There is an exchange office on the corner near the house, but the difference between the buying and selling rates makes the eye twitch.

Contents

Modern foreign exchange market David Golding Design
Fx? Foreign eXchange? My knowledge of the foreign exchange market did not differ from the knowledge of the average man in the street.

In the subway cars there is an advertisement for forex companies “Feel the difference? You can make money on this! " Newspapers describe investment banks as omniscient speculators who predict exchange rates for years to come, or as a bunch of mediocre snatchers who brought down the world economy. “Okay,” I thought, “we`ll figure it out in the process.”

How it works

This article is part of what I have learned while working on one system, then on another. Why should you read it? First, it`s interesting. The modern foreign exchange market is a complex distributed system of many independent actors. Second, if you are in finance, you may see similarities with other markets, from the bond market to the weather derivatives market. Finally, thirdly, if an investment bank crashes again in the next crisis, it will be easier for you to read the debriefing in the press - read more here forex strategy.

Currencies

Our plan is as follows. In this article I will tell you how the foreign exchange market works, what is the role of large investment banks, what services they provide to their clients, how they risk and how they make money. In the second article, we will discuss whether the market can work differently and what can happen if banks are prohibited from doing this business. You can skip straight to the second article if you are familiar with the terms market maker, order book, market risk, and over-the-counter market.