If you’re involved in forex trading, you are probably going to come across the term interbank foreign exchange trading from time to time. You could see it mentioned on websites or forums. The meaning is not necessarily very clear and you’ve got to know a little bit about the history of forex trading to understand it. When speculative foreign exchange trading started, after the relaxation of the gold standard which fixed relative currency values until the 1970s, it really only concerned banks and other giant financial institutions such as fund managers.
So initially the currency market was nearly totally interbank, meaning between banks. But then the Net began to take over from the phone as the main trading medium, and at the same time it became more and more common for average citizens to have a home PC and a broadband connection. All of a sudden there was the capability for the average bloke to connect up to the currency market. Brokers replied to this by creating software platforms which would permit folks to log in and manage their own account. This reduce costs and made it worthwhile for many brokers to take on clients who were not dealing in many thousands of greenbacks, but far littler amounts. So steadily it became less complicated for folk to trade from home. More of these retail traders have been coming online in the previous couple of years, getting concerned in the currency market to earn income – or frequently sadly, to lose it. That is what can occur if an amateur is not sufficiently well prepared for the fast moving and dodgy environment of the foreign exchange trading market.
You continue to may see the term ‘interbank’ utilized in a way that includes the whole of the forex market and people who trade it in, but precisely it shouldn’t be used that way any more . There’s a difference between retail currency trading and interbank foreign exchange trading.