Forex Market Participants: Who Controls the Forex Market? / Axi (2024)

Forex /
Milan Cutkovic
  • Forex
  • Market
  • Participants

Forex Market Participants: Who Controls the Forex Market? / Axi (1)

There are a variety of participants in the foreign exchange market - from small retail investors and beginner traders to large hedge funds and commercial banks.

While there is a large number of participants in themarketwith different goals and motives, we can generally place them into a few categories to understand more easily how theFXmarketfunctions.

The FX (foreign exchange) market is the largest financial market in the world. Banks, commercial companies, hedge funds, central banks, and individual speculators participate in it and exchange currencies on a daily basis for both speculative and hedging purposes.

According to the latest survey conducted by the Bank of International Settlements (BIS), the daily turnover in the OTC FX market stood at $6.6 trillion in 2019 (vs. $5.1 trillion in 2016). The U.S. Dollar was the most traded currency - being on one side of 88% of all transactions. The Greenback was followed by the Euro at 32% and the Japanese Yen.

London was the top spot for forex trading, followed by New York City, Singapore, Hong Kong, and Tokyo.

Who trades in the foreign exchange market?

See below a list of the major players who are trading in the foreign exchange market every day:

  • Commercial banks
  • Hedge funds
  • Real money
  • Retail traders
  • Sovereign wealth funds
  • Prime brokers
  • Retail brokers
  • Proprietary trading firms
  • Money transfer/remittance companies
  • Foreign exchange fixing
  • Commercial companies
  • Governments and central banks

Participants of the foreign exchange market

Commercial banks

Commercial banks are one of the most important participants in the foreign exchange market. They trade on their own behalf but also provide a channel for their clients to participate in the market. They are essential for providing liquidity and are the backbone of the forex market.

Commercial banks do not only help their customers facilitate their trades but also participate in the market as speculators. Those desks are known as "proprietary trading desks" and the mission of the prop traders is to make a profit for the bank. Following the financial crisis of 2008, banks have become more risk-averse, and prop trading dwindled. However, it can still be found within the banks, especially in countries with less regulatory restrictions.

Commercial banks are amongst the best-informed market players, simply due to the infrastructure, amount of capital available, and perhaps most importantly - their knowledge about the market. Commercial banks can see a significant amount of flow going through the market - from central banks to hedge funds and investment funds. This information gives them a significant advantage.

Hedge funds

Hedge funds are the most prominent members of the group of speculators. While there are several types of hedge funds, the ones that are most active in the FX market are the global macro funds and the currency funds. Macro funds trade in many markets globally, while currency funds are focused on opportunities in the FX market. Hedge funds can handle huge positions in the market and are important participants.

Many traders are probably familiar with the story of how George Soros broke the Bank of England in 1992. While the hedge fund industry has changed a lot since then, it still can have a large impact on markets, especially when many of those funds go after the same trade. This category also includes some smaller participants, like CTAs and system funds.

Real money

Investment funds that do not use leverage, hence the term 'real money'. Those are usually pension and mutual funds, which manage large sums of money and use the FX market for transactions when dealing in foreign securities. For example, buying a large amount of UK stocks at the London Stock Exchange will require the purchase of the local currency, in this case, the Pound Sterling.


Individual traders usually access the market through a retail broker, but may also use a prime broker if they have the necessary capital. Given the small amount of money needed to open a trading account, retail traders have access to utilise leverage.

It is difficult to estimate the volume of global retail trading, but from the same survey conducted by the Bank of International Settlementslatest in April 2019, $201 million was traded by retail traders. Volumes have been steadily rising and this trend is unlikely to change soon, as the currency market remains very attractive for individual traders.

Sovereign wealth funds

State-owned investment funds manage the country‘s money and invest it in various markets. They usually exist in countries that have large inflows of foreign currency, like Qatar from selling natural gas, or Kuwait selling oil. Sovereign wealth funds manage huge amounts of money and hence, their transactions can have a large impact on the FX market.

Prime brokers

Firms that offer liquidity, leverage, and supporting services to other market participants. Most major banks have prime brokerage operations, but there are also non-bank prime brokers active in the business. The clients of prime brokers are usually other institutional participants, but in some cases, an individual trader can also use a PB, if he meets the requirement set by the broker.

Retail brokers

Brokerage firms that allow individual forex traders to access the FX market. They can be market makers, STP brokers, or ECNs. Market makers take the opposite side of all the client’s trades and are basically acting as dealers, not brokers. STP (straight-through-processing) brokers direct most or all orders directly to the market, while an ECN allows you to trade with various other participants and the broker has no conflict of interest at all.

