Currency Futures / IB

[myoung]

Is anyone here currently trading currency futures with Interactive Brokers? If so, by experience, how does this compare in terms of liquidity, spreads & slippage to the spot / FX cash market?

 

[Jack o'Clubs]

Fine on all fronts. I used to trade spot, now only do futures and have not had any issues. Spreads of a pip, no real liquidity or slippage problems in reasonably stable markets. Of course if you trade the news, etc, things can be a bit different so it depends on your strategy, but I've not noticed it to be markedly different (and maybe a little better) than the spot market at these times - probably depends more on how good your forex broker is. You have the advantage that CME currency is a 'real' market, whilst as I understand it many forex brokers are essentially bucket shops. By the way, I use IB for some futures but not for forex - FuturesBetting a better prospect, IMO.

 

[myoung]

Fine on all fronts. I used to trade spot, now only do futures and have not had any issues. Spreads of a pip, no real liquidity or slippage problems in reasonably stable markets. Of course if you trade the news, etc, things can be a bit different so it depends on your strategy, but I've not noticed it to be markedly different (and maybe a little better) than the spot market at these times - probably depends more on how good your forex broker is. By the way, I use IB for some futures but not for forex - FuturesBetting a better prospect, IMO.

I do trade the news and have been doing this through my spreadbet firm for a while now but wanted to move over to IB in order that I may step it up a gear, so to speak.

Liquidity, I would assume, is better in the cash over the futures. Am I therefore correct in thinking if I were to trade the cash market I would have more sucess in terms of quicker execution, reduced slippage etc than the futures?

I have been living under the umbrella of my speadbet firm for too long so please forgive my ignornance in this arena.

Is it possible you could elaborate why you consider FuturesBetting being a better prospect over IB?

 

[Jack o'Clubs]

I do trade the news and have been doing this through my spreadbet firm for a while now but wanted to move over to IB in order that I may step it up a gear, so to speak.

Liquidity, I would assume, is better in the cash over the futures. Am I therefore correct in thinking if I were to trade the cash market I would have more sucess in terms of quicker execution, reduced slippage etc than the futures?

I have been living under the umbrella of my speadbet firm for too long so please forgive my ignornance in this arena.

I don't have stats comparing the two - maybe someone else can help - but if you're trading big currency pairs, futures should not be a problem for liquidity or slippage - relative to spot. Certainly total daily CME FX volumes are in the tens of $billions. Yes, that's much much smaller than the global FX market, but its still a huge number. I moved to futures originally because at the time I was trading news, and was fed up of requotes in the spot market. I felt that with futures at least I could see the market depth and position myself accordingly. Certainly speed of execution will not be an issue if you're just trading at market - your deal will get matched instantly. You'd need to be trading in some size to notice liquidity issues - as I write, the Euro has >100 contracts on the bid and >50 on the offer on a one-pip spread.

Is it possible you could elaborate why FuturesBetting is a better prospect in your opinion?

Have a look at the FB thread here, but in a nutshell it's because they offer DMA futures in a spreadbet 'wrapper', so the best of both worlds. http://www.trade2win.com/boards/showthread.php?t=16941&highlight=futuresbetting

 

[Directional]

myoung,
JOC is right on the nail - futures as a centralised marketplace generally have massive liquidity compared to the spot markets made by the individual bucket shops. there is a bit of info about the futures vs spot arguments here: http://www.trade2win.com/boards/showthread.php?t=20519

Globex futures is the 3rd largest currency marketplace, after EBS and Reuters.

excerpt from that other thread:
remember that when the bucket shops tout the forex market as trading trillions each day, this is spread across hundreds of currency crosses. No individual retail forex broker comes close to the liquidity of the CME and Globex. When you have an account with a fx retailer, you trade its prices or not at all, subject additionally to the retailer's willingness to honor its prices -- and that is all the liquidity available to the customer. There isn't any more, as liquidity in other FX houses or ECN's is not transferrable. You are not trading in the spot market - you are trading against a bucket shop, so in reality there is no liquidity.

Globex has the third highest liquidity of ANY fx platform. Only EBS and Reuters FX beat it for liquidity. Remember that 1 Globex Euro futures contract is worth $125,000 notional currency, and with around 150,000+ contracts trading daily thats nearly $19BN trading on that one currency pair all in the same place, accessible by all - unlike EBS or Reuters.

Forex has a lot of $ business done for every currency cross in the world aggregate combining all transactions on all the disparate platforms and firms, but when you look at each pair individually at each firm, you start to understand that spot forex isnt as liquid as they want you to think.

If you put execution speed into the mix as well, globex will beat ANY fx platform including EBS - HANDS DOWN for execution speed. The OTC cash forex market is mostly used by traders or institutions who have genuine need to do business there for what ever reason, as in banks who need to deal in cash, spots or forwards as part of their business, but the markets that they access, such as EBS are generally closed to the majority of retail clients - hence why your average retail trader ends up dealing with bucket shops without really understanding the difference.

