Who Really Drives The Market?

The question that we seek to answer is the following: What are the "things" that really drives the market?

Following a quick search, it becomes evident that there is a select few "things"...

1. Buy-Sides,

2. Sell-Sides,

3. Liquidity pools, and

4. Market Makers.

It doesn't take long to renew your mind. Once you do, the ball game changes eventually.

Here are some of the findings that will make you question your beliefs on the financial markets and motivate you to further research this topic in order to learn the basic functionalities of the market to ultimately build a successful trading business.

What is Sell-Side?

The sell-side refers to the part of the financial industry that is involved in the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments. Sell-side individuals and firms work to create and service products that are made available to the buy-side of the financial industry. The sell-side includes investment bankers, who serve as intermediaries between issuers of securities and the investing public, and market makers who provide liquidity in the market.

Since we are foreign exchange traders, let go into a little more details about that specific market.

Foreign Exchange Sell-Side

The Sell-Side is dominated by top multinational banks, led by JP Morgan Chase, Citibank, Deutsche Bank, and UBS.

Bank trading rooms are divided into two groups:

1. Interbank traders who buy and sell large amounts of currency on the spot and forward markets.

2. The salespeople that sell securities to buy-side customers including hedge funds, mutual funds, and large corporations.

Many interbank traders take proprietary positions, but salespeople generally do not.

Source: Investopedia & DealRoom

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