RUBRICORE – The Forex market is decentralized, what does it mean? Different from other types of trading like shares or futures, Forex trading uses the decentralization principle. This trading doesn’t need an exchange center just like other types of market. It means that the price offered can vary also.
Although it sounds complex, at the same time, this matter also becomes a benefit of Forex. The different prices or values cause a very tight competition in it. Therefore, clients can get your best offer anytime. Moreover, the system of the Forex market that opens 24 hours a day makes it more flexible for you to do transactions day or night.
The Regulation and Levels in the Decentralized Forex Market
The Regulation in the Forex Market
The decentralization system is often defined as freedom to all the participants in doing transactions because there is no monitoring from the government. But freedom here doesn’t mean there is no regulation at all. The primary regulation in the Forex market is to divide the participants into some categories.
Categories or Levels of the Forex Market
On the top level, there is the interbank market. It consists of world-class banks along with some smaller finance companies. They transact from one to another online through a network namely the Electronic Brokering Services (EBS). All the banks that participated in the market can see the prices offered. However, not all of the time can do transactions at those prices.
On the middle level, the participants are retail creators, ECN retails, hedge funds, and many more. They are in the middle-level category as those participants don’t build up credit affairs closely to the interbank market. To do the transaction is only possible through commercial banks, which means that their interest rates are higher than them in the interbank market.
The lowest level in the Forex trading market is the retail traders. Retail traders include common people who play the trading in a small amount. Although their participation is minor compared with the first and the second levels, they play important roles to keep the transactions working and qualified.
In the past, it sounds impossible for common people to involve in the Forex trading market. This type of investment indeed looks expensive and risky particularly for those who don’t have enough capital and experience. But along with the development of the internet, the opportunity is getting higher. They can even simply keep in touch with the members of the top level in the market. So, are you interested to be a part of the Forex Market?