From the perspective of the main body of foreign exchange transactions, the foreign exchange market is mainly composed of the following participants:
(1) Foreign exchange market makers (Market Makers)
Foreign exchange market makers mainly refer to commercial banks and financial institutions designated or authorized by central banks or monetary authorities of various countries to operate foreign exchange business. It can be a domestic bank specializing in foreign exchange, a domestic bank concurrently operating foreign exchange business, or a branch of a foreign bank in the country. Foreign exchange banks are the most important participants in the foreign exchange market, and their foreign exchange transactions constitute the main part of foreign exchange market activities. About 1/3 of the daily foreign exchange transactions occur between banks. Large-scale commercial banks may conduct transactions for their investors and only charge commissions, not for the purpose of earning exchange rate differences; or their own investment departments may invest in the foreign exchange market to obtain profits based on bid-ask spreads.
(2) Forex Brokers
Foreign exchange brokers refer to intermediaries that facilitate foreign exchange transactions, mostly trust companies, banks and other concurrently operating institutions, and there are also companies and individuals specializing in this kind of business. It is between foreign exchange banks, between foreign exchange banks and other participants in the foreign exchange market, and negotiates foreign exchange transactions on behalf of them. Foreign exchange brokers must be approved by the central bank of the country where they are located to operate. They are generally divided into two categories: one is general brokers, that is, they participate in foreign exchange transactions with their own funds and are responsible for their own profits and losses. At this time, brokers are self-employed traders; The second type is a street broker, who conducts foreign exchange transactions on behalf of investors, and only charges spreads without taking any risks.
(3) Foreign exchange speculators
Foreign exchange speculators' foreign exchange transactions are not based on the actual needs of international receipts and payments, but use various financial instruments to pay a certain margin in exchange rate changes to pre-buy and pre-sell to earn exchange rate differences. Fund institutions are real speculators in the market, and the funds in their hands are commonly known as "hot money". These institutional investors dominate the market and often attack other countries' currencies. The most famous ones are Soros and his Quantum Fund. Since global mutual funds, trust funds, pension funds, arbitrage funds and other foreign financial instruments need to be constantly repositioned to adjust their fixed-income portfolios of foreign exchange assets, these transactions usually involve large capital flows, which have a negative impact on the market. Exchange rate movements have a major impact.
(4) Actual suppliers and demanders of foreign exchange
In the foreign exchange market, the actual suppliers and demanders of foreign exchange are those individuals or companies who use the foreign exchange market to complete international trade or investment transactions. They include: importers, exporters, international investors, multinational companies and tourists.
(5) Central Bank
The central bank is one of the main participants in the currency market. They are not foreign exchange speculators. Their main purpose of entering the foreign exchange market is to observe the market and control the currency supply and exchange rate trend. In order to maintain the stability of the domestic currency exchange rate, the central bank can also adjust the supply and demand of funds in the foreign exchange market by directly participating in the foreign exchange market, so that the exchange rate can be maintained above or below a certain level. The central bank usually sets up a foreign exchange stabilization fund. When the demand for foreign exchange in the market exceeds supply and the exchange rate rises, it sells foreign exchange and buys domestic currency; when the market for foreign exchange exceeds demand and the exchange rate falls, it sells domestic currency and buys foreign exchange. Therefore, in a sense, the central bank is not only a participant in the foreign exchange market, but also the actual manipulator of the foreign exchange market. A country's government often monitors economic activity through the central bank, thereby maintaining an appropriate money supply to achieve economic goals.
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