| The Foreign Exchange market (or Forex/FX) trades | | | | Brokers - These act as intermediaries between |
| in different currencies. It lets banks and other | | | | banks. Dealers contact them to find out where they |
| institutions easily buy and sell currencies. The purpose | | | | can get the best price for currencies. These |
| of the Forex is to help international trade and | | | | arrangements are beneficial because the afford |
| investment. A foreign exchange market helps | | | | anonymity to the buyer or seller. Brokers can profit |
| businesses to convert one currency to another. For | | | | by charging a commission on the transaction they |
| example, it allows a U.S. business to import European | | | | arrange. |
| goods and still pay Euros, even though the business's | | | | Customers - Large companies usually require foreign |
| income is in U.S dollars. In a typical forex transaction, | | | | currency during the course of doing business or |
| a party purchases a quantity of one currency by | | | | making investment. Other types of customers are |
| paying a quantity of another currency. | | | | individuals who buy foreign exchange to travel |
| It is primarily an over the counter market with trades | | | | abroad. |
| between large commercial banks. There are four | | | | Central Banks - These sometimes participate in the |
| types of people involved in the FX market: banks, | | | | FX market to influence the value of their country's |
| brokers, customers and central banks. | | | | currencies. |
| Banks - These are the biggest participants. They can | | | | With more than $1.2 trillion changing hands everyday |
| profit by buying and selling currencies to and from | | | | the activity of these participants affects the value of |
| each other. Roughly two-thirds of all FX transactions | | | | every dollar, pound, yen or euro. |
| involve banks dealing directly with each other. | | | | |