Unlike the forex futures trading that is carried out through the exchange like CBOT, CME etc, over the counter in spot forex means that the buyers and sellers make a binding contract with each other after agreeing on the price and this is not carried through an exchange.
Forex traders in the spot forex market carry out their activities by dialing directly with one another or through brokers on telephone or internet. There are several advantages of a central exchange like the counterparty risk for the trades is reduced. There is trading anonymity something that big players want to hide their trails.
Chicago Mercantile Exchange (CME) along with Reuters launched the world’s first centrally cleared global forex market place in 2007; FXMarketSpace. CME will act as the clearing house and guarantee the performance of all the contracts for both buyers and sellers in this centrally cleared system.
Unfortunately FXMarketSpace is an institutional trading platform and is not open to retail forex traders. Only sophisticated investors with net worth of more than $20 Million can trade on the FXMarketSpace.
The spot forex market is still skewed against the retail forex trader. Recently NFA (National Futures Association) had also passed certain new rules that make it more skewed against the small investor like you and me. Why is it so?
With the advent of the internet, it became possible to introduce trading platforms for the retail investors. Previously spot forex trading was the playfield of the big banks, multinationals and the hedge funds.
A mushroom growth of online forex brokers took place. Many did not have even enough capital with them to start the brokerage business. But this is the way; the spot forex market has developed over the years.
It is essential for you that you understand the nature of the spot forex market and who are the main players. Why they trade forex? What type of advantages they have over the retail forex traders?
Over the counter (OTC) means that the spot forex market is spread all over the globe with no central location! Over the counter nature (OTC) of the spot forex market means that currency transactions do not take place at any single place. Discover a revolutionary new forex robot. Learn forex scalping. Know the forex market.
A player’s access to the spot forex market depends on the quantity of transactions of large amounts of money. Players in the spot forex market range from those who trade billions of dollars daily to those who only trade just a few thousand dollars daily. Now who are the main players in the forex market against whom you as a retail forex trader will be competing?
You must log in to post a comment.