The market of stock exchange and over-the-counter: what are silent dealers FOREX

The idea of enriching itself by reselling financial instruments, such as stocks or currencies, seems very attractive. With the development of the Internet, it has become particularly widespread. Numerous brokers and dealers lure an unsophisticated customer and promise the golden mountains. At the same time, some actively promote the trading of currency pairs in the "Forex", while others are campaigning to invest money in the stock exchange market of Russia, that is, to buy shares of domestic companies. Many believe that the difference between these sites is only in the tools available for trading. In fact, this is just the tip of the iceberg. But in order to understand everything, it is necessary to go a little deeper into economic theory.

What are the markets?

As part of the global financial market, it is customary to single out several main segments: stock (including urgent), currency, insurance, investment and capital markets. For the ordinary investor (trader), the first two segments are of interest, while all the others are the lot of professionals. Primary securities - stocks and bonds - are traded on the stock market. The derivatives market is the place of circulation of derivatives - fixed - term contracts (futures, forwards, options, swaps). In the foreign exchange market, as its name implies, there is a currency exchange.

What is the exchange and over-the-counter markets?

Depending on how the process of circulation of financial instruments is organized, the markets are usually divided into exchange and over-the-counter. If we consider the stock, futures or currency markets, stock and OTC segments are in each of them.

The exchange market is an asset trading organized by the exchange. It establishes the procedure for conducting trades and settlements, a list of traded instruments and other rules. Counterparties search for each other inside the stock exchange through their brokers, and the exchange acts as a guarantor at the conclusion of the transaction. Exchange - this is a legal entity that has the address of the bidding and the mode of operation. Earlier "to come to the stock exchange" meant, in a literal sense, to come to this site and conclude deals with other traders live. Now everything has become much simpler: the market of exchange trade has become almost completely electronic. However, the main task of the exchange remained the same - to organize trades and act as guarantor of the transaction.

The OTC segment of any market exists outside the exchange and is much less regulated. OTC market is not tied to any site and exists virtually. In some ways it can be called more free. At the same time, the parties do not have any guarantees from a third party that the asset will be transferred to the buyer, and the cash to the seller.

Trading on the exchange

Encouraging future investors to carry money to the stock market, brokers mean the stock exchange. Although in theory you can buy shares directly and directly from the owner - a private person or company. However, this is due to a lot of inconvenience, from searching for a counterparty to documenting. The market of exchange trade assumes that all these worries are taken over by the exchange.

The client's interests on the stock exchange are represented by a broker. He receives instructions from the trader through a special program (trading terminal) and conducts appropriate operations. Quotations that a trader sees in his terminal are real transactions or orders of other traders. They will be the same if you open, say, several terminals from different brokers.

Thus, the market of exchange trade provides a private trader access to the global trading platform, where he can carry out transactions with other such traders. Neither the stock exchange nor the broker is interested in having one of the traders earn or lose money. Their business is built on the receipt of commission fees, which bidders pay, regardless of their outcome.

FOREX - over-the-counter currency trading

Unlike the stock exchange market, where stock trading occurs, FOREX is its over-the-counter counterpart. This is a global currency trading market, in which mainly central banks of different countries and other financial institutions participate. Small participants join large ones through a number of intermediary organizations. A private trader for trading on FOREX goes to a dealer - a company whose functions are similar to those of an exchange broker. Externally, everything looks about the same - the same trade through the Internet, the same application for purchase and sale.

But there are moments that fundamentally distinguish the market of exchange trading from FOREX. The fact is that in most cases the FOREX dealer does not display the client's request for a global over-the-counter platform, where large banks trade currency. This is simply impossible, since lots in this market are measured in thousands or even millions. The dealer reduces his clients in his own mini-market, and more often acts as a counterparty himself. It turns out that the trader is trading against his dealer. In this case, the latter shows the quotes of currencies, which are also set independently. They are close to the real quotes FOREX, but differ in a disadvantageous for the client side.

It turns out that the FOREX dealer is a big currency exchange point: he sets the quotes himself and acts as one of the parties to the deal. It is not hard to guess who will win as a result.

The legal moment

Exchange activities in Russia are subject to licensing since the mid-1990s - now the Central Bank is engaged in this. To the license applicants serious demands are made, including the authorized capital, which is estimated in millions of rubles, which indicates the reliability of the mechanism for entering the stock market through a broker. In addition, they do not have access to the money and shares of their customers - all assets are stored in special accounts on the stock exchange.

But the FOREX dealers are only trying to take control of the central bank. Recently, their activities are also licensed, but only a few companies that have received the appropriate license. Others simply bypass the law - they work through offshore firms. Thus, for trading on FOREX, the trader transfers his own funds to a certain company, which is probably registered somewhere in the Cayman Islands or in Cyprus.

How to be a trader who, despite everything, still wants to trade in currency? Of course, no one can forbid a man to try his hand at FOREX. The main thing is to carefully choose the dealer from among the largest and do not risk big sums. But a more reliable way is to go to the Moscow stock exchange, in the urgent section of which you can buy and sell futures for some currency pairs.