Forex Dealer

Forex Dealer:

What is a forex dealer?

A forex dealer provides online trading services to allow individuals to speculate on rapidly changing foreign exchange rates. Forex Dealer Members (FDMs) are regulated by the CFTC and National Futures Association in the United States, as well as by national and local regulatory bodies where they conduct business, and are held to stringent business and ethical standards.
[edit] How does forex trading work?

Many U.S. and international companies provide online trading software and services for individuals (traders) who want to speculate on the exchange rate differences between two currencies. In doing so, these speculators buy or sell currencies with the objective of making a profit when the value of the currencies changes in their favor, whether those fluctuations derive from market news, supply and demand principles, or geo-political events taking place throughout the world. In addition, the forex market is available to trade 24 hours a day, 5.5 days a week, so customers can trade at nearly any time, not just when an exchange is open.
[edit] Popularity of forex trading

The growth of trading OTC foreign exchange (known as retail FX or retail forex trading) has nearly doubled from 2004 to 2007[1], and has been projected to continue well beyond 2010[2]. Industry innovation, competition and consumer demand helped spur this growth.

The public has recognized U.S. forex companies as leaders in technology, with three of the leading forex firms named to the Deloitte Technology Fast 500[3], a ranking of the top North American technology companies, for three consecutive years. The leading U.S. forex companies have also been named to the Inc. 500 list of the country’s fastest growing companies. In 2006, the top FX companies made up nearly 20 percent of the total number of financial services industry firms on the Inc. 500 list[4]. As indicated by these rankings, the popularity of this growing market with active traders has helped to make foreign exchange one of the fastest growing industries in the United States.
[edit] A legacy of innovation and entrepreneurship

In the late 1990s, a group of American entrepreneurs saw the future of trading. Over-the-counter (or “off exchange”) foreign exchange trading was generating significant profits for large banks and corporations and, likewise, it lured individual traders who were increasingly becoming interested in participating in this large, but seemingly closed, market.

However, individuals with relatively small capital and no access to proprietary bank-to-bank computer systems were only able to trade currencies as futures through two exchanges. There was no method for traders to participate in the over-the-counter (OTC) forex market. The rapid pace of the currency market made it very difficult to trade on exchange, as most exchanges still traded currencies in the pit – an age-old system requiring multiple interactions to place a single trade. In addition, there were only a handful of currency markets available to trade, with inconsistent pricing and trading volumes. The pricing spreads fluctuated to widen significantly during times of increased market volatility, and market liquidity was not sufficient for overnight trading.

Meanwhile, Internet technologies were making rapid advances, and small upstarts recognized that these new technologies could solve the service delays and other problems faced when trading currencies with exchanges. These entrepreneurs became forex dealers who saw the Internet as an ideal avenue to provide customers with what they needed – instant and efficient access to the rapidly moving currency markets.

Acceptance among investors

The retail forex trading community provides a service that the global banking community cannot. Since forex dealers were originally intended to serve individual traders, they can provide around-the-clock service while managing risk to give customers consistent pricing and market liquidity, 24 hours a day. This is something that even the largest banks cannot provide 24 hours a day: to constantly deliver competitive prices day or night to individual traders.

These small forex dealer startups have evolved into major global financial institutions, yet their commitment to innovation and customer service allows everyday citizens to access the world’s prime market, all because of the emergence of online technologies and the determination of a few dedicated leaders.