The interbank market is the market where banks and large financial institutions trade currencies, money market instruments, and other financial products directly with each other.
In foreign exchange trading, the interbank market plays a central role, as it is where the main exchange rates are formed that serve as a reference for the entire market. Transactions are conducted over-the-counter (OTC) and executed through electronic platforms or direct trading relationships.
Liquidity in the interbank market is extremely high, and spreads are typically very tight. For retail traders, the interbank market is not directly accessible; instead, access is provided indirectly through brokers who act as intermediaries between private clients and the interbank market.
ECN brokers offer the closest connection to interbank liquidity.