Proprietary trading firms

Firms hire individual traders to trade the company’s money and give them in return a certain share of the profits they have realised. The trader can benefit from professional tools that would be too expensive to purchase as an individual, a network of fellow professional traders, and capital allocation that can easily reach seven-figure amounts for successful traders.


Companies specialising in money transferring have been able to significantly gain market share in the past 10 years. This was primarily driven by digitalisation and consumers becoming more informed. They are often able to beat the exchange rates offered by traditional banks, and given that remittances by foreign workers have a large impact on the economy of certain developing countries, their significance is growing. Money transfer companies generally do not engage in speculative trading.

Foreign exchangefixing

The foreign exchange fix is a benchmark that is based on trades that were executed in a particular time window. At the fix, banks guarantee to their clients the market mid-rate (the rate between the bid and the ask price).

The most famous fix is the WM/Reuters fix at 4 PM London Time, which is based on trades taking place in a one-minute window. The WM/Reuters fix is important because it is used to calculate major equity benchmarks.

In 2013, there was a scandal surrounding the WM/Reuters fix amid allegations that traders at major banks were colluding to manipulate the exchange rates. It resulted in significant fines for multiple banks and the launch of reforms to make the FX market more transparent.


This group includes various corporations, like multinational firms or exporters/importers. Their main goal is not to make a profit from currencytrading but rather to hedge theircurrencyexposure or get theforeigncurrencythey need to pay their workers in other countries and similar.

Governments andcentral banks

Central banks intervene in themarketwhen theircurrencybecomes a problem for the domestic economy, by either being too strong or too weak. This applies to all exchange-rate regimes – the floating, pegged, and fixed.

For example, the SNB has been very active during the past few years, when it has tried to weaken the Swiss Franc against the Euro. Furthermore, we can take the Hong Kong Dollar as an example of the pegged exchange-rate regime. USD/HKD is allowed to trade within a 7.75 to 7.85 range, which means that the Hong Kong Monetary Authority (HKMA) will sell it when it gets too close to the upper range and buy it when it gets too close to the lower range of the band.

Central banks are also active in themarketwhen they have to manage theirforeigncurrencyreserves. Forexample, if the HKMA has boughtUS Dollarsto weaken the Hong Kong Dollar, it may wish to exchange thoseUS Dollarsfor anothercurrency, like the Euro or theAustralian Dollar. The Asiancentral banksare quite often doing this, as they have to intervene much more thancentral banksin, say, Europe, where mostcurrenciesare floating.

How do bankstradeforex?

Banks mostly facilitate transactions on behalf of their customers, but they can also trade with each other or take speculative positions (prop trading). When dealing with customers, banks often hedge their exposure as they don't have infinite capital and don't want to take too much of a risk.

However, banks can also engage in speculative trading. Their prop desk will seek to gain a profit from market moves, just like other speculators. Banks do not disclose their strategies of course, but given the massive amount of information they can gather, they clearly have a powerful edge.

Who controls theforexmarket?

The foreign exchange market is decentralised and there is no organisation that controls it. However, commercial banks act as market makers, and central banks have significant powers and can influence the market.

Generally, the FX market is too big for one particular participant to control.

For example, if a hedge fund decided to buy $1 billion of EUR/USD at market price, the currency pair would most likely jump just based on that. However, the effect of this transaction would be short-lived as this is one of the most commonly traded currency pairs.

Furthermore, it is not in the interest of market participants to move the market in this way as it worsens the execution for them but also reveals what they are doing. It is far easier for a hedge fund to keep a large FX position secret if it was built up over time rather than by executing a massive trade in one go.

Top 10 players in the forex market by global market share

According to the 43rd annual survey of liquidity consumption in the global forex market by Euromoney, this is the top 10 overall by market share in 2021.

CounterpartyMarket share %
Deutsche Bank8.49%
XTX Markets6.69%
Jump Trading5.91%
Goldman Sachs5.20%
Bank of America4.69%
State Street4.54%

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This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice.

Milan Cutkovic

Forex Market Participants: Who Controls the Forex Market? / Axi (2)

Milan Cutkovic has over eight years of experience in trading and market analysis across forex, indices, commodities, and stocks. He was one of the first traders accepted into the Axi Select programme which identifies highly talented traders and assists them with professional development.

As well as being a trader, Milan writes daily analysis for the Axi community, using his extensive knowledge of financial markets to provide unique insights and commentary. He is passionate about helping others become more successful in their trading and shares his skills by contributing to comprehensive trading eBooks and regularly publishing educational articles on the Axi blog, His work is frequently quoted in leading international newspapers and media portals.

