What is a Counterparty?

Counterparty Definition. A Counterparty is the opposite party in a currency transaction. If you are the buyer, the counterparty is the seller, and vice versa. The primary risk concern for both parties is will your respective counterparty live up to their settlement obligations by either delivering good funds or good title. In many circumstances, the counterparty in a financial transaction is unknown. However, in the forex world, your broker is your counterparty, whether they are a market maker or an Electronic Communication Network, or ECN. Each type of broker serves as a counterparty to the transaction regardless of how they may price for their services.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.