Foreign Exchange Market Structure (Figure 3.4)

• Transactions of two types: 1. through Direct Dealing or 2. through a broker

• 1. Direct Dealing is direct phone contact with another bank dealer

  • advantage – information from the way the dealer “shades the price”

• Dealers are market makers (p. 81), the role of dealers’ trades is

  • to acquire and lay risks &
  • to discover transaction prices

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