• Trading different currencies electronically, banks can move billions of dollars daily between foreign exchanges.information and money image by Vladimir Melnik from Fotolia.com
  
  Foreign exchange markets move significant amounts of investment dollars between currencies daily, far outreaching the amount of capital moved and created in stock markets. However, the Securities Exchange Commission does not involve itself in these markets anywhere near the level the Commission works at in public stock markets.
  
  

Historical Treatment

• Over-the-Counter Sales. Prior to the 1970s, foreign exchange investment could be traded on an OTC basis by banks. Since the OTC market requires no regulation, the Securities Exchange Commission did not get involved. OTC trades represent nine out of 10 foreign exchange trades.
  
  Banking Powers. Foreign exchange remained within the express functions of banking, so government has generally treated it as a banking activity not requiring constant third-party review, similar to deposits, lending and borrowing.
  
  Buyer Beware. Due to little regulation, many bankers and buyers of currency exchange are on their own if an unscrupulous deal occurs. Buyers have to research their own purchases without much help from regulators to make their transactions safe. However, banks do maintain organized exchange U.S. markets in New York, Chicago and Philadelphia for buyers to use.
  
  

Rules of Trade

• Agreements. Foreign exchange trade rules are largely determined by the exchange trading market, known as Forex, and the trading banks involved in the trade. If all agree to the terms, the trade transaction agreement binds the trade. No government oversight gets involved.
  
  Hours of Trade. Foreign exchange can occur at any time of the day or night. The Securities Exchange Commission retains no rules or regulation binding trade activity to set hours as it does with the stock markets.
  
  

Compliance

• Audits and Review. Private examiners associated with the trading banks involved self-regulate and police foreign exchange trades. Government auditors from the Securities Exchange Commission do not get involved unless criminal matters are present. Banking regulators, however, may give scrutiny to any questionable transactions.
  
  Forex Policing. The banks themselves work to abide by Forex rules so as to maintain industry trade standards and common treatment of issues. This policing gets practiced by Forex personnel supported by the banks involved.