The interbank market is the financial system of trading currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is done by banks on behalf of large customers, most interbank trading is proprietary, meaning that it takes place on behalf of the banks' own accounts.

The interbank foreign exchange market developed after the collapse of the Bretton Woods agreement and following the decision by U.

President Richard Nixon to take the country off the gold standard in Currency rates of most of the large industrialized nations were allowed to float freely at that point, with only occasional government intervention.

There is no centralized location for the market, as trading takes place simultaneously around the world, stopping only for weekends and holidays. The advent of the floating rate system coincided with the emergence of low-cost computer systems with allowed increasingly rapid trading on a global basis.

Voice brokers over telephone systems matched buyers and sellers in the early days of interbank forex trading, but they were gradually replaced by computerized systems that could scan large numbers of traders for interbank spot fx trading best prices. In order to be considered an interbank market maker, a bank must be willing to make prices to other participants as well as asking for prices.

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Among the largest players are Citicorp and JP Morgan Chase in the United States; Deutsche Bank in Germany; and HSBC in Asia. Most spot transactions settle two business days after execution; the major exception is the U. This means that banks must have credit lines with their counterparts grain prices stock market order to trade, even on a spot basis.

In order to reduce settlement risk, most banks have netting agreements that require the offset of transactions in the same currency pair that settle on the same date with the same counterpart. This substantially reduces the amount of money that changes hands and thus the risk involved.

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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What is the 'Interbank Market' The interbank market is the financial system of trading currencies among banks and financial institutions, excluding retail investors and smaller trading parties.

Background The interbank foreign exchange market developed after the collapse of the Bretton Woods agreement and following the decision by U. Largest Participants In order to be considered an interbank market maker, a bank must be willing to make prices to other participants as well as asking for prices.

Credit and Settlement Most spot transactions settle two business days after execution; the major exception is the U. Interbank Call Money Market Interbank Rate No Dealing Desk Big Figure Euro Overnight Index Average Real Time Gross Settlement - RTGS Interbank Deposits Hong Kong Interbank Offer Rate Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

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