbank) consisting of investment banking firms besar.Pada interbank
market, the difference between the bid price / selling price (ask) price and
demand / purchase price (bid) is a very thin one even usually not exist, and
this price is only applicable to their own ranks who are not known to players
outside the group of foreign exchange. At the access level below, the range
difference between the selling price and the purchase price to be largely
dependent on the volume of transactions.
If a trader can guarantee the implementation of foreign
exchange transactions in large amounts, they can request that the difference
between the selling price and purchase reduced-called better spread (thin
difference between buy and sell prices).
Level access to the foreign exchange market is largely
determined by the size of the exchange transaction is conducted. Top ranked
banks dominate "the interbank money market (interbank)" up to 53% of
the entire value of the transaction. And after the top-ranked banks are the
next rank is a small investment banks and multi-national corporations large
(which require hedge transaction risk and pay employees in different
countries), large hedge funds, and retail traders determines the foreign
exchange market. According to Galati and Melvin, pension funds, insurance
companies, mutual funds and institutional investors is a player who has a big
role in the financial markets in general and in particular the foreign exchange
market since the 2000s decade.
Bank
Interbank money market (interbank) meet the needs of the
majority of the velocity of money in the business world as well as the needs of
daily transactions speculators who can reach the value of trillions of dollars.
Some transactions executed for and on behalf of its clients, but most are for
the benefit of owners of the bank or to the interests of the bank itself.
Until recently, foreign exchange brokers are the culprits of
exchange turnover in large numbers, facilitating interbank trading and matching
sellers and buyers to "wages" (fee) is small. But today many
businesses are turning this foreign exchange to a more efficient electronic
systems such as EBS (now owned by ICAP), Reuters Dealing 3000 Matching (D2),
the Chicago Mercantile Exchange, Bloomberg and Tradebook (R)
The business world
One actor is the foreign exchange market is the need of the
company's activities in making payments for goods and services denominated in
foreign currencies. Currency foreign exchange needs of a company is often only
a small value compared with the needs of banks and speculators and foreign
exchange trading does often only a small impact for the market value of the
exchange rate. Nevertheless foreign exchange trade flows of these companies in
the long term is an important factor for the direction of the exchange rate of
a currency. Transaction some multinational companies can bring unexpected
consequences when they close a position (buy or sell position) where a very
large once the transaction is not widely known by the market players.
The central bank
The central bank of a country holds a very important role in
the foreign exchange market. The central bank is always trying to control the
money supply, inflation, and interest rates or even often they have a target of
both official and unofficial exchange rates currency country. Often the central
bank to use its foreign exchange reserves to stabilize the market.
With market expectations or the issue of intervention by the
central bank alone has been enough to stabilize the exchange rate of the local
currency, but aggressive intervention conducted several times each year in a
country whose exchange rate of its currency fluctuate.
Various sources of funds in the foreign exchange market when
combined can easily "play" the central bank (withdraw or sell a
currency in very large numbers once the central bank can no longer intervene) in
which this scenario appears in 1992-1993 where European exchange rate mechanism
( European Exchange Rate Mechanism - ERM ) experience fall and fall some time
currency exchange rates in Southeast Asia.
Investment management company
Investment management company (which usually is a lot of
accounts manager on behalf of customers such as pension funds and foundations
donated funds) that trade on the foreign exchange market for the needs of
foreign currencies to make purchases of shares abroad. Foreign exchange
transactions for them is not a primary investment objective so that it does not
deal with speculative purposes or in order to obtain maximum profit.
Hedge funds
Hedge funds (an investment company that runs business
activities speculative transactions for profit) such as George Soros whose
reputation rose due to currency speculation does aggressively since 1990. He
manages trillions of U.S. dollars and is still able to borrow more trillions of
U.S. dollars, and are thus able to make interventions by the central bank of a
country to maintain its exchange rate to be helpless if the economic
fundamentals depends on the "mercy" of hedge funds.
Foreign exchange broker
Foreign exchange broker is a company established
specifically to conduct brokerage services for the benefit of its customers in
the fields of financial markets to obtain compensation for his services.
According to CNN , a foreign exchange brokerage transaction volume has between
25 to 50 billion U.S. dollars per day, or about 2% of the total value of the
foreign exchange market transactions as reported by the website and Futures
Trading Commission ( Commodity Futures Trading Commission - CFTC ) that the novice
investor with ease may be a target of fraud in foreign exchange trading.
0 comments :
Post a Comment