An interdealer market is a specialized trading platform where transactions occur primarily between banks and financial institutions, usually operating over-the-counter (OTC) rather than on a centralized exchange. It functions globally, characterized by tight bid-ask spreads, and involve large transactions.
The foreign exchange interdealer market is one of the better-known such markets and is characterized by large transaction sizes and tight bid-ask spreads. Currency transactions in the interdealer market can either be speculative (initiated with the sole intention of profiting from a currency move) or customer-driven (by an institution’s corporate clients, such as exporters and importers, for example).
