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Foreign exchange brokerage firms play a
crucial role in currency markets. They provide momentum to currency
markets in various ways, such as by offering an interface to sellers
and buyers of currencies and by executing transactions at their
behest. They also offer margin account services, under which small
traders can take much larger positions in the markets as compared
with their deposited money. These brokers also act as advisors to
exporters and importers, as well as to corporate houses exposed to
currency market movement risks. In addition, they also cater to the
forex requirement of miscellaneous customers like tourists and
students who are studying abroad.
Margined currency
trading is becoming increasingly popular with the expansion of
inter-connectivity across the globe; so too are the brokerage firms
providing this facility. Earlier, forex brokers role was limited to
servicing big banks as their agents, at a time when currency markets
were practically off-limits to small aspirants due to high
transaction costs. The Internet has also unleashed unrestricted flow
of information on currency market operations, inviting small players
into the forex trading business in hordes.
Forex
brokers usually operate under arrangements known as limit orders,
good till cancelled (GTC) orders, good for the day (GFD) orders and
stop orders. Usually, buyers and sellers of currencies place an
order with their broker to execute deals on their behalf. The
sellers and buyers also specify time checkpoints and target rates
for executing transactions. These are called limit orders. A GTC
order is cancelled at the order of buyers and sellers - the dealer
cannot cancel the order on his own. Otherwise the order remains
active for the entire day of trading. A GFD order remains active in
the market until the end of a days trading. A stop order is issued
by buyers and sellers to limit their potential losses from a
transaction.
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