Futures also carry less risk than the OTC market - forex bucket shops are really the bottom of the pile - slow fills, massive counterparty risk (refco fx anyone), etc...

So you're absolutely right, hopefully FX Marketspace will be everything to everyone in spot.

 

[myoung]

Thank you Arbitrageur & Jack o' Clubs, very helpful and informative reading.

 

[notouch]

Interesting post Arbitrageur but it isn't a case of bucketshop v futures. The question related to IB so the real comparison is between futures on the one hand and the ECN/STP model like IdealPro and EFX on the other. In no way are IdealPro or EFX bucketshops and they do give you access to the true interbank fx market.

As for futuresbetting, are there any benefits of trading with them over IB apart from the (assumed) tax benefits?

 

[Directional]

true - the ECN model is the closest thing to "direct access" in the spot forex market.

IB's IdealPro is probably the best retail ECN type platform out there too - but it isnt giving you access to interbank rates - you have access to the limited liquidity pool provided by the ECN market makers and the other traders in the ECN board, the biggest MM I beleive is Timber Hill for IB's platform.

EBS and Reuters are the true "inter-bank" ECN's but remember that some interbank deals are still subject to massive croneyism and done counterparty to counterparty over the phone a not on the board at all.

It is quite probable that EBS and IdealPro would trade at different rates through-out the day due to differing liquidity pools, though I suppose its likely that Timber Hill may have access directly or indirectly to EBS or other liquidity and if IdealPro platform was significantly out of line they could arb it back.

 

[notouch]

I don't know about IdealPro but MB/EFX offer what they call a combined ECN/STP (straight through processing) model where prices come from and orders are sent directly to banks. I believe that is true interbank pricing and execution.

 

[wasp]

I am currently listening to a webiner from EFX and he has just said they are networked with 11 of the worlds largest banks.

quote "our technology is the first active ECN that will allow you trade with banks and other clients..."

 

[forexmentorprogram]

I am currently listening to a webiner from EFX and he has just said they are networked with 11 of the worlds largest banks.

quote "our technology is the first active ECN that will allow you trade with banks and other clients..."

Forex Mentor Program can get you direct Currenex access for qualified accounts, no dealing desk, straight access to the true interbank market. We also provide Free Software, Free Esignal Data and Free Training. The website is www.forexmentorprogram.com

 

[tradermig]

Liquidity non majors currencies

Hi,
Found your reply very interesting..I use IB to trade currencies futures, for the majors the liquidity is good but for other currencies such as the Rand, the HUF, The Real....the liquidity is non existant... also I wanto to trade asian currencies and it's impossible. Aaron offers me the possibility to trade most of asian currencies , heard that the liquidity is good withb them..
Any suggestion ? Is marketspce or Aaron (via Currenex) a better choice than IB in terms product offering, liquidity, crosses ?
Kind regards

myoung,
JOC is right on the nail - futures as a centralised marketplace generally have massive liquidity compared to the spot markets made by the individual bucket shops. there is a bit of info about the futures vs spot arguments here: http://www.trade2win.com/boards/showthread.php?t=20519

Globex futures is the 3rd largest currency marketplace, after EBS and Reuters.

excerpt from that other thread:
remember that when the bucket shops tout the forex market as trading trillions each day, this is spread across hundreds of currency crosses. No individual retail forex broker comes close to the liquidity of the CME and Globex. When you have an account with a fx retailer, you trade its prices or not at all, subject additionally to the retailer's willingness to honor its prices -- and that is all the liquidity available to the customer. There isn't any more, as liquidity in other FX houses or ECN's is not transferrable. You are not trading in the spot market - you are trading against a bucket shop, so in reality there is no liquidity.

Globex has the third highest liquidity of ANY fx platform. Only EBS and Reuters FX beat it for liquidity. Remember that 1 Globex Euro futures contract is worth $125,000 notional currency, and with around 150,000+ contracts trading daily thats nearly $19BN trading on that one currency pair all in the same place, accessible by all - unlike EBS or Reuters.

Forex has a lot of $ business done for every currency cross in the world aggregate combining all transactions on all the disparate platforms and firms, but when you look at each pair individually at each firm, you start to understand that spot forex isnt as liquid as they want you to think.

If you put execution speed into the mix as well, globex will beat ANY fx platform including EBS - HANDS DOWN for execution speed. The OTC cash forex market is mostly used by traders or institutions who have genuine need to do business there for what ever reason, as in banks who need to deal in cash, spots or forwards as part of their business, but the markets that they access, such as EBS are generally closed to the majority of retail clients - hence why your average retail trader ends up dealing with bucket shops without really understanding the difference.

Futures also carry less risk than the OTC market - forex bucket shops are really the bottom of the pile - slow fills, massive counterparty risk (refco fx anyone), etc...

So you're absolutely right, hopefully FX Marketspace will be everything to everyone in spot.

 

[yari123]

marketspace is for institutional or individuals with 20 million deposits

currenex 50k and above.

currenex is used by some quant funds. okay for most part.