NotQuiteRandom
Well-known member
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Hi,
I hate to interject in a conversation which has gone on for so long but I would like to point out a small error:
It is possible to trade (the majors) at spreads ranging from 0 to 1 pip plus a commission of $10 to $30 per million per round turn using liquidity amalgamators like Currenex.
There are others available but Currenex is the only one I have used.
The way it works is that they amalgamate the quotes from a dozen or more liquidity providers (UBS, Citi, Barclays, JPM etc) and show the best bid and ask from all of the market makers with a number below to show the size that they are good for that quote in.
Because numerous participants are making their best prices and everyone has a slightly different weighting on their book it is perfectly common to see 0 pip spreads where the bid is from one bank and the ask from another.
The commission is a fraction of a pip and is paid to the clearing broker who provides the service.
I have not used it for a few years but when I did it was great and I frequently got choice prices (no spread).
As this was novel to us at the time we wrote a little script which analysed the data coming through their API to see if the prices would ever cross over so we could score a 1 point (or more) arb. In the 10 months we were checking it never happened but we noted choice prices on EUR/USD over 30% of the time and the net spread was rarely more than a pip (usually half a pip).
Our minimum trade size was 5m back then so it is not for the retail punter but the point is that, if you have access to a wide range of liquidity providers, hedging fx need not cost any more than 1 pip.
If we add to this the effect of having many clients trading at the same time and the self hedging effect this has it is relatively inexpensive to hedge the residual overhang assuming that a flat VaR is desired.
On this basis I am perfectly willing to believe that 1 pip spread betting on the majors is possible for a vendor with a good set of hedging algorithms and access to enough liquidity.
Cheers,
NQR
I hate to interject in a conversation which has gone on for so long but I would like to point out a small error:
It is possible to trade (the majors) at spreads ranging from 0 to 1 pip plus a commission of $10 to $30 per million per round turn using liquidity amalgamators like Currenex.
There are others available but Currenex is the only one I have used.
The way it works is that they amalgamate the quotes from a dozen or more liquidity providers (UBS, Citi, Barclays, JPM etc) and show the best bid and ask from all of the market makers with a number below to show the size that they are good for that quote in.
Because numerous participants are making their best prices and everyone has a slightly different weighting on their book it is perfectly common to see 0 pip spreads where the bid is from one bank and the ask from another.
The commission is a fraction of a pip and is paid to the clearing broker who provides the service.
I have not used it for a few years but when I did it was great and I frequently got choice prices (no spread).
As this was novel to us at the time we wrote a little script which analysed the data coming through their API to see if the prices would ever cross over so we could score a 1 point (or more) arb. In the 10 months we were checking it never happened but we noted choice prices on EUR/USD over 30% of the time and the net spread was rarely more than a pip (usually half a pip).
Our minimum trade size was 5m back then so it is not for the retail punter but the point is that, if you have access to a wide range of liquidity providers, hedging fx need not cost any more than 1 pip.
If we add to this the effect of having many clients trading at the same time and the self hedging effect this has it is relatively inexpensive to hedge the residual overhang assuming that a flat VaR is desired.
On this basis I am perfectly willing to believe that 1 pip spread betting on the majors is possible for a vendor with a good set of hedging algorithms and access to enough liquidity.
Cheers,
NQR
. It all goes so swimmingly for a few days and then goes ballistic. Keep up the good work all.
