But with FX what is the 'real market'?
Zero Spread WorldSpreads
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But with FX what is the 'real market'?
For us traders, it's FX Futures.
Great question the market in forex is the banks
capitalspreads
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The futures markets are not as deep or as tight as the Spot FX markets. LCG has 16 of the major quoting banks adding liquidity to our ECN platform.
Our Spot FX product (unregulated) is under the CapitalFX and LCGFX brands.
Our regulated FX product has two MT4 platforms . One DMA to the liquidity provision and one using LCG market maker provision. These are Rolling Spot FX products (effectively cfds)
Beyond this we have the Viking FX platform and our own cfd and spread betting platforms.
Simon
Our Spot FX product (unregulated) is under the CapitalFX and LCGFX brands.
Our regulated FX product has two MT4 platforms . One DMA to the liquidity provision and one using LCG market maker provision. These are Rolling Spot FX products (effectively cfds)
Beyond this we have the Viking FX platform and our own cfd and spread betting platforms.
Simon
Me too. I used to use Doris Stokes, but now I have to rely on Derren Brown.
Jason Rogers
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Hi Paulds11,
I’m happy that you found my post informative.
I’ve often heard dealing desk brokers say "there's always a market maker on the other side of your trade" as a way to imply there's no difference between a broker acting as the market maker (dealing desk execution) and a broker using NDD/STP execution, but there is a big difference between trading anonymously against multiple liquidity providers, and against a dealing desk broker where there is no anonymity.
Pricing on FXCM's NDD execution is set through price competition from 10+ liquidity providers and not by FXCM. When you trade with a dealing desk broker, the broker is making the market and determining the spread and pricing. So while an external source can be used to determine the price you see, the broker has the ability to ultimately determine pricing through the spread. Fixed spreads are usually a good indication you're trading through a dealing desk since spreads in the interbank market (and on currenex) are typically variable.
Orders on FXCM's NDD forex execution are hedged one for one with one of the 10+ liquidity providers. Whether your trade ends up as a profit or a loss has no impact on our bottom line since we're compensated through the pip mark-up which acts as a commission. The liquidity providers see all orders as coming from FXCM and they cannot single out any traders for re-quotes. A dealing desk broker takes the opposite side of your trade and may or may not offset the trade. It's their choice. There's no anonymity and your broker knows exactly what your positions are. This presents a conflict of interest since they control the pricing and liquidity which could result in a profit or loss on your position. The broker can also use re-quotes or order restrictions such as the minimum stop/loss distance from the current market price in order to manage their own risk. The broker's dealer is there to protect their own trading book even if it means re-quoting or restricting the placement of trades. Again as in my previous post, chances are you only receive a re-quote when the market is moving in your favor (trading in the direction the market is moving). Yet when you're trading against the market direction, you will likely have no problem entering or exiting a trade. Why do you think that is?
And lastly, all resting orders such as stops or limits are held on FXCM's servers and remain hidden from the liquidity providers. Your orders are anonymous. When you trade with a dealing desk broker, your stops and limits are held on your broker's server and are not anonymous. Dealing desk brokers likely vary on how much risk they are willing to accept which can impact how aggressive they are with re-quotes and order restrictions; however, the conflict of interest does exist and saying there's always a market maker somewhere on the other side of your trade tries to paint over this.
Jason
You have a point here regarding trades being anonymous on your NDD/STP model and if it is really the case one would not see any difference in execution if being profitable. But the problem that I have encountered with FXCM in the past is that it is hard to get a decent fill in fast markets. Whereas better fills can be obtained from other market makers/NDD/STP/ECN.
alphadude
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what I don't understand is; why i never get a dealer referral or requote on Interactive Brokers FX platform. I always get my market orders filled; regardless of market condition; be it in my favour or not.
My guess the reason for the above is purely because IB does not mark up the quotes; it pass it on to clients as is; and charges commission.
It would have been much better if FXCM changes the business model to charging commission; instead of quoting marked up prices.
Quoting marked prices; as indicated above in this forum; introduces conflict of interest.
Obviously marking up the quotes makes more $$ for the broker; and conceal the actual cost from clients who doesn't have a clue about the transaction cost.
On the other side; FXCM offers micro accounts; a value add service for retail clients. If not this platform; they won't be able to trade with small capital.
so in summary; here is my 2 cents for FX retail clients:
- if you are trading micro accounts; you have no choice but to trade with bucket shops who mark up the quotes
- if you are trading big account: 20K and above; go with brokers that charges commission; and DO NOT mark up the quotes
Jason Rogers
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Hi Pipstar,
During fast moving markets, whether the order is filled or not can be impacted by the order type submitted. FXCM traders have the ability to control slippage on market orders by selecting either “At Market” or “Market Range”. Choosing “At Market” instructs the order to fill at the best price available dependent on liquidity. The order will always be filled, but there’s no control over slippage. So you have execution certainty, but less price certainty.
The “Market Range” feature allows you to control slippage by specifying a range of prices you are willing to accept if the price you click on is not available. For example, if you choose a market range of 2 and the market price you click on is 94, the order will execute as long as the price is within +/- 2 pips of 94. And it will execute at the best price available in that range. This gives you more control over slippage, but constricting the market range can also mean that your order has a higher likelihood of being rejected, especially during fast moving markets. So you have less execution certainty, but more price certainty.
There’s a trade-off between each as you can see from the different order types, and how wide or small you set the market range.
Jason
My view is that no SB can offer zero spreads, look at it this way WorldSpreads said they did, but you had to tell them which way you were, buying or selling, its not rocket science is it, market trading 70-71 you call and tell them that I want to buy, they make a zero spread to you of 73 choice.
I use ProSpreads you have to be a higher volume trader to get there low spreads but worth a look.
To be fair zero spreads worked fine for me. If it was a market order, you did not need to specify the direction. I do miss them. The hedging was also useful. Apart from a small number of problems in execution, it was normally swift. Waiting for my money back is a real pain. Meanwhile, I have to look for an alternative to park my less than 50k capital. Looking at capitalspreads but they do not have hedging. CMC appear to be introducing it soon.
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