Finance & Loans

The U.S. Foreign Exchange Market

The foreign exchange market is where most commercial banks in the United States buy and sell foreign exchange for their customers. But commercial banks are not the only corporations involved in 4X trade. In fact, over the last 25 years, many other dealers including investment banking firms and other financial institutions have joined commercial banks as major dealers in foreign exchange trading.

So just who are the major players in the U.S. segment of the foreign exchange market? According to the 1998 foreign exchange market turnover survey by the Federal Reserve Bank of New York, there are 93 major foreign exchange dealers in the U.S. Commercial banks made up the majority, accounting for 82 out of the 93 forex trading dealers. Eleven were investment banks or insurance firms. The entire group is made up of institutions located in New York, Boston, Chicago, San Francisco and other U.S. financial centers. A major portion of the group includes U.S. branches of foreign banks from Japan, the United Kingdom, Germany, France, Switzerland, and other countries.  According to the Federal Reserve, to be considered a major currency trading broker or dealer in the U.S., “an institution must be located in the U.S. and play an active role as a dealer in the market.”