Trading Forex - OTC market

Hi guys,

Isn’t it a concern that cash forex is traded OTC ? I am sure it is but somehow it is widely traded market.

Being OTC does it mean that cash forex has no regulatory org looks over it ? Is it like private guys got together and created a market just like that ?

who do these people - the market creators - answer to ?

It is said that banks liquidity is given to retail traders in ECN model - is it not that a some people just got together and started selling stuff ? Like how much more regulated and sophisticated is it than for example someone just running a betting market in a country where betting is not allowed. Done behind closed doors and rules laid by the providers and them being the decision makers on any matters ? Or is cash forex a bit more regulated and sophisticated than that ?

Thank you

I’m not too sure what you’re really asking? As for regulation by country, then that’s down to the respective financial authorities of whom such brokers are registered with - evidently ‘some’ authorities by country are perhaps more pragmatic than others.

You’ve got to remember that as a retail trader you really are never participating in the spot fx market - each one of your trades is a bet with your broker, just like a bookmakers. This is the business model used by all FX retail brokers who settle in-house and [perhaps] off-set the net risk into the market should they need to.

As for banks liquidity being give to all retail clients, I would assume that this really means you are betting on that price feed - not taking part in the transactions that generate that price feed, a subtle difference.

There is a limited amount of currency that each country has in circulation - hence the [I]maximum [/I]supply is fixed at any given time. The supply and demand of this currency [in real money terms, physically exchanging one currency for another] is what drives the exchange rates - not speculating on currency derivatives - which as the name suggests is a derivative of the primary function of exchanging real cash.

Anyway, I’ve rambled about pointless things here - take it as you like!