Your information here is incorrect. The banks providing liquidity to FXCM take mini lots of 10k in addition to 100k standard lots. Your statement may have been correct in the early 2000’s when you traded with FXCM, but this is no longer true. Technology progresses.
This has nothing to do with "technology," Jason. I said that
Interbank does not deal in fractional lots and the don't - nothing has change there.
Are you saying that FXCM offers Straight Through Processing to
Interbank for its customers? We already know that's incorrect. Why? Because I've already pointed out that FXCM manipulates the inbound Bid/Ask to fuel its revenue model. FXCM makes revenues by artificially widening the Bid/Ask to install its "commission like" fee. Yet, FXCM Advertises that it
does not charge a commission. Not only is this confusing to the Newbie, it is flat out incorrect in at least two (2) dimensions:
a) Cost Structure of the Trade to the Newbie.
b) Whether or not the Newbie is actually dealing direct with Interbank through its Intermediary via STP.
In the case of FXCM, neither can be true, as I will demonstrate later in this thread with some simple math and some rather interesting facts about the market players and what their turn-over is in this business.
I’m happy to announce that we are also preparing to offer No Dealing Desk execution for our micro clients as well....
The reason that it was and
is still unheard of in the Forex, is that the real Interbank System, composed of some of the world's largest banks, model funds and commercial financial institutions (just to name a few), have
never dealt in fractional lots - period. This entire concept of fractional lot transactions, is based entirely on the fact that "Brokers" are manipulating incoming prices seen by their Customers on their respective trading platforms (FXCM included) to include a "mark-up" and to business proposition for what had not been in existence just 18 years go, called the Retail Forex Spot Market/Industry.
You've found a way to carve out a niche and execute a business case. I've got no problem with that. What I have a problem with, is the fact that you've been telling people for years that FXCM carries its Customer direct to Interbank, which is totally incorrect. There is no "Mini Lot Notional Value" concept and/or language being used between the institutions that make up Interbank and that deal with each other daily. The primarily deal in fractions of
Yards not Mini Lots.
Firms like FXCM and others, take multiple positions from various customers and push them through an aggregation algorithm that consolidates desperate customer positions into singular blocks that can be transacted in the real Interbank market. If you don't do this or can't do this, then you are forced to either build your own
proprietary pool of liquidity and then market the heck out of it as "Bank" driven, or you must reside your firm to being a PayPal Bucket House and exploit other marketing niches such as the Mini and Micro Lot worlds, where the people you engage don't typically have a clue about what they are doing and/or why they are doing it.
This means that BEFORE any individual FXCM customer gets off-set anywhere near Interbank, FXCM must either 'batch' the trade into an aggregate and THEN pass it along as a block [if calculations permit], or
trade against it as the in-house counter to the customers position. That Trader has no idea that their trade has been "pooled," "aggregated" and/or "transformed" into a larger block, with their original trade often times never seeing the light of day at the actual Interbank level on an individual basis and I can think of one of your current ASP customers right now who does this very thing to their own Customer transactions.
Now, this "Mini Lot" concept that FXCM offers, is made possible not because
Interbank deals in "Mini Lots," but because FXCM "might have" worked a deal with its proprietary pool members, to accept smaller fractional sizes. But, FXCM
does not make a market for every single player in Interbank, not even close. FXCM has a
proprietary list of liquidity providers under its own platform and many of them are NOT large scale Interbank players, while some, I am sure, might be.
Do you think that I can enter a trade on Deutsche Bank's Autobahn FX platform, or the UBS FX Trade platform, or the Barclays BARX platform, or the HSBCnet FX Network platform, or the Standard Chartered CT platform; in fractional, so-called "Mini Lots?" To the contrary, FXCM and the rest of the firms like it, have put together a proprietary pricing pool, that in no way should be confused by the Newbie as having much to do with Interbank pricing depth and breadth. FXCM has put together and maintains a Retail FX Price Pool. That is not - I repeat - not truly representative of Interbank in any real depth or dimension.
Of course, simply posting the full names of the "Banks" that FXCM uses, would be a good start to ending this debate. But, how many times has that request been completely ignored.
Our FXCM Micro traders have since placed over 30 million trades totaling 200 billion in notional volume,
Hello? That's approximately 0.00015 trades per notional dollar. Do you see anything wrong with this picture?
