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Until the late 1990s, only the “big guys” could play the game of forex trading. The initial requirement was that you could trade only if you had about 10 to 50 million dollars to start with.

Forex was originally intended to be used by bankers and large institutions, not by us “little guys.”

However, because of the rise of the internet, online forex brokers are now able to offer trading accounts to “retail” traders like us.

Major Forex Market Players

1. The Super Banks

Since the forex spot market is decentralized, it is the largest banks in the world that determine the exchange rates.

Based on the supply and demand for currencies, they are generally the ones that make the bid/ask spread that we all love (or hate, for that matter).

These large banks, collectively known as the interbank market, take on incredible amount of forex transactions each day for both their customers and themselves.

A couple of these super banks include Citi, JPMorgan, UBS, Barclays, Deutsche Bank and HSBC. You could say that the interbank market is the foreign exchange market.

2. Large Commercial Companies

Companies take part in the foreign exchange market for the purpose of doing business. For instance, Apple must first exchange its U.S. dollars to the Japanese yen when purchasing electronic parts from Japan for their products.

Since the volume they trade is much smaller than those in the interbank market, this type of market player typically deals with commercial banks for their transactions.

Mergers and acquisitions (M&A) between large companies can also create  exchange rate fluctuations. In international cross-border M&As, a lot of currency conversations happen, leading to forex price movements.

3. Governments and Central Banks

Governments and central banks, such as the European Central Bank, the Bank of England, and the Federal Reserve, are regularly involved in the forex market too.

Just like companies, national governments participate in the forex market for their operations, international trade payments, and handling their foreign exchange reserves.

Meanwhile, central banks affect the forex market when they adjust interest rates to control inflation. By doing this, they can affect currency valuation.

There are also instances when central banks intervene, either directly or verbally, in the forex market when they want to realign exchange rates. Sometimes, central banks think that their currency is priced too high or too low, so they start massive sell/buy operations to alter exchange rates.

4. Speculators

Speculators are a class of traders that have no genuine requirement for foreign currency. They only buy and sell these currencies with the hope of making a profit from it. The number of speculators increases a lot when the market sentiment is high and everyone seems to be making money in the Forex markets. Speculators usually do not maintain open positions in any currency for a very long time. Their positions are transient and are only meant to make a short term profit.

“In it to win it!” - This is probably the mantra of the speculators. Comprising close to 90% of all trading volume, speculators as forex market players come in all shapes and sizes. Some have fat pockets, some roll thin, but all of them engage in the forex simply to make bucket loads of cash.