FOREX participants are first of all large commercial banks that are used by exporters, importers, investment institutions, insurance and pension funds, hedgers and private investors to carry out main operations. These banks also carry out operations for their profit using their own assets. Hence, the turnover of large banks reaches billions of dollars, and the main income of some banks is even made up solely of speculative currency transactions. Besides banks, broker companies acting as intermediaries between many banks and investment funds are active participants in the market. Commercial banks and broker companies not only carry out currency purchase-and-sale operations at the prices that other active participants offer, but also bid their own prices. In this way, they actively influence the price formation process in the market and they are therefore called market makers.
Unlike active market participants, passive ones cannot bid their quotes and purchase and sell at the prices offered by active market participants. Passive market participants usually have the following as their object: paying import and export contracts, foreign industrial investments, opening affiliates abroad or creating joint ventures, tourism, speculating on rates difference, hedging currency risks, etc. Speculative deals in the FOREX market comprise 80% of its daily turnover.
As a rule, central banks enter the FOREX market with purposes different from making profits; they check the stability of the existing national currency exchange rate or correct it, since the latter is crucial for the country's economical situation. Although profits are not the main goal of the banks, they are not interested in detrimental operations either. Thus, the interventions by central banks are usually concealed and carried out via several commercial banks simultaneously. Central banks of different countries can also act together as a team to intervene.

Posted by Anushka G at 6:10:00 PM