The investor in the currency market takes for granted that a currency pair can be bought or sold on a moment’s notice. Once an order is placed with a broker, the trade is executed in a matter of seconds. It is, of course, is not as easy as that.
When a currency pair is bought or sold, there must be someone at the other end of the transaction. It is very unlikely that the investor will always find someone who is interested in buying and selling the same two currencies in the same amount, and at the same time. Therefore, the question is, “How is it possible that the forex investor can buy or sell at any time?” Here is where the forex market makers come in.
The forex market maker is a bank or a brokerage company that is ready, every second of the trading day with a company of purchase and sale. This is good for the investor because when the investor decides to buy and sell a currency pair, the market maker will buy and sell to the investors, even if you do not have a buyer and a seller lined up. By doing so, they are literally “making a market” for the coins.
Forex market makers ensure that the market is always functional and that the currencies in it will always fetch the market rate. Forex market makers do so by updating their prices at intervals of at least 30 seconds and undertaking to trade if this is requested. Forex market makers must fulfill their obligations, regardless of the economic situation is favorable or unfavorable, or whether they lose or profit by doing so.
Typical forex market makers include Gain Capital, CMS Forex, Forex Capital Markets (FXCM), and Global Forex Trading, all of which are regulated by the Commodity Futures Trading Commission (CFTC) of the united states. Another prominent forex market maker is Saxo Bank, which is regulated by the Financial Services Authority (FSA) of Denmark.
Until recently, central banks, commercial banks and investment banks dominated the forex market. Due to the entry of forex market makers, other market players like international money brokers, large multinational companies, registered dealers, global money managers and private speculator, have entered the market in large quantities.