Spread in the interbank market

At the interbank market, some market makers are called as price quoters who are obliged to make price quotations both for the bid rate and the offered rate at the same time, and other are called as position takers who take or hit the market prices which the market makers provide for. According to the request by a position taker, the market maker has to show his own price with considering the current market level and his own position. There does not exist the sole price because the forex market is different from the exchange traded products. He price is always moving, and therefore, the market makers would become necessary to quote the market prices with some spread widening as taking risks into consideration.

In the interbank convention, each bank sets a credit line to take the relevant counterparty risk. Each bank sets up the maximum limit of the outstanding, and then, there occurs "Never trade with such a bank". Most banks set the credit line in accordance with the rating or grades. It makes difficult for the lower rating banks to get the credit line from the higher rating banks. Even if the lower rating banks could get the credit line from the higher, the spread they actually trade would become wider. It is not simple how to decide the credit line for each bank because it is closely relating to the annual revenue target. In the forex market, the spread is getting two points or three between good names, while 5 to 10 points between the lower rating banks. It is needless to say that the spread should become wider when the price moving gets more rapidly.