Who are the Market Participants?

The list below explains the various market participants who trade in the online market.

About The Various Market Participants

To know more about each of these Indices market trading participants we shall look at the various categories of those taking part in Indices and also discuss how each of these market participants influence the trading market.

• Banks - Market Participants

These large banks transact billions of dollars daily on behalf of commercial companies, brokers, their indices customers and retail stock traders. Some of these trading transaction activity is undertaken on behalf of corporate customers while some activity comes from the banks treasury room which also conducts a large amount of transactions, where dealers are taking their own indices positions to make profits.

• Liquidity Providers - Market Participants

These trading dealers handle large amounts of business, facilitating online trading transactions and matching anonymous counterparts for comparatively small fees. With the increased use of the Internet, a lot of this trading business is conducted on electronic systems that are highly efficient in connecting many online trading brokers.

These trading dealers deal with financial firms or retail brokers & provide institutional liquidity to these firms.

Indices Liquidity Providers are therefore major participants in Indices because all of the stock trades of indices investors & retail traders are passed to these liquidity providers who then offset these orders in the online exchange stock market. Once traders places orders with their brokers who then pass these orders to the liquidity providers who then place these orders in the online trading exchange market, in what's referred to as providing liquidity.

• Commercial Companies - Market Participants

Multinationals & commercial companies taking part in international in Indices for the purpose of trading investing as part of their overall investment strategy.

Commercial companies take part so as to invest their money in these markets.

• Retail Brokers - Market Participants

Use of the internet has brought about retail brokers. These offer trading softwares, indices trading analysis, and strategic advice to customers and will place stock trades on behalf of their trading clients and facilitate these retail trading investors who do not have a lot of money. Indices trading brokers will then provide capital to these retail trading investors in the form of trading leverage. This group only participates in as far as placing stock trades on behalf of retail stock traders.

The brokers will provide bid and ask stock quotes, depending on whether a retail trading investor wants to buy or sell, the trader will then buy or sell at the current price quotes (bid quote - buyer will buy at this price, ask quote - the seller will sell at this price).

The role of this broker group is to only facilitate indices trading transactions between the trading market and the traders for a small markup called indices trading spread. This group does not therefore hold any orders of their own, they just facilitate the trading.

• Hedge Funds

Hedge funds use aggressive indices trading speculation methods to make profits. Hedge funds are indices trading investments that are under the management of experts and professional money managers, the size and liquidity of trading is very appealing and the indices trading leverage available in these markets also allows such funds to invest in with billions of dollars at a time in stock trading market.