Hedge funds
Hedge funds are famous for aggressive currency speculation. They control billions of dollars of equity and may borrow billions more. This fact allows them to overwhelm central banks' intervention to support almost any currency. Retail Forex brokers
Market makers or retail Forex brokers control only a small part of the total volume of the foreign exchange market. As a rule, all firms that offer Forex trading online are either market makers or facilitate the placing of trades with market makers.
Usually market makers have two separate trading desks. The one is used for actually trading foreign exchange. It determines the firm's own net position in the market, and serves as both a proprietary trading desk and a means of offsetting client trades on the interbank market. The other, called the "dealing" or "trading" desk, is used for off-exchange trading with retail customers. Often retail Forex market makers claim that they "offset" clients. But offsetting would greatly reduce market makers' profits as the overwhelming majority of retail currency speculators are beginners and they usually lose money. Market makers use offsetting only when they judge their clients' net position as being very risky. Rates shown at the dealing desk do not necessarily reflect interbank market prices. They are adjusted to incorporate spreads before displaying to retail customers.
As there are the limited number of clearing banks willing to process small order, retail Forex brokers don't offer their customers direct access to the market. Retail speculators are on an unequal footing in comparison with other Forex market participants. Retail speculators usually lack trading experience and capital. Small traders are forced to take large positions using extremely high leverage because of large minimum position sizes (from $10,000 to $100,000). Professional Forex traders use 10:1 leverage, whereas many retail forex firms allow client leverage of 100:1 or even 200:1. This highly increases the risk of a margin call (which is pure profit for the market maker, if the speculator's trade is not offset).
If the offeror isn't a regulated financial entity, it is illegal in the USA to offer foreign currency futures and option contracts to retail customers. Legitimate retail brokers serving traders in the U.S. are members of the National Futures Association (NFA) and most often are registered with the CFTC. Before making a deal, check the broker's FCM status at the NFA, as an increase in Forex scams has been noted last years.
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