...and the banks have changed their minds. Where there’s a will, there’s a way, and the banks have realized the opportunity in taking even these trades. As one of the largest forex brokers, the amount of volume we bring to the table allows us to negotiate this type of service to pass along to our traders.
Ok, fine - but stop tell the Newbie that you are offering STP to Interbank, that's all! Stop telling them this because it is not true. You take positions in-house
against your customers and/or you manipulate the Bid/Ask of your proprietary liquidity pool, before you extract your "commission like" cut and pass their trade on for proprietary off-setting within your proprietary liquidity pool. But, to continue to author the story as if FXCM was just like UBS or Standard Chartered Bank, is simply not correct and it confusing the heck out of the Newbie trying to wrap their head around this subject for the first time.
Do you think the best bid and offer price magically sorts itself out on its own and then displays this information on the platform? Of course not, the pricing engine looks at the 10 bid and ask prices being quoted, and then the best bid/ask price is streamed onto the platform.
Well, sure - after you "mark-up" the spread to collect your
"acts like a commission" cut, while never once marketing FXCM as a
commission based FX Broker. That's my point, Jason. You don't offer Level and Transparent type pricing with market depth and market breadth that shows the FXCM customer
where the "best Bid" price is located along with its
real volume. This is what a Broker attempting to offer real clarity would offer its Customers, IMO.
Assuming there is a 1 pip mark-up on GBP/USD, the final pricing you see on the platform would be 1.5042/1.5045 for a 3 pip spread on GBP/USD. FXCM is compensated for it’s services through a mark-up on the spread as explained on the website and what you pointed out. This is the fee paid for using FXCM’s services.
Yeah, well - I don't buy the "Fixed Pip" argument - not for one millisecond. Where is it fixed? How does FXCM determine what the "Fix" should be? And, define "Fixed" anyway, Jason? I mean, is it fixed for "today" but not "tomorrow?" Is it fixed for "this week" but not "next week?" Is it fixed for "this hour" but not
during the news driven hour? Who fixes the "mark-up" at FXCM, exactly?
Fee for Service? Sure, I've got no problem at all with FXCM making an honest buck. My problem comes when you Broker's widen the spread
near the Stop on purpose, just so the Stop itself gets triggered
when you took the other side of the trade. Look, I'm not one of these Stop Hunting Theorists. That makes no sense to me. However, I do believe in
Stop Trigger Approximations (my term, don't bother looking it up) by Brokers who see a
clustering of Stops at or near a specific location/level, and then who use their so-called "Trade Management" Add-On (server side model) to "Widen The Spread" at or near the "cluster" to take-out what the actual
Interbank market NEVER ticked.
Now, FXCM might not be a "Stop Hunter," but are you telling me that FXCM is not a Stop Trigger Approximation artist in disguise? You can deny it if you want - I would not be surprised if you did. I'm just here to let the Newbies in on what I think after many years in this business - that's all.
On the FX Trading Station II, this entire process in the pricing engine occurrs with 10 separate banks providing liquidity....
Can you name these "Banks" so I can verify their Charter and their existence in the BIS triennial report?
Suppose you want to buy GBP/USD and the current market price you see on the platform is 1.5045 and assume that the mark-up on the buy price is 1 pip.....
Why not simply code the platform to show the Trader what
each of your proprietary liquidity providers (you call a "Bank") is offering and THEN show the FXCM "mark-up/commission" next to it? That would offer the Trader a much better idea of where the broader market might be headed, what the
real cost of the trade looks like and depth and breadth confirmation prior to execution. All things any good Trader should know and understand prior to execution. A real trading platform worth its weight in salt would offer this, or at least something approximating this with no questions asked.
When you press the buy button, the order is sent to FXCM, and FXCM routes the order to Bank A to execute a trade at the price 1.5044.
This is incorrect as far as I am concerned, not to mention very deceptive for the Newbie.
a) How does the Newbie know that "Bank A" still offers the best price at time of execution, if the Trader can't see depth, breadth and volume offered by the proprietary FXCM pool? The Trader, will have to
assume and accept that the FXCM algorithm is working in their (the Trader's) best interest and accurately providing "Best Bid."
b) Is that a realistic assumption that Trader's should be asked to make in this seriously flawed FX Broker environment where scams are the rule rather than the exception?
c) Why not simply code the platform to SHOW the Trader what "Best Bid" looks like and WHERE "Best Bid" originates? That would demonstrate real transparency on the part of FXCM, if it would do that.
d) Since you argue (above) that FXCM offers STP to Interbank, I will ask you yet again, how is it possible for FXCM to pass through fractional lots to a system that's been around far longer than FXCM and that
does not deal in fractional lot sizing? Are you possibly confusing Interbank with FXCM's Proprietary Pool of private players?
