Foreign Exchange dealers are the large commercial banks. They buy and sell currency on behalf of their clients and they also make speculative transactions themselves. Such speculative transactions may account for up to 33% of the profits of commercial banks.

The dealers agree to buy or sell currency with their counterparts worldwide and initiate the deal by making a bid/ask offer. The 'bid' or 'buy' price is slightly lower than the exchange rate and the 'ask' or 'sell' price is slightly higher than the exchange rate.

The difference in value covers the cost of transaction. In other words, it pays the traders and covers profits and overheads. The differene in the exchange rate and its 'buy' and 'sell' rate is very small, which is a reflection of the low transaction costs in this market.

At this international dealing level, the bid/ask offer is only valid for a few seconds, and the dealers make their decisons (i.e. to accept or reject the bid/ask offer) immediately. Such deals may be for either spot deals or forward deals.

Spot deals are for currencies that are for immediate delivery, with full settlement within two working days. Forward deals are currencies due to be delivered within a fixed period, normally more than one day and less than a year. In the vast majority of cases, the delivery periods are in the region of days.