Who/how/where of the price feeds

Let us forget about supply and demand, or effect of news or software graphics… how are the currency price charts decided. Who decides them? well banks but how are they centralised, fed to brokers and our false brokers. How does news for example decides the price in terms of low level mechanism of numbers versus time.

Once I asked same question. I was given analogy of apple prices that it is just the market. No that is wrong, apple prices are not centralised.

Is there a question here?

Supply of goods & services, Capital inflows/outflows, monetary policy. Supply & demand would automatically determine prices were decentralised. I can’t think of why any reason why how the exchange rate could be centralized.

My country (Sri Lanka) tried to artificially peg it (therefore subject to centralized action) and that failed miserably. Went for a freefall recently. That said even RBA Governor Lowe yesterday said they made a number of mistakes in their QE and how they handled their subsequent rate hikes. Similar concerns with the EU atm which is why they are very hesitant about rate hikes, which could cause an economic crisis in the weaker countries in the EU.

Goes to show how even central banks, have a hard time regulating the exchange rates, which is why I have a hard time understanding how it could be cenralized.

Good question. All I know is that my broker gets their prices from a third party data supplier but I don’t know who they are or how they get their prices.

Of course, the broker is free to drift the spread to their required width to cover their exposure risk to clients’ positions. And those the prices I care about, because my trades are with my broker.


I didn’t say government centralised but they are more or less same, just watch news… You came back to supply/demand just what I didn’t want to hear. I am NOT asking about theory of market but how these price numbers pop up every moment. Since it is free market then how come it is fixed per unit time across all the world. Ignoring spread issues which are minor variation alongside the main trend.

is that an answer??

It’s not a question of what you want to hear. That’s how prices are dictated to begin with.

What even makes you think prices are centralized? Where’s the evidence? Have you not had different exchange rates from different brokers when you exchanged currencies? If they were centralized wouldn’t they all be priced the same?

They are different simply based on supply and demand. Monetary policy sets a baseline and the various banks/liquidity providers merchant their services to the various consumers (retail customers like us, institutions, funds, etc) around those baseline policies.

It’s not a question of what you want to hear. It is what is happening.

Edit: If that’s not what you want to hear perhaps you can do yourself a favor and conduct independent reading on why central bank rate hikes & economic new events have such an impact on prices & what impact it has on the various markets worldwide.

Do you mean what you see in your broker platform? The bid and ask?

Give this a read.

Not really. I am asking about real FX prices. I see exchange rates reported by media across the world as same. Google it and see. It doesn’t depend on location.
I know our betting brokers can alter it as they use it for their betting game but I am interested in actual FX market. I know it depends on whatever factors. My question is about who finally connects these factors to the final prices we see around. Who implements the charts. who feeds them around. Surely “factors” are not physically able to draw charts. It must be some humans in between or behind curtains. For example there are so many real brokers around and somebody has to average all the transaction figures and present the “net” result…

No they’re not. That’s a false narrative. Each bank and liquidity provider sets their own prices independently. That’s why everyone’s prices are different (even if, at times, some of those differences are in fractional pips).

Supply & demand. Free market principles. It’s the same reason why most grocery items are priced nearly the same across a majority of groceries/supermarkets. Ever wonder if there’s some central governing body determining the price of your Kellog’s Corn Flakes?

So an example narrative could be as follows:
A real FX broker is approached by a client having USD and wants 10 Million GBP. The broker approaches various banks for best rate. Once done other banks get aware of the transaction and this way price moves.
And then some businesses draw charts following some average mechanism and possibly sell their product of charts.

In theory that’s how it’s supposed to function. As in the position is floated out for the best bid/ask spread, as is demonstrated in this screenshot of an FX Aggregator (FXall)

source: Foreign Exchange Operations - David DeRosa (2014)

The reality for retail clients may differ because we are getting bid/ask quotes from most likely from one source (our chart provider). There’s a likelihood we are already set up with one liquidity provider (LP), even if the broker advertises that they have access to 20+ LPs.

How market forces work in this instance is that large volume retail clients will hunt for the best broker with the best liquidity providers, which should force FX brokers to source more competitive LPs, which in turn should keep LPs offering competitively lower prices.

For large MNCs & institutions there are aggregators, like FXall, which they use for the risk management & hedging. They don’t just rely on one or two LPs for their prices. This series of videos from Deutchbank (one of the largest LPs out there) highlight how competition among LPs affect prices.

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This is simplified and contentious explanation. The broker in all likelihood acts as counterparty to our positions, nets the positions for both their A & B books and then gets quotes from their LP (s). I tried finding material on how brokers work on the the retail side and don’t have anything conclusive. So I don’t, in reality, know how they work.

But what is evident is that there is competition among banks & liquidity providers. Even Central banks can’t completely control their exchange rates. It’s completely in the hands of a market forces in a free market.

Great video share!

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You mentioned A and B books. Might be interesting.

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