Institutional Trading

Institutional trading can be characterized as individuals or entities with the ability to invest in securities that are not available to retail traders directly.

This includes specific investments such as FX forwards or swaps, among others.

There are many types of players in the institutional trading space. These include central banks, retail and commercial banks, internet banks, credit unions, savings, and loan associations, investment banks, investment companies, brokerage firms, insurance companies, and mortgage companies.

The biggest institutional investors in the United States includes Blackrock, Vanguard Asset Management, State Street Global Advisors, and BNY Mellon Investors.

Institutional traders are making trades for banks, insurance companies, or even hedge funds.

It is estimated that institutional forex investors control approximately 70% of the market.

By extension, retail traders make up only about 5.5% of the market, while rest is comprised of central banks such as the US Federal Reserve and the European Central Bank (ECB).

Institutional Traders Explained

Institutional traders buy and sell securities for accounts they manage for a group or institution. Institutional investors buy and trade in all markets and on all exchanges.

Only certifiable individuals can become institutional traders. To be an institutional trader, you must take exams to become a registered representative or broker.

Institutional traders buy and sell securities for accounts they manage for a group or institution.

Pension funds, mutual fund families, insurance companies, and exchange-traded funds (ETFs) are also familiar assets used by institutional traders.

Of note, institutional traders can affect the market in ways that ordinary retail traders cannot. Since institutional traders can engage in larger volumes, these trades potentially can greatly impact the share price of a security.

As such, many traders often may split trades among various brokers or over time in order to not make a material impact.