Interbank Market: Size, Participants and How Pricing Works

The interbank market is named after the institutions that were once almost the whole of it. That name still shapes how the market gets explained: a top tier of large banks quoting each other, with everyone else drawing prices from what happens up there.

The survey that actually measures this market no longer supports that picture. In April 2025 the trading banks did with each other was a minority of global foreign exchange turnover, and it has been near that level for over a decade.

What follows is the measured shape of the market rather than the traditional description of it: how much trades, who the counterparties are, where the desks sit, and why there is no interbank rate a trader can look up. Every figure here comes from the same statistical release, and the date it was read appears at the end, because a market surveyed once every three years is described accurately only with the survey year attached.

What the Interbank Market Is, and What It Is Not

The interbank market is the wholesale layer of foreign exchange, where dealing institutions trade currency directly with one another rather than through an exchange. There is no central venue, no clearing house standing between the two sides of a spot trade, and no obligation on anyone to publish what was dealt.

Two things follow from that, and both matter more than the definition itself. Prices are bilateral, agreed between two named counterparties, so two dealers can hold different prices for the same pair at the same instant. And volume is not observable in the way an exchange makes it observable, which is why the market has to be surveyed rather than simply counted.

The term also gets used loosely to mean the best price available anywhere, particularly by services quoting a transfer against it. That is a different claim, and the section on rates below separates the two.

What the interbank market is not is a price feed a retail account connects to. A retail order reaches a broker, and the broker deals on its own account or passes exposure on. Where the pricing a trader sees departs from the wholesale price, the mechanism is the broker model and the spread you are quoted, not a direct line into the wholesale layer.

The Measured Size of It, and What Sits Inside

The measurement comes from one place. The BIS Triennial Central Bank Survey collects turnover data every three years from central banks and authorities in 52 jurisdictions, which in turn collect it from over 1,100 dealing institutions. The April 2025 round was released on 30 September 2025.

It put average daily turnover in over-the-counter foreign exchange at 9.6 trillion dollars, 28 per cent above the 7.5 trillion recorded three years earlier. That total covers every instrument, and the mix inside it moved noticeably between the two surveys.

Spot, the instrument most retail trading is priced against, is under a third of the market. The largest single component is the FX swap, a funding and hedging instrument that combines a spot leg with a forward leg and typically matures inside seven days. Its share fell nine points in three years, not because it shrank but because everything else grew faster.

The currency composition moved as well, and it is measured on a different basis: because every trade has two sides, the individual shares total 200 per cent rather than 100. The US dollar sat on one side of 89.2 per cent of every trade, against 88.4 per cent three years earlier.

The euro fell to 28.9 per cent from 30.6 per cent, and sterling dropped more sharply, to 10.2 per cent from 12.9 per cent. The Japanese yen held at 16.8 per cent, while the Chinese renminbi reached 8.5 per cent and the Swiss franc 6.4 per cent, moving the franc to sixth place from eighth.

The concentration this produces is easy to underrate. All ten of the most traded currency pairs involve the US dollar, so a pair quoted without it is generally priced through two dollar legs rather than dealt directly.

None of this appears as a visible order book. Spot foreign exchange has no consolidated one, and what a platform window shows about resting orders is covered separately under no consolidated order book in spot forex.

Banks Trading With Banks Is Now Under Half of It

Here the survey and the standard description part company. Trading between reporting dealers averaged 4.4 trillion dollars a day in April 2025, which is 46 per cent of global turnover. Dealer trading with counterparties the survey groups as other financial institutions was 50 per cent, at 4.8 trillion dollars a day.

So the bank-to-bank segment that gives the market its name is the smaller of the two. That is not a one-survey anomaly either. The inter-dealer share was 47 per cent in 2022, and the 46 per cent recorded in 2025 remains above the levels reported in every survey from 2010 to 2019, which places the crossover more than a decade back.

The gap is wider in the instruments a retail trader deals in. Other financial institutions accounted for 55 per cent of spot turnover, up from 52 per cent, and 62 per cent of outright forwards, up from 57 per cent. Measured on spot alone, the interbank segment is further from a majority than the headline number suggests.

Three of the readable explanations checked for this page describe the market as the tier through which price formation runs, and none of them mentions the inter-dealer share, the survey, or the counterparty split at all. The description is not wrong about what the interbank market is. It is out of date about how much of the market it accounts for, and the difference changes what a reader should expect wholesale pricing to reflect.

Turnover with other financial institutions grew 35 per cent between the two surveys, driven by a 72 per cent rise in outright forwards and a 50 per cent rise in spot with that group. The BIS attributes part of that to hedging activity after tariff announcements early in April 2025, which is a reminder that a single survey month carries the conditions of that month.

