Interbank Forex TradingInterbank Forex trading designates the system of financial transactions that take place among banks and other major financial institutions. These do not include retail investors and other smaller third trading parties. Nevertheless, the idea of individual investors taking part in the interbank Forex trading is not excluded because the banks can operate on the behalf of large clients. However, the majority of the financial operations are performed between banks and fiscal companies. The actions of managing currency investments and merchandising various considerable supplies of currency constitute the substance of the interbank market. In 2004, the Bank for International Settlement did a research showing that almost 50% of all Forex transactions belong to banks. Forex Interbank trading manifests under two forms. One is the direct dealing from one bank to another- the currencies are exchanged directly; the other one resorts to electronic brokering platforms in order to maneuver the trades.
In what concerns the last modality of transacting, the first two major providers of this service are the Electronic Brokering Services (EBS) and Reuters Dealing 3000 Matching. The most important segment of Forex market is represented by the interbank one because it channels the majority of significant currency exchanges. It is constituted of 3 principal components which are: the spot market; the forward market and SWIFT (Society for Worldwide Interbank Financial Telecommunications). The spot market refers to the public fiscal market where stocks and currencies are delivered immediately/on the spot. The forward market deals with the over-the-counter trading of forward contracts. SWIFT designates a co-operative of software companies that ensure safe messaging services and interface software for fiscal institutions. Having no specific location or center where the financial operations take place, the interbank market is decentralized. However, in some countries, efforts are taken to solve the aspect of unregulated and decentralized activity.
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