Market Makers

There are two types of Forex market participants: market makers and market users. 

Market makers are large banks and financial organizations that have a great impact on the currency rates owing to a significant share of their operations in a total volume. Market makers provide liquidity to a particular instrument, making buy or sell orders of a significant volume. Their daily currency operations amount to billions of US dollars. The biggest market makers are Deutsche Bank, Mizuho Bank, Barclays Bank, PBS, Citi Bank, Chase Manhattan Bank, Union Bank of Switzerland and others.

 

The criteria for defining an organization as a market maker are the company’s size, its share in market operations, and its capability to influence the market by setting a price policy. Interestingly, for a particular market there can be a particular market maker. For example, for the USD/CHF currency pair the main market makers are Credit Suisse Bank and Union Bank of Switzerland. For pairs with the Asian currencies the major market maker is the Standard Chartered Bank. 

Market makers determine the current currency exchange rate by conducting trades with each other as well as with smaller banks, which are also market participants. These are the market makers that introduce quote rates to small banks, organizations and individuals. Thus, another notion emerges characterizing these participants - market users. Market users are financial organizations, brokers, small banks, and individuals who use the quoting rate set by market makers for their operations. Though a total volume of market users’ operations in the market can be significant, the share of each one is minor. Consequently, market makers make prices and market users take it.