I'm sorry, but
10 banks does not make-up even the tiniest of majority of the Interbank pool of liquidity. So when you say "Best Bid" - how does FXCM have the slightest clue what "Best Bid" truly looks like juxtaposed against the real Interbank global network?
Regardless of the amount you make or lose on the trade, FXCM is left with 1 pip. Your profit or loss is not FXCM’s loss or gain since we are not acting as a market maker on No Dealing Desk execution. Neither is slippage an additional gain for FXCM since the same pip amount is paid.
Sure, if it were true No Dealing Desk
AND FXCM were offering STP to the actual Interbank market - but that is not the case because 10 Banks is not full Interbank spectrum - not even close. Which, of course, continues to beg the question that I ask above regarding Proprietary Pools -vs- Real Full Spectrum Interbank Liquidity.
If checking the website, one would discover there is no separation between mini and standard accounts.....
Not if the deal is being done at true Interbank levels. Again, you keep saying "the Banks will" this and "the Banks will" that. The entities that you call "Banks" have yet to be revealed either on the FXCM website
(like some of your competition does) nor inside this thread.
Again, Newbies need to fully understand the differential between a Market Makers Proprietary List of Business Partners (some of which will be banks and some will not) -vs- the real Interbank market,
which is Global in scope with a very high spectrum of variability in pricing and volume available.
It says no entry order restrictions because you can place it within 1 pip of the forex market. Here’s the exact quote from the FXCM UK website “Place Entry Orders and Stops/Limits within 1 pip of the forex market. Any order whether it be market order or entry order has a restriction of 50 million notional per trade.
Then why does the Front page of the FXCM main website say that there is
No Deal Size Limitation - period?
Why is this the case? There is not unlimited liquidity at each price.
Oh, I see. :idea:
Jason, this was a $3.2 Trillion
per day market in 2007, with a 3 year growth rate of approximately 69% and no end in sight for that rate of growth. It was projected to be over $5.4 Trillion
per day at the end of 2010, by a very reputable source. So, let's do some fairly uncomplicated mathematics here, shall we.
Using $5 Trillion per day, $50 million yields a quotient of precisely 0.00001% of total daily notional turn-over. Now, before you go math guru on me, let me adjust this figure DOWN by saying that of course, not all $5 Trillion turn-over in FX is strictly pair/spot based transaction totals. Excluding swaps (because they represented more than half the growth rate between 2004 to 2007), outright forward contracts (which grew by 80% internally the same period), hedging activity, etc.; you are left with just spot, which grew by itself by
59% for the exact same period of 2004 to 2007, setting the stage for the 2010 expectations. Note that spot growth was greater from 2001 to 2004, than from 2004 to 2007. [I'm presenting all values in USD for ease of use.]
Let's move on to Banks -
real Banks, Jason.
In 2007, the dispersion of FX turn-over with the Banks that make up the vast majority of
real liquidity in the Interbank system, shows that the U.K., Hong Kong, Singapore and the United States, led the turn-over activity with
75% of the total turn-over being led by Banks from ten (10) different countries. Not merely "10 Banks" but 10 different countries. In 2007, the four most turned-over currencies were the:
USD, EURO, JPY and the GBP with NZD, CAD, CHF, CNY and a few others picking up the rear.
The Daily turn-over by pair was as follows for 2007, Jason:
EURUSD =
$840 BLN per day
USDJPY =
$397 BLN per day
GBPUSD =
$361 BLN per day
AUDUSD =
$175 BLN per day
USDCHF =
$143 BLN per day
USDCAD =
$115 BLN per day
Excluding EURJPY, EURGBP and EURCHF (the Triple "A" Ball Club) whose grand total Daily turn-over for 2007 was a combined
$188 BLN per day alone and the remaining USD/Other and EUR/Other whose Daily grand total turn-over was a "tiny"
$684 BLN per day, you are left with a boiled down representation of
mainstream FX Daily turn-over of a very "small"
$2.031 Trillion PER DAY.
