The retail banks set the exchange prices for their interbank trading. This is known as the Interbank Liquidity Pool.
These retail banks act as the central exchange for the forex market, although they are regulated like regular banks. But as far as the provision of currency is concerned, they are unregulated, thereby impacting market prices to suit their investment and wishes.
Typically, the purpose of any bank is to make a profit from what is known as the “Off-Balance Sheet.” This is where the forex market delivers millions every day. All the bank needs to do is create a forex dealing desk, along with a proprietary trading group, and then watch the money roll in.
Interbank Liquidity Pool 12Tradepro. (bpt) Automated Trading System
The Interbank Liquidity Pool is the starting point in the market. It is through the pool that exchange rates are delivered through live feeds through different channels. These feeds are expensive for small retail traders. They cost thousands of dollars a month! But not to worry, there are simple fees (free and paid) from which you can make money from
However, if you trade with these feeds, you will be trading at the exchange market with major banks. You will also receive the latest quotes, the tightest spreads, and access to the deepest pool of liquidity and depth of the market.
While individual traders can subscribe directly to the feeds, it is more likely you become the client of a broker using this feed to provide live feeds on their platforms. These prices are what is quoted on your trading screen. It is also essential to know that the brokers quote different prices. They can name any price they wish.
They might also quote prices distinct from the interbank market. Many of these brokers trade against you, and lagging prices, market manipulation, and malpractice represent problems forex traders face. Few small brokers can’t afford to subscribe to these fees directly and meet minimum capital requirements under multiple regulatory rules.
White Label Brokers
These brokers are known as “White Label Brokers.” As they work for large brokerage companies, they add a layer of quoted prices, distancing a small trader from the interbank quoted prices.
The best way to understand how the prices are quoted between these entities is by thinking of the major banks as wholesalers. Every business has wholesalers and retailers. Wholesalers buy in bulk and therefore get the best prices. The retailer buys from the wholesaler at a very high price, then breaks the goods into small orders and sells to end-users like you and me.
The wholesalers make a profit by selling at a higher price to the retailer; the retailer makes profits by selling to consumers also at a higher price. This is also how the forex market works. Interbank pool prices follow the same rules.
12Tradepro. (bpt) Automated Trading System Who Are You Trading Against?
In the forex market, you often trade against your broker. In the future market, you trade against someone who is holding a different position in the market. That is, if you buy, you are paired with someone who has sold and vice versa
12Tradepro. (bpt) Automated Trading System Forex Trading Hours
The Market is open twenty-four hours a day and six days a week. The market is always open, no matter the time zone you are in the world. It rarely closes, unlike the physical stock exchange and futures exchange. It only closes on public holidays like Christmas and the New Year.
For traders in the Northern Hemisphere, the market opens on Sunday evening and closes late on Friday night.
12Tradepro. (bpt) Automated Trading System How Market Prices are derived in the Futures Market.
The determination of prices in the futures market depends mainly in demand and supply. Buy and sell orders from various sources are used to determine prices on the trading floor, by being translated into actual purchases and sales. The prices are discerned publicly on the trading floor according to regulations and then disseminated publicly over a telecommunications network.
A futures market aim is to provide an avenue where members can trade in commodities and non-members can trade through a broker.