Milan is frequently quoted and mentioned in many financial publications, including Yahoo Finance, Business Insider, Barrons, CNN, Reuters, New York Post, and MarketWatch.

Find him on: LinkedIn

Forex Market Participants: Who Controls the Forex Market? / Axi (2024)


Forex Market Participants: Who Controls the Forex Market? / Axi? ›

Governments and central banks are vested in controlling the forex market given the issues a currency can have on the domestic economy when it becomes too strong or weak. Some governments have full control over monetary policy, while some will have a central bank that operates independently.

What controls the forex market? ›

The foreign exchange market is decentralised and there is no organisation that controls it. However, commercial banks act as market makers, and central banks have significant powers and can influence the market.

Who are the participants in the forex market? ›

Banks, forex dealers, commercial businesses, central banks, investment management companies, hedge funds, retail forex dealers, and investors make up these foreign exchange markets.

Does anyone control the forex market? ›

Customers often turn to banks to intermediate their foreign exchange transactions, and banks often trade their own accounts as well. Because there is no central location for forex trading, there is no central body controlling prices and the actions of many players.

Who oversees the forex market? ›

How is Forex regulated?
JapanThe Financial Services Agency (FSA)
SingaporeThe Monetary Authority of Singapore (MAS)
United KingdomFinancial Conduct Authority (FCA)
United StatesThe National Futures Association (NFA), Commodities Futures Trading Commission (CFTC)
4 more rows

How is forex controlled? ›

A central bank is responsible for fixing the price of its native currency on forex. This is the exchange rate regime by which its currency will trade in the open market. Exchange rate regimes are divided into floating, fixed and pegged types.

Who regulates forex market in us? ›

United States:

Financial Industry Regulatory Authority (FINRA) National Futures Association (NFA) US Securities and Exchanges Commission (U.S. SEC)

Are banks the main participants in the forex market? ›

Commercial banks are some of the largest participants, and as such are essential for market liquidity. Due to their position in the FX market, commercial banks have a significant advantage as they see the money flow from different directions – from government organisations, hedge funds and individual investors.

Who is the largest holder of forex? ›

China has by far the largest foreign currency reserves with over two and a half times more than the second-largest reserve holder, Japan. When China's and Hong Kong's reserves are considered together, the total is nearly $4 trillion.

How many people are successful forex traders? ›

Forex trading is a popular way to make money, but it's also a risky business. Many people start trading Forex with the hope of getting rich quick, but the reality is that most Forex traders fail. So, how many people actually succeed in Forex? The exact number is difficult to say, but estimates range from 5% to 10%.

Is there a secret to trading forex? ›

Opening and closing orders should just be treated as an execution that is always performed without any emotion. All of your trades should open according to your system and analysis conducted beforehand, this is one of the most important Forex trading secrets.

When should you not trade forex? ›

There will be times where a currency is moving differently from normal. Perhaps price is spiking and you don't know why. This is a good time to stay out of the market. If you can't understand why price is behaving in a certain way, it is usually due to some unscheduled news that has been released or leaked.

Can someone manage your forex account? ›

Yes, a professional forex account manager could potentially help grow your forex account. Here are some things to consider: Properly managed accounts have the potential for higher returns.

Why do forex brokers not accept US clients? ›

If a Forex broker doesn't accept clients from the US, it's typically due to strict rules from US regulatory bodies like the Commodity Futures Trading Commission (CFTC). Brokers usually avoid serving US clients to adhere to these regulations.

What is the FX winning lawsuit? ›

FxWinning's actions have caused significant financial harm to the plaintiffs. The lawsuit's primary claim is for breach of contract. The plaintiffs argue that FxWinning materially breached its own T&C by refusing to release their funds, resulting in substantial damages.

Why is forex trading not allowed in the USA? ›

Because the forex market is decentralized and largely unregulated, it can be difficult to police. This can make it more vulnerable to scams and other fraudulent activities. By prohibiting forex trading in the US, the government is able to protect investors from these risks.

What does forex rely on? ›

Foreign exchange, or forex traders, rely on technical and fundamental analysis techniques that are very similar to those used in the stock market. In forex, a fundamental analysis might involve looking into the economic conditions that affect the value of the country's currency.

Why is forex not regulated? ›

Forex Regulation

Forex is a global decentralized market, and this inherently makes it difficult for a single body to oversee the entire industry. Depending on your jurisdiction, there is a relevant regulatory body that sets the standards and guidelines that online brokers must comply with.

Is regulated in the US? › is regulated in the United States by the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC). As such, is required to have a written complaint handling process.

Is forex a regulated broker? ›

We adhere to the strictest standards and are regulated in multiple jurisdictions worldwide including the US, Canada, and the UK.

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