Conflict of Interest FXCM CFDs

[safvan]

Hello

I was looking into signing up for FXCM's CFD products to trade S&P500 index. I have been a prior customer of theirs when they used to offer managed forex accounts.

My main question is of conflict of interest. If FXCM is the market maker of the products offered then it goes against them to let the customers side be making money. If they have to take the position on the other side and the customer is right then it loses them money.

I would imagine this is the case with many other CFD product providers out there. If the chances of being successful CFD trader are slim because the market makers are against you then why do so many people go for it?

I have been trading non derivatives for while but contemplating going into CFDs. I believe for smaller amounts of orders it might be easy for them not to go after a client but say a client earning consistently $50k plus per week would hurt them bad not just fxcm but all others. If there is a limit to what you can do with CFDs product providers, why go with them?

If they do things differently over there please let me know.

 

[glyder]

I started looking into FXCM recently too (FX)
Don't FXCM have a no dealing desk execution?
Or is that only forex.

 

[safvan]

No Dealing Desk or NDD is for forex only. I am highly skeptical about competing with a broker when its creating the market for their own product. Thats like going to a casino and trying to win consistently from the house which they would not allow.

Correct if im wrong.

 

[glyder]

Yes there is a conflict if they are making the price, this is often the case, but FXCM offers no requotes on CFDs- though they are making the product they are not making the underlying market they follow.

They will need to have internal procedures to avoid conflicts from disadvantaging clients and have a conflcits of interest policy that they follow- you can ask them for this, its there for clients.
From their website ...

""" No Re-Quotes** on all index products, giving you fast, efficient trade execution without expensive re-quotes.

** Re-quotes occur when a trader makes an order at a specific price, but the order is rejected by a trading desk, and the trader is given a new price to accept or reject. Re-quotes can slow down your trading. FXCM cannot re-quote forex orders because those orders operate on straight through processing. FXCM also maintains a no re-quote policy for indices, metals, and oil, although those orders do not operate on straight through processing. Orders are executed at the best price available within the trader's parameters, subject to market liquidity at the time."""

 

[safvan]

Re qoutes do not stop market makers from spiking the price up and down just to stop out someone. I have read many horror stories regarding this. I also think this has something to do with success levels of an account as well. Nevertheless its tricky.

 

[safvan]

Well I would like to hear from a FXCM rep in regards to this topic.

 

[glyder]

I've asked if they can comment.
http://www.trade2win.com/boards/forex-brokers/88834-fxcm-discussion-36.html#post1580186

I know it might sound naive but
TBH you don't want to be too mistrustful until you have good reason to be.
We all need a broker and they need us too.
The market spikes plenty on its own, there are stop chasers and all sorts out there
all the time, don't blame the broker. Its just a part of the trading landscape.
You can even take advantage of it.

 

[safvan]

Glyder

You are correct and for small to medium sized accounts it really does not matter anyways. I was talking about the transitions from medium sized cfd trader to a large one and conflict of interests arising from them. Ah well DMA options are also available.

As long as a broker does not intentionally look to stop out cfd traders just because they are winning most of the time, all is reasonably acceptable. In true sense we may never know what happens behind the scenes unless its really monitored by a regulatory body.

 

[Jason Rogers]

Well I would like to hear from a FXCM rep in regards to this topic.

I've asked if they can comment.
http://www.trade2win.com/boards/forex-brokers/88834-fxcm-discussion-36.html#post1580186

Hi safvan and glyder,

Thanks for letting me know about the thread. Sometimes I get caught up on other forums or projects and forget to take a look around.

NDD execution applies to all forex transactions. While we offer no re-quote trading on the CFD products, FXCM is making a market and managing the risk for CFD (gold, silver, oil, stock index) trades being placed. Maybe some day we will be able to offer the same type of NDD execution for CFD products; however, even with FXCM making the market for the CFD products, we believe our no re-quote product provides a much better trading environment than what traders have to deal with at many of our spreadbet and CFD competitors. The CFD FAQ's on the website goes goes over a little more detail for trading and execution http://www.fxcm.co.uk/cfd-faqs-answer.jsp#q14 .

-Jason

 

[glyder]

Jason,

Thanks very much for your response.
No requote is a step in the right direction as far as I'm concerned.

 

[rcampbell]

I have an FXCM account and I am looking for another CFD provider. I only trade Oil (scalping) and here is my issues with FXCM and this trading method...

The spread on Oil is fixed at 5 ticks (too high for scalping), when you are looking to only profit 5 ticks at a time, you need a 10 tick move.
FXCM also limits where you can place your stop.. no closer than 10 ticks.

So if I was to go long at 100.00, my break even is 100.05
This makes my stop at 99.95 (the stop is only 5 ticks from my desired entry but I am still risking 10 ticks)
To get a 10 tick breathing room from where price actually is I would have to actually move it down another 5 ticks to 99.90 (putting 15 ticks at risk when only looking for a 5 tick profit). Not a good R/R ratio.

Why not let me put my stop where I want (when I need to get it in tighter to lock in profits of 2 or 3 ticks before closing out at 5 ticks)?
Why not make the spread variable so it tightens during high volume?


Also they are Market Makers and do not follow the underlying price tick for tick. You can easily see this if you have a signal service and watch the two feeds side by side. So the actually commodity price may move a tick or two up or down and it won't always reflect in your FXCM system. A very subtle difference, but when you are scalping these very small moves are noticable. I suspect they have some algorithm built into their system which works it in their favour when to move those 1 or two ticks on their system.

I'm sure these are not problems if you are looking for bigger moves, but FXCM CFD's are not good for scalping.

 

[safvan]

I think one needs a better broker for scalping related trading. There sure should be a few out there. I am not a scalper or even a day trader so cannot comment.

Volatile instruments usually test support/resistance levels at least 2 times during off peak hours and this is where a lot of people get stopped out. Its a good idea to trade business hours

 

[piparb]

I got 2 accounts with FXCM and I got no problems with them .
Only thing is , the spread is high all the time , not so well for scalpers like me .
Now I got a very fine low spread and a ultrafast fill , so I could scalp well .
To get this , you need a lot of things to do , it takes 5 years for me to understand
how the system works and why the order is not good filled .
To trade prof , you must have a Ninja Zen plattform , with a payed,
original feed , then you get want you see and want ....:cheesy:


have a nice datafeed:smart:

 

[rcampbell]

I agree with you piparb the spread is too high for us scalpers.
Which broker are you using Ninja Trader and Zen with?