h...m
I guess then FX futures much better ,
That depends on what the trader is looking for. Many fx trader use spot fx brokers with success. Also if you believe the futures market is transparent with little or no scamming of the customer then you have a lot to learn.
Peter
SO are you saying the big established exchanges scam the retail trader? Does ICE/ CME/ CBOT do stop running? like many FX brokers are accused of!
Sure the big players would have a co lo advantage etc but the exchange is a exchange, Judge and Prosecutor are separate.
How many "Exchanges" have been shut down as comapred to the OTC brokers in this space?
Also the MM model does not exist in terms of true exchange ( lets not confuse the term Market makers within the exchange context as compared to the broker himself being a market maker
My point is why bother with this counter party issue at all when a more transparent alternative is present. Jutste becasue the OTC FX platform looks more attractive!
Unfortunately the FX futures is not marketed as effectively in retail space as the "OTC " product is
In simple term example with a long swing trade,
On a exchange the exchange does not bother if you win or loose
On a OTC the Broker MAY be in conflict may be not. We will never know and hence the model creats another risk dimension.. simple logic
No, I am not saying that. You are putting words in my mouth. Read my post again. Nowhere do I say that the exchanges themselves are scamming anyone. Again you are not informed about how things work. You are so anti spot fx brokers that you won't take time to educate yourself.
Peter
Peter
I am not anti anything I am just looking at facts! and have no vested interest..
My only vested interest is transparency from trader's point of view
I dont know why are you making it personal?
If you think "won't take time to educate yourself." why dont you make it simple and show the bad parts of a true exchange!
OTC fx has it's place but that does not mean that is the only thing and there are alternatives which are in some respect better in some respect may be not
Exchange Traded = Standardizes = Market Risk
OTC Traded = Customized = Market Risk + Counterparty Risk How can anybody ignore this?
Do educate me please I am an ignorant bafoon , bring all the dirty laundry of Exchange and exchange participants and do the same for OTC FX
We recently completed a study that examined the quality of execution for FXCM LTD (aka FXCM UK) client orders versus the three largest FX trading venues globally, venues widely considered to represent the benchmark for reliable FX pricing. We wanted to explain why FXCM's pricing is better for retail clients.
The results of this study show FXCM LTD retail client order prices to be better than the Futures Market and Interbank Market prices for FX.*
As you can see below, FXCM's execution of orders provides customers significant advantages for FX. We believe in so doing, our traders can be confident and trust in FXCM as their broker.
Study conclusions
FXCM LTD was equal to or better than the quoted futures price 81.34% of the time compared to the spot equivalent quoted futures prices on the CME leading to potential savings of $42,529,156 for FXCM LTD clients.
- BETTER than the Futures price: 74.97%
- Equal to the Futures price: 6.37%
- Worse than the Futures price: 18.61%
Click here for a full presentation of the study and an in-depth FAQ.
How is FXCM able to offer a better price at which the client’s order is executed versus the quoted price on the futures market?
To answer this question it’s important to understand 1) the characteristics of an institutional market maker and 2) how market makers can operate on exchange vs. with FXCM.
First, trading at the institutional level has become a game of speed in which the lifespan of a trade is often measured in milliseconds. Some top market participants are looking to flip positions in less than a second and their main concern is to be profitable in a trade whose typical lifespan is measured in milliseconds. In order to make trading decisions and place orders at these incredible speeds, some institutions spend millions of dollars on high tech trading equipment and services to be the fastest liquidity provider possible. This entails fast market data access, collocated servers, high speed data transmission for order routing, etc. all of which is very expensive.
In a trading venue filled with these super‐fast traders, the slowest person loses the race to be the first to trade. Therefore, a safer route for institutional liquidity providers to take is to quote smaller sizes at wider prices to minimize margin of error of being picked off. Mistakes are very costly. If your algorithm is wrong, it’s better to be wrong at a smaller amount and wider price. The risks involved makes market making a fishing expedition based on speed where quality pricing and liquidity could be punished. The competition in the highly sophisticated institutional market is too great to provide the best pricing possible along with deep liquidity if the institution is exposed to the risk of being picked off by other fast and sophisticated market participants.
FXCM's NDD forex execution is different in that our liquidity providers (also known as market makers) are only allowed to be price makers on our Retail Client stream, and only a Retail Client can take a price from the liquidity provider. Liquidity provider A is not able to take a price from liquidity provider B through FXCM. This gives our liquidity providers the ability to make a market based on quality of price and liquidity rather than speed to protect against being picked off by predatory trading from other liquidity providers.
Second, compare the trading profile of the super fast market maker to that of an average retail trader. A retail trader is more likely to be using a regular internet connection on a home or smartphone while gather data from charts, news websites, etc. and making these trading decisions manually. The retail client takes a figurative eternity to perform a trade the institutional liquidity provider can complete in possibly microseconds. The lifespan of a retail trade from open to close is then measured in seconds, minutes, or perhaps longer.
As you can see, the profile of participants trading behavior at the institutional level is significantly different than the profile of participants at the retail level and therein lies the key to creating the trading environment for our liquidity providers to give better pricing to retail clients. On FXCM's platform, the liquidity providers do not have to constantly watch their back, worrying about predatory high frequency trading because the liquidity providers are only allowed to be price makers for our Retail Clients. They know that liquidity provider A (who may be a predatory liquidity provider on the futures or institutional market) is not allowed to cross over and take a price from liquidity provider B. Each liquidity provider is only allowed to take orders from Retail Clients. This creates a trading environment for liquidity providers to offer tighter pricing without fear of being picked off by another liquidity provider’s high speed trading algorithm.
I would recommend that you take a look at the study and FAQ linked above as we go into a lot more detail about the study results and market dynamics. :smart:
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* The study does not in away way attempt to represent that FXCM maintains a particular capacity or performance level. The figures in this study are provided for information purposes only, and are not intended for trading purposes or advice. FXCM is not liable for any information errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Past results are not indicative of future performance.
Material Assumptions
FXCM’s Retail Clients are defined as individual, joint, and corporate accounts trading on our retail price stream.
The comparison to each of the Futures and Interbank data is made at the time that the FXCM client order is executed. Normal market slippage and slippage due to rejections by liquidity providers are already included by the time the FXCM client order is executed. However, there is an assumption that there is no slippage on the Futures or Interbank market data.
In order to maintain consistency, Futures Market data and Interbank data used the same acceptable ranges in market trades. The summary of findings is based on the assumption that the maximum acceptable difference between the FXCM price and the Interbank/Futures market price is 5 pips in either direction.
Fees that a participant would pay on the Futures or Interbank market, such as CME Exchange Fees, NFA Fees, FCM Fees, Clearing Fees, and other commissions, were excluded from the study. Similarly, FXCM Commissions are excluded from the study.
