Several big lenders have outsourced parts of their foreign exchange businesses, cementing their dominance in the $6.6 trillion-a-day FX market. However, the loose informal relationships still exist in the market, despite high-tech trading supercharging competition to offer the tightest prices and fastest speeds. The question remains: What does it mean for big banks to outsource to smaller banks? The answer is largely dependent on the particular institution and the type of trade.
Banks and non-bank foreign exchange companies are the two main avenues for participating in the forex market in the USA. These institutions are regulated by the Federal Reserve and the Foreign Exchange Administration International, and they can offer their clients better exchange rates than their competitors. In the United States, banks and non-bank foreign exchange companies are required to register as Forex CTAs in order to participate in the market. In order to do so, they must have a higher net capital requirement.
While retail traders can mimic the moves made by big banks, they do not have the confidence to trade for long periods of time. As a result, they are limited to making short-term moves based on market drivers, rather than trying to control market trends with their own trading decisions. However, learning how big banks trade forex is essential for maximizing your trading profits. Not only can you learn from their strategies, you ll also be able to identify when a specific position by a big bank can send the market trend higher or lower.
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