I am aware it's all about supply and demand

When a lot of party buying USD with EUR, USD price will increase. EUR will decrease it's stand against USD. And vice versa

But who exactly determine the increase rate?

Is it only determined by large national banks between countries that becoming market maker, each set their bid-ask price from time to time towards the World Bank?

And using certain formula, becoming day-to-day exchange rates in our currency chart? Since currency chart always the same everywhere so there have to be only one reference point

Adding to my confusion, how it works in other currency, cryptos for instance, or commodity - where in different exchange platform, each have their own "market making" system, and not connected to each other. How and who determine the market price then?

  • $\begingroup$ This is the automatic market mechanism: each trade (USD for EUR or whatever) involves a seller and a buyer, and the market price is that where the amount being sold is equal to the amount being bought - if there were an imbalance of supply and demand at that price in that market, traders would perform trades at different prices and the new market price would change to reflect that $\endgroup$
    – Henry
    Jun 5, 2022 at 9:45

2 Answers 2


The statement that currency charts are always the same everywhere is simply wrong.

Trading takes place through transactions at brokerages, over-the-counter (OTC) markets, or via the interbank system, rather than centralized exchanges. Therefore, each platform will show slightly different prices. If you see the same, one must use the data from the other. FX is decentralized OTC (over the counter). Each platform that offers exchange rates must follow certain logics (e.g. aggregate all OTC quotes from market makers to display the best bid ask available in the market based on some filter criteria; mostly based on reliability - filter out spikes, stale quotes etc). The World Bank is not involved in this.

I want to illustrate this by looking at a single, widely used source for FX market data: Bloomberg

  • ALLQ for example shows all quotes (that your institution has access to). There will be a large amount of banks and brokers quoting bid and ask to Bloomberg
  • Bloomberg curates these quotes (all, not just the ones you can see) based on two different methods (CMPN and BGN), where CMPN stands for composite New York, and BGN for Bloomberg Generic.
  • The timing of the snapshot (New York, London, Tokyo etc.) can also be set and details and white papers can be found on QFX and XDF.
  • Bloomberg also offers BGNE, which is directly derived from executable quotes on FXGO (Bloomberg's FX trading platform), whereas the other quotes are purely indicative. There are numerous such trading platforms like FX Connect from State Street’s GlobalLink, EBS, now part of the CME or Refinitiv. The aforementioned platforms offer quotes from numerous institutions in one place. E.g. Refinitiv states that it connects you with 16,000+ counterparties and 4,000+ institutions (not all will be for FX trading though). Euromoney routinely ranks these platforms by market share. While Refinitiv is the biggest, it largely depends on regions as well. E.g. 360T is very strong in the DACH region. FXGO has a good user base with corporations. However, there are also single bank platforms like Deutsche Bank Autobahn. According to Euromoney, DB has a ~14% market share in FX trading.
  • BFIX is a fixing (see next paragraph for details) that you can even get for free without a Bloomberg terminal (fixings should be easily available to be useful benchmarks).

So even with the same provider, based on your settings and choice of composite, you will see different rates for the same FX pair and day.

This leads to an obvious problem with OTC quotes though, because no one knows what the "exact" rate actually is. However, whenever someone needs to compute an amount payable or the value of a financial instrument or contract, or wants to track returns of funds, compute indices (see Appendix I and II), compute (performance) fees and the like, there must be a uniformly agreed way of doing this. In other words, there must be a benchmark for transaction purposes.

Therefore, so called fixings were developed, which are not only reliable, transparent and representative but also compliant with benchmark regulations like IOSCO or EU BMR which carries over to the UK via the onshored BMR. Two of these officially approved fixings are WMR and BFIX.

It is worth to note that this is different in different countries. For example, PTAX in Brazil is widely used, also CFETS in China or MOEX in Russia, where FX is exchange traded.

Crypto Currencies are traded on exchanges (you should be able to figure out on the respective website how they aggregate supply and demand).

Commodities: For example, if you read about oil prices, it is usually the price of Brent or WTI.

  • The ICE (Brent) has an Exchange for Physical (EFP) delivery mechanism, with an option to cash settle. Hence there is no obligation of taking physical delivery.

  • WTI is physical delivery only, at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Cushing is the most significant trading hub for crude oil in North America, connecting the Gulf Coast suppliers with northern consumers.