Now, all joking aside about small numbers. If you scale that number up by approximately 59% growth [projected], you end up with between
$2.031 to $3.229 Trillion PER DAY being traded in FX Spot
ONLY between 2007 and the projected 2010 event horizon.
Now, can you explain to us exactly WHY FXCM, with its
"Banks" offering the best liquidity anywhere in the Retail FX business food chain, has decided to classify a lousy
$50 million notional, as something that would
most likely trigger a "slip and fall" merely because it was clicked into the market at one time? Given the scope of the numbers just put up here, does this make any sense to you?
$50MM is approximately 0.000024% of $2.031 Trillion. So, you are saying that FXCM's "deep pool of liquidity" is not capable of a singular transaction that nets less than a fraction of a fraction of a fraction of 1% of the total spot market? And, that if you attempted to enter the market at one time with such
massive sums, it would immediately trigger not "Apocalypse Now" - but Apocalypse
Right Now among the "Banks" in the FXCM pool?
Is this proof positive that FXCM is mostly a Bucket Shop and not a real STP Interbank Intermediary? Have I not just driven the last nail into the coffin of FXCM being a true STP "FX Broker?" What's the other logical alternative explanation for why FXCM considers $50MM to be Apocalyptic and virtually guaranteed to trigger a "slip and fall" routine?
If you place an order for 50 million, chances are you will be slipped.
Yes, indeed. Slipped right into no execution land. And, WHY? Because FXCM can't handle 0.000025% of the total spot market? Is that a justification for getting "slipped," or an
excuse for getting "slipped?" Or, maybe it is just more proof that when you trade with FXCM, you can't possibly be trading the real Interbank market to anywhere near its depth, breadth and/or liquidity.
Most profesional traders will instead scale into their positions even if it’s 10 million at a time so as not to show their entire “hand” on what they are doing to the market.
Professional Traders. Are you certain about that?
We are not talking about Cost Basis (equity) here. The numbers that I refer to above are taken straight from BIS and they represent
notional value in USD not individual transaction Cost Basis to make the deal. So, "scaling" a lousy $10MM
notional is definitely not the same thing as scaling $10MM Cost Basis with its associated leverage.
Tell me, who would possibly be so overly concerned with somebody coming to market with a small $50MM notional at one click, other than Bucket Shops and Brokers taking the
other side of your trade?
Do you think Citibank cares about my $50MM notional coming to market in one click? These guys are tossing around
billions per day. So, how is it that FXCM, with all of its glorious "liquidity" can't manage a drop in the proverbial "Bucket" with a singular click - unless it had to balance its
own books with the
opposing risk involved in the trade itself? Sooner or later, you were going to walk right into this trap.
Restrictions on stops, limits, and pending entry orders often occur with market makers or dealing desk brokers. This occurs because bank spreads are variable, while dealing desk market makers are normally fixed. Therefore, if a bank provides a 5 pip spread and the dealing desk broker is guaranteeing a 2 pip spread, the dealing desk broker will lose 3 pips on each trade. To mitigate this risk, restrictions on orders may be imposed.
Which is some of the finest nonsequitur reposition that I've seen from you yet in this thread, as it has absolutely nothing to do with the mathematics that I just put before you and the viewers of this thread.
If the dealing desk broker chooses a restriction of 5 pips then they have mitigated their risk to 7 pips (5 pip restriction + 2 pip spread). Unless bank spreads widen past 7 pips, the dealing desk broker is protected. During news events and volatile markets, bank spreads can easily widen beyond this amount, which is why dealing desk brokers may heighten restrictions when the market is likely to move.
Translation: Bucket Shops that trade against you, will widen the spread such that it prices the Trader right out the door, "when the market is likely to move."
I completely respect your opinion. Our decisions on the expo location are made on accessibility for our traders.
I still prefer the Broadmoor over the Vegas strip for serious minded business. And, I respect the fact that at least you opened up this thread and was willing to take some criticism on behalf of your employer. However, I think that I have sufficiently proven beyond a shadow of a doubt, that FXCM is a Bucket Shop. A gloriously decorated Bucket Shop, but a Bucket Shop nonetheless.
Thank you for dropping your quarter in the machine and selecting my favorite tune - The Forex! I look forward to your many replies as this is getting really good!
