Handbuch Treasury / Treasurer's Handbook

S. 454PART III Foreign Exchange, Options & Commodities

S. 456The Foreign Exchange Market is the place where supply of and demand for foreign exchange meet and where foreign exchange then is changed at an agreed exchange rate. Through the foreign exchange market the exchange of domestic money into foreign money is made possible and purchasing power changes from the domestic currency to the foreign currency. Global foreign exchange markets are characterized by foreign exchange trading. Next to financial institutions large industrial companies, private foreign exchange dealers, brokers and trading houses are the main participants on the foreign exchange market. Another important actor on the foreign exchange market are the central banks. The central banks can intervene in the market for (economic) political reasons, e.g. to rebalance the foreign exchange market.

The biggest part of foreign exchange trading is done off-market in interbank trading. In contrast to security markets, forex markets were hardly involved in foreign exchange trading and therefore largely eliminated. In Europe their function, ie, the setting of official exchange rat...