What type of oil to deliver is also tightly regulated, see for example chapter 200 of the rule book. It must satisfy certain criteria with regards to sulfur, gravity, viscosity, reid vapor pressure, basic Sediment, water and other impurities, pour point and so forth.

However, there are numerous places where oil is drilled and stored and various qualities.

  • Canada has readily available quotes for Central Alberta, Light Sour Blend, Peace Sour, Syncrude Sweet Premium, Sweet Crude, US High Sweet Clearbrook, Midale and Albian Heavy Synthetic for example.

  • Oilprice.com shows 15 quotes for Texas alone (click on the dropdown next to United States Blends in the menu on the left). There are several regions though.

  • Oil wells exist in a vast number of countries, like UAE, Kuwait, Qatar, Iraq, Iran, Saudi Arabia, Nigeria, Australia, Mexico, China, Russia, Venezuela and Malaysia to name a few. Tower 1 of the iconic Petronas Towers in Kuala Lumpur is fully occupied by Petroliam Nasional Berhad (National Petroleum Limited), commonly known as Petronas, a Malaysian oil and gas company wholly owned by the government of Malaysia.

For short, unless there is exchange trading (which means well defined products and pricing mechanisms), prices will vary across regions, market makers and available qualities. How much a market maker charges depends on demand and supply. Simplified, if they are "too expensive", no one will trade with them, if they are "too cheap", everyone will. In reality, the price will move to ensure equilibrium (market makers do not run out of inventories or pile up large amounts, sellers can get rid of the amount they want to, and buyers can buy what they want, given that they accept the price).

A simple analogy may help:
You can buy Coca Cola in more than 200 countries. There is no global market price for Coca Cola though. There are many different places where the company manufactures the drink, and the price one pays for depends largely on where one demands it (country, wholesale, discounter, retail markets, restaurant). The price itself is set by supply and demand in the respective place (you can expect to pay more at the super bowl than at Aldi or Walmart). Coca Cola will charge different prices in different countries as well, and has to keep in mind competition (price of Pepsi etc) as well as demand.

In FX, there is a large amount of interbank trading, which largely determines the exchange rate. All other dealers look at this market (and finance themselves or source there quotes from this market). You can have a look at this answer to see how the forex market is a quote driven market. However, ultimately supply of currency is largely determined by central bank policies, which will have a large impact on FX rates. You can look for example at this answer which has a chart showing the exchange rate of USDTRY. The depreciation of the Turkish Lira is a direct result of (central bank) policy.


There is no market price. There is an ask price and a bid price.

The ask price is the minimum price which the seller will accept. The bid price is the maximum price which the buyer will pay. These prices always exist, because there's always a price at which one is willing to sell, it's just a question of how much.

When the commodity is very liquid (this term means there are lots of buyers and sellers for it) - such as USD and EUR - then the ask price and bid price will be very close to each other, and that's the "market price" you see.

We can see how supply and demand works. Let's say you buy EUR using USD. You can only buy because there's someone willing to sell the EUR at the ask price. After you buy it, there are fewer sellers who still have EUR that are willing to sell at the ask price. Eventually there are no more sellers, and the price goes up.

  • $\begingroup$ Speaking of EURUSD, the exchange rate can be anywhere between 0.82 and 1.6, despite maintaining a tight bid-ask spread throughout. $\endgroup$
    – Alex
    Jun 5, 2022 at 13:51
  • $\begingroup$ @Alex really? Show me where I can buy 1.6 Euros for 1 USD, I'll buy all the EUR available. $\endgroup$
    – Allure
    Jun 5, 2022 at 13:56
  • $\begingroup$ Obviously throughout history. My point is that bid-ask spreads were always tight (well it depends where you look, because currency exchange rate boards at airports actually have very wide spreads. $\endgroup$
    – Alex
    Jun 5, 2022 at 14:17
  • $\begingroup$ @Alex I am not sure how that is related. $\endgroup$
    – Allure
    Jun 5, 2022 at 14:47
  • $\begingroup$ I don't see how the bid ask spread is related to the question either. Yes, that's how the market quotes prices, but it doesn't explain how market prices change. $\endgroup$
    – Alex
    Jun 5, 2022 at 15:05

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