Forex glossary
Commercial banks
Banks providing services such as payments and currency exchange to customers. In FX, they may quote prices, execute client orders and manage their own exposures.
Illustrative example
How does it work in practice?
In a hypothetical example, a company asks its bank to buy 1,000 EUR and transfer it to a supplier. The bank is serving a payment need; this transaction alone does not reveal its exchange rate forecast.
A case to work through
Two customer flows
In a fictional simultaneous file, one customer buys 60,000 EUR and another sells 40,000 EUR.
- Compare opposite flows in the same currency and settlement period.
- The difference is 60,000 − 40,000 = 20,000 EUR.
What follows? Separate the matched amount from the residual exposure the bank must manage.
Example boundary: This is simplified; actual risk management uses specific limits and execution channels.
A useful distinction
Commercial banks / Corporations (treasury hedging)
A bank serves customer flows; a corporation may exchange currency for its own payments.
Check your understanding
Calculate a residual flow in a simplified bank example.
Show the answer and explanation
20,000 EUR
Subtracting opposing amounts gives 20,000.
FX participants, access and execution
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Read the fuller explanation
Related terms
Sources and documentation
- Triennial Central Bank Survey of foreign exchange and OTC derivatives markets in 2025 – BIS
Provides the earlier basis for distinguishing market participants and functions.
- The FX trade execution landscape through the prism of the 2025 BIS Triennial Survey
Describes fragmented FX execution, dealers, non-bank providers and internalised flows.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.