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The Interbank Market: The Top Layer of Price Discovery

At the top of the forex structure sits the interbank market, where the largest banks trade with each other. It sets the reference prices from which most other quotes derive.

Participation has widened over time. Today, interbank trading involves global banks, non-bank market makers, and large funds, connected through electronic platforms and direct streaming links. The names of the electronic platforms, such as EBS and Refinitiv, appear often in market discussions.

The structure is tiered. At the top, the largest institutions get the tightest prices, because they trade in large size and contribute to liquidity. Below them, smaller banks, brokers, and corporations get slightly wider prices. Retail clients come last, receiving prices with an added markup.

The tiers explain the spread differences you see. Institutions trading billions might pay a fraction of a pip, while a retail client pays one or two pips on the same pair.

The system also explains why data differs. There is no single official tape, so every venue sees its own slice of the market.

For a retail trader, the interbank market is not directly accessible. But understanding that your price is one step in a chain removes the idea that you are trading against a single central price.

Prices converge quickly because arbitrage between participants keeps them aligned.

Practical step: sketch the chain from interbank market to your screen, listing each step where a markup might be added.

The tier idea is useful when you compare spreads. Your 1 pip on EURUSD isn't a rip off by itself, it's the markup for being at the end of the chain. The question is whether it's a fair markup compared with other brokers. When comparing, look at the total cost, not just the headline spread. A raw spread account at 0.1 pips plus a commission can work out cheaper or more expensive than a standard account at 1 pip, depending on the commission per lot. Work out the cost of a round trip for one standard lot on each and compare those numbers. Also check typical spreads at your trading hours, not the best case figure.

No single official tape is also why volume indicators on spot forex can only show your broker's slice. Good reminder before reading too much into them. What most platforms call volume on forex is usually tick volume, the number of price changes in each candle at your broker. It often moves in line with real activity, so it's not useless. Busy sessions show more ticks, quiet ones fewer. But a big tick volume bar isn't proof that a large player traded there. If you want a rough check on actual participation, currency futures volume from the exchange is a better source, though it only covers part of the market.