Forex market structure:
Centralized market structure: Centralized market that you are very familiar with the stock market. This is the structure of the stock market. The stock market runs to be monopolistic. There is only one specialist that controls market price. All traders must enter through this specialist. The specialist can easily alter price value for the benefit to the specialist, not for traders.
In the stock exchange market, the centralized person is forced to fulfill the order of its clients. Now let’s see, the number of sellers exceeds the number of buyers. Simply the centralized person widen the bid ask price (spread) or increase the transaction cost for preventing sellers from enter the market. In other words a centralized person can manipulate the quotes.
Spot fx trading is Decentralized: Suppose if you unlike in trading futures or stocks, you need to enter through a centralized exchange (like London stock Exchange, the New York Stock Exchange etc...) with just one price. In the fx market, there is multiple price that for a given currency at any time.
This might be overcome at first (centralized market), the fx market is so huge also competition between the dealers is vary, So that you get the best deal almost every single trade.
The fx ladder: You know the fx market is decentralized, the traders in the Forex market can be arranged into a hierarchy based.
Forex Market Hierarchy:
At the top of the fx market hierarchy ladder is the interbank market. Composed of the largest banks of the world and some smaller banks, the participants of this market trade directly with each other or electronically through the Electronic Brokering Services (EBS) or the Reuters Dealing 3000-Spot Matching.
The competition between the Reuters Dealing 3000-Spot Matching and the EBS – is similar to Pepsi and coke company. While both Reuters Dealing 3000-Spot Matching and the EBS offer most currency pairs, some currency pairs are more liquid on one than the other.
For the EBS platform, EUR/JPY, USD/JPY, EUR/USD, USD/CHF, and EUR/CHF are more liquid. Meanwhile, for the Reuters platform, AUD/USD, EUR/GBP, USD/CAD, GBP/USD, and NZD/USD are more liquid.
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