Foreign Exchange MarketÃ¯Â¿Â½ PAGE Ã¯Â¿Â½3Ã¯Â¿Â½
November 16, 2008
Good evening and welcome students to tonight's discussion about how business gets done. International business transactions in today's market are very complex, so today I will be discussing with you just how they get done. When thinking about international business you are thinking about trading, investing, and buying stocks from other well established businesses. In order to buy, invest, or trade you must think about the best place for you to do this at. The foreign exchange market otherwise known as "The forex market" is an over the counter, or decentralized market. This means that traders may choose from a number of dealers to make a trade with, as opposed to the stock market for example, in which all trades of a particular stock must pass through one point. This allows for much more price competition (2006).
The foreign currency exchange market is essentially composed of six types of participants: commercial and investment banks, central banks, corporations, global funds, and retail clients (individual traders) (2006). Commercial and investment banks trade on what is known as the 'interbank' market and make up the largest portion of foreign exchange trading. They trade for themselves as well as for their customers, and balance accounts by trading with each other (2006). The largest investors in foreign exchange trade with members of the interbank system at the best possible rates. Central banks function in the foreign exchange market as regulatory agencies with the responsibility of maintaining their country's money supply. Each and every country that trades has to have a central bank in order to do business; they are the biggest participant in the exchange market. Corporations or large businesses use the foreign exchange market to acquire foreign currency in order to...