Currencies traded

Interbank can be said that two parts: direct and indirect.

In direct markets, banks bid for buying and selling prices directly to each other and all participating banks are market makers. It is sometimes AHS characterized as "decentralized, continuous, open bid, double auction" market.

In indirect markets, banks put orders with brokers who make "books" and try to match buy and sell orders for different currencies. They charge commissions to both buyers and sellers. This market is characterized as "quasi - centralized, permanent, limit - book, an auction" market.

Currencies are traded on the "spot" or "cash" basis, ie, for immediate delivery, and "forward" basis, for delivery sometime in the future of fixed price today.

The FEMs in developed and developing countries differ in two important respects.

First, in the former they are generally more free then the second, although this difference is reduced in the recent past.

Secondly, the second is expected to provide more service for import and export trade rather than pure trade, as in the case of the former.