[Hassam]

Volume of FX short term transactions is increasing. This increase in intraday transactions is due to traders operating from different time zones. Nonfinancial corporations, hedge funds, pension funds, mutual funds and insurance companies have also shifted to short term intraday transaction from long term due to low spreads on intraday transactions. These transactions have been made possible with the development of real time information systems. In the wholesale market, dealers are not allowed to keep overnight positions. This increases intraday transactions. In one minute, we can observe 50-100 ticks easily.

Central banks still have large influence on currency market. Central banks can keep large positions open for a long time and influence the foreign exchange rate significantly. Over the counter market transactions are between number of banks and dealers. Currency market is an over the counter market. So each market maker has its own price quote. Market maker can have a preference for buying or selling. New quote published is designed to attract deal in the desired direction.

This is important for you to know. FX quotes lag behind the real time market prices. This lag can extend upto 1 minute. Some market makers intentionally try to introduce lag in the price feed. There is a large market for FX swaps independent of the FX spot and forward transactions.