Unlike the stock and futures markets, forex (“foreign exchange”) does not have a central exchange through which all trades are routed and cleared. Forex trading consists of many private transactions, conducted via telephone or the Internet, between buyers and sellers (usually banks, which is the reason forex is sometimes referred to as the “interbank” market) all over the world. Forex’s global nature ensures the market is open nearly 24 hours a day, from Sunday at 2 p.m. to Friday at 5 p.m. (ET).
Unlike currency futures, forex involves the actual exchange of one currency for another (settlement occurs two days later); there are no contracts. Also, the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) don’t regulate forex.
For individual traders, today’s forex market revolves around retail brokerages that either act as middlemen between the large banks and small traders, or operate ECN-like order matching services for retail customers.
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