Important Role of Banks in the Forex Trading Market
In the forex market, the role of banks can act as facilitators, hedgers or even speculators. The role of banks is very important in the forex market, especially when considering the forex market is a market between banks throughout the world. There are so many goals from these banks in transacting in these markets. They are just like us, looking for profits from every sale and purchase transaction.
Some banks are considered active according to the following Bank for International Settlements (BIS) survey:
- New York Mellon
- Barclays Capital
- BNP Paribas
- Canadian Imperial Bank of Commerce
- Credit Suisse Group
- Deutsche Bank
- Goldman Sachs
- JPMorgan Chase
- Mizuho Corporation
- Morgan Stanley
- Royal Bank of Scotland
- Skandinaviska Enskilda Banken
- Societe Generale
- Standard Chartered Bank
- State Street Bank & Trust Company
- Sumitomo Mitsui Banking Corp.
- Wells Fargo
These large banks and financial institutions are active players in the forex market. Now at least you already know banks and financial institutions that are considered as “Big Player” in the forex market. So you can keep up with the developments of these banks to find even more information. Other banks also have a role in the forex market. But its role is not too large to have a big impact on the forex market.
There are 3 main roles of banks which are considered as “big players” in the forex market, such as:
Bank as a Facilitator
Banks have a role in facilitating currency transactions from each of their clients, whether it is large multinational companies, or tourists who need services in currency exchange. Certain banks also facilitate their clients as brokers. In other writings, we will discuss this point more deeply.
Bank as Hedger
The bank also acts as a hedger (protecting the value of an asset). They are tasked with protecting an asset from clients so as not to decrease in value, usually assets in the form of certain currencies. As an example of a multinational company engaged in exports entrusting assets (currency) to the bank, then there is a change from the asset, then the bank deposited in the fund has the task of maintaining the value of assets not to decrease.
The bank also hedges against other investment activities, not only assets in the form of currencies.
Bank as a Speculator
The bank also speculates on every opportunity available for profit. Some banks also have special funds to invest in the forex market, as we (retail traders) do. Banks that also do forex trading usually have their own analysts and economists who of course already have official certificates or have experience as professional traders. Unlike retail traders, banks invest in the forex market on a large scale and can sometimes have an impact on currency exchange rates.