Forex Market Nature

The Foreign Exchange Market is considered as an over-the-counter (OTC) market. This means that the presence of central exchange and clearing house is non-existent where orders are matched. Given the different levels of access, currencies as well are traded in different market makers:

The Inter-bank Market –  The Electronic Brokerage System (EBS) is linked to large commercial banks and is used for trading. Availability of the quotes in the market is intended by the banks to those which they trade with only. Moreover, retail traders are not able to access directly in this market.

The Online Market Maker – The FX market can be accessed by retail traders by means of online market makers that are doing trades outside the US and the UK. In fact, these market makers have a connection with numbers of banks on EBS; if the market maker traded a larger volume, the more connections it likely has.

As long as banks were opened with one of the major financial centers of the world, forex market will work actively, as well as trading. The stock market is open from the start of Monday morning in Tokyo until Friday afternoon in New York. However, with regards to GMT, the trading week begins from Sunday night to Friday night, or roughly 5 days, 24 hours per day.

Price Reporting Trading Volume

In forex, consolidated tape is not existing, the trading prices and volume are also not reported unlike many other markets. It’s actually more likely for the trades to take place continuously at different prices along with different parties in the market. Good pricing depends on how closely it is tied to the larger market. In fact, pricing is correlated between market makers, though there are no concrete data on the volume that’s been traded in any given time frame or either given price. Open interest, as well as a volume on currency futures can possibly be used as a proxy. However, there’s no perfect assurance.

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