Do you think a "Forex exchange" website is a good idea?

[quantuz]

So...do you think it's a good business if a website acts as a forex broker that matches orders between its customers? Something like an ECN or a DMA broker...but without offering the orders on some intranet of other banks, hedge funds - but just its own customers? Like...on the fictional website "exforex.com" someone wants to buy 100,000 eur with usd and another customer wants to sell 100,000 eur. The website makes money of the spread - which here can be just one pip fixed. Because there are no middlemen and middlemen of middlemen and middlemen of middlemen of middlemen...etc. I guess this could be a very profitable idea...but there's one problem. In order for such orders to be matched, one will need say 100,000 customers or more. So if I start such website, I don't see how I will get thousands of customers so that the orders are easily matched, or at least some serious % of them. Even big stock exchanges like ASX have problems with liquidity, let alone a new website. I guess if I had one million in my bank account it would be much easier, but I can start such website with as low as just $50-$70k of my own money which won't be enough even for leverage. Would you use such a broker anyway?

10x and happy new year!

 

[BlueChilli]

no no no, do not waste your money like this....take your $50k to a casino and go to a rollette table and bet $1,000 on black, if you lose then bet $2,000 on black the next turn, if you still lose then bet $4,000 on black once again, if you still lose then bet $8,000 on black (keep on doubling until you win!!)...easy...red will eventually come up as it's a 49% chance of coming up!!

To make money, the margin for error (and thus profits) is always very very small...if you do not have big b$lls you will never win!!

 

[BlueChilli]

btw, the above does work for obvious reasons but I'll let you figure that out!!

 

[Hotch]

btw, the above does not work for obvious reasons but i'll let you figure that out!!

ftfy

 

[shadowninja]

I think Betfair's creators have created the equivalent for the stock market and therefore something similar to what you describe, taking commission as a percentage of profit made. I forget the name of the website.

 

[cheekychops]

I think Betfair's creators have created the equivalent for the stock market and therefore something similar to what you describe, taking commission as a percentage of profit made. I forget the name of the website.

I think you maybe thinking of Lmax.com - its backed by Goldman and the betfair people, base liquidity is provided by Goldman, JPM and Optiver one broker member plus all the traders liquidity. Runs as what they call an MTF much like a regulated exchange e.g cme, eurex. Had an account with them for a couple of weeks, been trading FX with them in the main. All good so far.

 

[shadowninja]

That rings a bell!

Disappointingly, there's no DOM ladder.

 

[wackypete2]

So...do you think it's a good business if a website acts as a forex broker that matches orders between its customers? Something like an ECN or a DMA broker...but without offering the orders on some intranet of other banks, hedge funds - but just its own customers? Like...on the fictional website "exforex.com" someone wants to buy 100,000 eur with usd and another customer wants to sell 100,000 eur. The website makes money of the spread - which here can be just one pip fixed. Because there are no middlemen and middlemen of middlemen and middlemen of middlemen of middlemen...etc. I guess this could be a very profitable idea...but there's one problem. In order for such orders to be matched, one will need say 100,000 customers or more. So if I start such website, I don't see how I will get thousands of customers so that the orders are easily matched, or at least some serious % of them. Even big stock exchanges like ASX have problems with liquidity, let alone a new website. I guess if I had one million in my bank account it would be much easier, but I can start such website with as low as just $50-$70k of my own money which won't be enough even for leverage. Would you use such a broker anyway?

10x and happy new year!

There's good money to be made by taking your $50-70k and trading it profitably for your self where you can limit your risk to suit your needs.

Peter

 

[ZT Strategy]

This does sound similar to the Betfair model. Their betting exchange is excellent and I almost always use their site compared to traditional bookmakers. However as yourself and others have said the problem is going to be liquidity and sufficient financial backing to support the exchange. You may need some serious capital backers to get something like this off the ground.

Trading spot forex on an exchange will be a more complicated arrangement than taking a defined risk bet on a site like betfair. Have you thought about how you will agree trading agreements between the two parties?

If you can sort this out what about limiting the exchange to trading only EUR/USD at the beginning. As the most popular currency pair there would be less of a liquidity problem and fewer customers required at the start. You could then add currency pairs dependent on demand as your customer base builds up.

 

[Bristolguy]

Well if you need a domain name i own one called www.forexeasy.co.uk which has very good potential. I have not expanded it at all, but the domain name is pretty valuable.

 

[wackypete2]

how about 4x4u4cheap.com

I'll sell ya a dozen of 'em

Peter