Institutional Forex Trading
The Forex market consists of many different categories of participants (Central Banks, Commercial Banks, Large Corporations, Retail Traders, Institutional Traders, etc.)
When we refer to institutional traders we are referring to Interbank Traders such is Banks and Large Investment Firms. Institutional Traders enjoy several advantages over retail traders when trading the Foreign Exchange. These advantages are in terms of lower trading costs (spreads) but sometimes also in terms of better information.
Institutional Forex Trading Features
These are some of the special features of the Institutional Forex Trading:
(1) Liquidity directly from Tier-Banks and Proprietary Trading Firms
(2) Best Rates Identification Mechanism
(3) Open order book / Full market depth
(2) Complete anonymity
(3) Low-latency order-execution
(4) The existence of complicated orders
(5) Pre-trade and post-trade transparency
(6) Fast Execution (High-Frequency Trading and low-latency order processing)
Institutional Forex Platforms
Institutional Forex Trading Platforms include MT4, Thomson Reuters, Barclays BARX, Orex, and some others. These platforms use a fully customizable interface, advanced and integrated charting plus advanced order execution.
(1) Barclays BARX
(2) Thomson Reuters Fx Matching
Orders Execution and Low-Latency
The speed of execution is a top priority issue for Institutional Forex Traders. Brokers who are focusing on institutional clients spend millions of US dollars to develop ultra-low-latency solutions.
Low-latency is based on:
(i) State-of-the-art technology
(ii) Physical location close to a major exchange
The maximum speed of execution is very important for arbitrage strategies, news-trading strategies, etc.
The Role of Liquidity
Institutional traders have access to larger liquidity pools than common retail traders. The liquidity factor is transformed into tighter spreads and therefore into diminishing trading cost. These lower spreads are extremely important for scalping strategies.
The Biggest Institutional Traders -Euromoney Foreign Exchange Survey
Based on the latest Euromoney yearly survey, Citigroup remains on the top. The other big players include Deutsche Bank, UBS, Barclays, and JP Morgan.
Chart: The Greatest Institutional Forex Players (2010-2016)
Note:
(1) The Euromoney Fx survey was first launched in 1976 and it is considered a key benchmark for the global Foreign Exchange industry
(2) The Euromoney FX survey uses data based on the votes and volumes recorded by major banks clients
More on Euromoney: http://www.euromoney.com/Article/3554914/FX-Survey-2016-Results-index.html
◙ Institutional Forex Trading
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