What is Interbank Market
Title: What is the Interbank Market
The interbank market is the backbone of the global Forex market, where banks and financial institutions trade currencies directly with each other. It is called “interbank” because transactions occur between banks, not individual traders, and it handles the majority of currency trading worldwide. Understanding the interbank market is key to seeing how Forex prices are determined.
In the interbank market, major banks, hedge funds, and central banks exchange large amounts of currency for commercial, investment, or speculative purposes. These trades are typically wholesale transactions, often worth millions of dollars, which is why retail traders cannot access them directly. Prices in the interbank market form the basis for the spreads and quotes that retail brokers provide.
This market operates 24 hours a day across different global financial centers, such as London, New York, Tokyo, and Sydney. High liquidity, tight spreads, and fast execution are hallmarks of the interbank market. The large volumes and sophisticated tools used by institutions influence trends, volatility, and key price levels, creating opportunities and risks for retail traders.
In short, the interbank market is where Forex truly begins. While retail traders trade through brokers, understanding how the interbank market works helps traders interpret price action, liquidity, and market behavior more effectively. It is the engine behind all currency movements.
