Two components to Forex

~ Saturday, September 12, 2009
- Forex has two components

Over-the-counter (OTC)

Organized exchanges

- OTC is a network of dealers, brokers, and final customers. Low
regulation

Dealers are mostly commercial and investment banks that buy a
currency at a bid price and sell it at an ask price

Dealers take a position and thus face a risk of a price change between
purchase and sale

Biggest dealers are Deutsche Bank, UBS, Citigroup, HSBC, Barclays
Bank, Merril Lynch, J.P. Morgan Chase, Goldman Sachs, ABN
AMRO, and Morgan Stanley

Brokers help in carrying out a deal, connecting a dealer with a final
buyer or seller. They receive a fee and take no exchange rate risk

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