The interbank market, as the name implies, is where banks trade currency, and it is frequently built on trades worth millions of pounds. The fact that these massive transactions take place in mere seconds may make many of us blush, but these trades take place every day between hundreds of privately owned banks all over the world.
Every trade between banks is made on a specific date and at a specific rate, and it is these agreed-upon rates that are reflected in the larger forex market. Rates adjust based on supply and demand and are "floating," which means there is no fixed location, such as the NYSE.

The interbank market is a global network where banks trade currencies and lend funds directly to one another. It sits at the core of the forex market and handles the largest transaction volumes. Major commercial and investment banks use the interbank market to manage liquidity, hedge currency exposure, and execute large foreign exchange deals. Prices formed here are known as interbank rates, which are typically tighter and more competitive than rates offered to retail traders. Trading is conducted electronically through dealing systems and direct bank relationships, operating almost 24 hours a day across major financial centres. For individual forex traders, access to the interbank market is indirect, usually through brokers that aggregate prices from multiple banks. Understanding this market helps traders see how true price discovery occurs and why spreads vary between brokers.