Who the Other Half Turned Out to Be

The survey breaks the other financial institutions group into subsectors, and the composition is not what the phrase suggests. The largest part is still banks, just not the ones that report to the survey.

Non-reporting banks were 2.4 trillion dollars a day on their own, a quarter of the entire market. Institutional investors reached 1.3 trillion dollars and rose in share for the first time since 2016. Hedge funds and proprietary trading firms, the group most often described as displacing banks, were 8 per cent.

The direction of travel is as informative as the levels. Institutional investors and the smaller banks both gained share between 2022 and 2025, while the inter-dealer segment gave a point away.

The survey also separates market-facing trades, meaning deals with customers and unrelated entities that contribute to price formation, from those that do not, a distinction introduced in the 2022 round precisely because gross turnover on its own overstates how much trading sets a price.

The group that shrank is the one the market was originally built to serve. Non-financial customers, meaning corporates converting currency for trade rather than for financial exposure, fell to 5 per cent from 6 per cent in 2022 and 7 per cent in 2019.

A market that is 95 per cent financial counterparties behaves differently from one where commercial flow sets the tone, and it is worth knowing which of those a broker means when it describes its pricing source. The distinctions between the models brokers actually operate are set out under broker models.

Why Four Jurisdictions Hold Three Quarters of the Trading

Foreign exchange has no home exchange, yet its trading is concentrated more tightly than most exchange-traded markets. Four places account for three quarters of all foreign exchange trading, measured in April 2025 by where the sales desk sat: Singapore, Hong Kong, the United States and the United Kingdom.

The United Kingdom held roughly 38 per cent and the United States roughly 19 per cent, both close to their 2022 levels. Singapore was the one clear mover, rising to 11.8 per cent from 9 per cent, while Hong Kong held at 7.0 per cent.

Concentration of desks is not the same as concentration of counterparties. Cross-border trading, meaning the two sides sitting in different jurisdictions, was 63 per cent of turnover, and it ran higher in the inter-dealer segment at 68 per cent than with other financial institutions at 61 per cent. Deals are booked where the desk is, not where either party lives.

This is why the trading day has the shape it has, and why liquidity in a pair thins when the desks that make prices in it are closed. It is also why an offshore version of a currency can trade on different terms from the onshore one, as it does for the offshore renminbi.

There Is No Single Interbank Rate to Look Up

The phrase interbank rate is used as though it names a published number. For spot foreign exchange it does not. No authority publishes a consolidated wholesale rate, because there is no consolidated venue producing one and no reporting obligation that would assemble it.

What exists instead is a set of bilateral quotes. A dealer quotes a price to a named counterparty, for a stated amount, valid for the moment it is shown. Another dealer may be quoting a different price to a different counterparty at the same instant, and both are the interbank price in the only sense the term has.

A quote is also contingent on more than the pair. Size matters, since a price good for a small amount need not hold for a large one, and so does credit, because a dealer prices against a counterparty it has agreed to face. Neither condition survives into a number presented as a single market rate.

Rates presented as the interbank rate by comparison and transfer services are generally a mid-market figure derived from observed quotes, which is a reasonable reference point and not a rate anyone could have dealt at. The mid is halfway between a bid and an offer, and no trade occurs there.

For a trader the practical consequence is that a broker quote cannot be audited against a wholesale benchmark, because the benchmark does not exist in the form the comparison assumes. What can be examined is the broker relationship itself: the model, the disclosed markup, and whether quotes are subject to a final check before acceptance, which is set out under last look.

What Governs Conduct in That Market

Wholesale foreign exchange is largely outside the perimeter that covers exchange-traded instruments. The main conduct standard is the FX Global Code, a set of principles of good practice for the wholesale market, written jointly by public authorities and the firms that trade in it across 20 jurisdictions, and last updated in December 2024.

The Code is voluntary. Institutions adopt it by publishing a Statement of Commitment, and those statements are collected in public registers indexed by the Global Foreign Exchange Committee. Adherence is therefore something that can be checked for a named institution rather than assumed for the market.

Two limits are worth stating plainly. The Code addresses wholesale conduct, so it does not govern the retail relationship a trader holds with a broker, which sits with that broker regulator. And a voluntary standard has no enforcement of its own; what it provides is a published expectation against which behaviour can be measured.

None of the comparable explanations read for this page mentions the Code, which leaves a reader with a description of a market and no account of the rules its participants have signed up to.

The wholesale layer sets the conditions a broker prices against, but almost everything a trader can act on sits one level down, in the broker relationship and the platform. The next step from here is how to assess a broker against what it discloses.