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Definition

Interbank Market

If a bank begins to experience a shortage in a particular foreign currency, it can purchase that currency from other banks. This trading between banks occurs in what is often referred to as the interbank market. Within this market, banks can obtain quotes, or they can contact brokers who sometimes act is intermediaries, matching one bank desiring to sell a given currency with another bank desiring to buy that currency. About 10 foreign exchange brokerage firms handle much of the interbank transaction volume.

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