Forex Direct Dealing
Forex direct dealing is based on trading reciprocity. A market maker (the bank making or quoting a price) expects the bank that is calling to reciprocate with respect to making a price when called upon.
Direct dealing provides more trading discretion, as compared to dealing in the brokers' market. Sometimes traders take advantage of this characteristic.
Direct dealing used to be conducted mostly on the phone. Dealing errors were difficult to prove and even more difficult to settle. In order to increase the safety while doing the dealing, most banks tapped the phone lines on which trading were conducted. This measure was helpful in recording all the transaction details and enabling the dealers to allocate the responsibility for errors fairly. But tape recorders were unable to prevent trading errors. Direct dealing was forever changed in the mid -1980s, by the introduction of dealing systems.
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