Demat, trading accounts can be unbundled

Who are Forex brokers? What is the Forex market? Let’s start with the Forex market. The Forex market is a market that works in trading currencies. Traders exchange currencies, looking for people to sell and buy from. That’s where Forex brokers come in. Forex brokers serve as the middlemen between the major players (the big financial institutions) and the traders. Forex brokers are basically financial entities that offer their platforms to others to trade freely.

Forex brokers work between an established interbank system, and the traders. The interbank system is basically made up of the network of financial institutions that trade and interact with one another. Trading mostly occurs between the eight most stable currencies in the world. These currencies include the following

  • The US dollar
  • The British pound
  • The European Euro
  • The New Zealand dollar
  • The Japanese Yen
  • The Canadian dollar
  • The Swiss franc
  • The Australian dollar

The market is a global one, and more often than not, finding buyers and seller is a daunting and tiring task. Buyers and sellers need somewhere to congregate, so as to make sure that finding transfers with common interests is easier. Also, the traders are usually miles apart, and there needs to be a system in place to make the transactions seamless, and reduce the risk of fraud and other dangers

The heroes come in

The Forex broker saves the day in this scenario. They serve as the middlemen between the institutions and the traders, and also provide a platform where finding buyers and sellers of currencies is easy. A person wanting to trade Dirhams with dollars does not have to travel miles to get another trader; the brokers help connect these two people together. 

Role of Forex brokers include

  • Providing a trading platform for traders.
  • Connecting traders for easy transactions.
  • Serving as middlemen between financial institutions and trader.
  • Some Forex brokers serve as liquidity providers.

What are liquidity providers

To get what liquidity providers are, the term “liquidity” has to be understood first. In markets, generally, liquidity is defined as the rate at which asset classes can be turned to cash. In Forex markets, liquidity is basically the term for the balance between the amount of buyers and the amount of sellers in the market.

Liquidity providers, like their name implies, are the entities that have the basic role of providing liquidity for the market. The market is defined as liquid, when there are as many buyers as there are sellers. In the buying and selling of currencies, the liquidity providers have perhaps, the most pertinent role. The liquidity provider helps traders know the exchange rate. This class of people greatly ensure price stability of the market.

Brokerage companies are also shareholders in the Forex market. Each of these companies have their own rules and regulations, bordering on the types of services they offer, and the types of accounts they allow. The best Forex brokers have been in the business for years, offer seamless and rapid services and have various types of accounts and trading pairs for customers.

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