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Forex ECN brokerage start-up question

  • Post #1
  • Quote
  • First Post: May 8, 2007 11:38pm May 8, 2007 11:38pm
Hello
I wish to speak with people (industry professionals or not) interested in starting a forex ECN brokerage for small retail traders. The model would be similar to mbtrading's model, of variable low spread, commision, reputable business practice, great customer service

I also, wish to speak with industry professionals, as to what steps are be undertaken to complete my goal
Quoting jbbb
Hello
I wish to speak with people (industry professionals or not) interested in starting a forex ECN brokerage for small retail traders. The model would be similar to mbtrading's model, of variable low spread, commision, reputable business practice, great customer service

I also, wish to speak with industry professionals, as to what steps are be undertaken to complete my goal
Here's the math.

$10,000,000
12 C++ Programmers
6-12 months to develop banking relationships, sign contracts, put deposits with banks, and pipe into their system

End result: Priceless
FXChant Singing the World of Forex
Where are you pulling that info from?

$10M for an ECN start-up? Where did you get that info from?
Why 12 programmers and not 7?
and 6-12 months fostering banking relationships?

And how does any of that guarantee success?

Quoting fxchant
Here's the math.

$10,000,000
12 C++ Programmers
6-12 months to develop banking relationships, sign contracts, put deposits with banks, and pipe into their system

End result: Priceless
You can get the back bone set up by signing up with a liquidity provider and licensing the MT4 platfrom.
Quoting mrmikal
Where are you pulling that info from?

$10M for an ECN start-up? Where did you get that info from?
Why 12 programmers and not 7?
and 6-12 months fostering banking relationships?

And how does any of that guarantee success?
I was rounding. And were you imagining that banks would just offer you their best spreads to compete with their other platforms that already send the most orders to them?
FXChant Singing the World of Forex
Quoting mister_doodi
You can get the back bone set up by signing up with a liquidity provider and licensing the MT4 platfrom.
Last I heard, MT4 cost almost six figures up front to license, plus it doesn't work with an ECN.
FXChant Singing the World of Forex
Actually, I wasn't assuming anything...I was just trying to figure out where you got your information from. $10M as a round seems a bit off when the majority of the start-up brokers have quite a bit less than that.

My thought was that most start-ups that wanted to start an ECN model would probably just use currenex anyways.

Like I said, you just sort of put numbers out there, and I wasn't sure if they were just you exaggerating or if you actually had some hard proof to back up any of your claims because you've done something like this before.

Quoting fxchant
I was rounding. And were you imagining that banks would just offer you their best spreads to compete with their other platforms that already send the most orders to them?
How do you know that MT4 can't work with an ECN platform? I could have sworn someone spoke of a currenex platform integration with MT4, and I know there was an MBT effort to get order processing through MT4.

Quoting fxchant
Last I heard, MT4 cost almost six figures up front to license, plus it doesn't work with an ECN.
Quoting mrmikal
How do you know that MT4 can't work with an ECN platform? I could have sworn someone spoke of a currenex platform integration with MT4, and I know there was an MBT effort to get order processing through MT4.
i don't know how atcbrokers does it but they offer currenex feed into mt-4 platform, so yes you can use mt-4 with ecn.
If I Go Broke Trying Then I Will die happy.
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  • | Joined Oct 2006 | Status: always protect yourself | 129 Posts
Quoting jbbb
Hello
I wish to speak with people (industry professionals or not) interested in starting a forex ECN brokerage for small retail traders. The model would be similar to mbtrading's model, of variable low spread, commision, reputable business practice, great customer service

I also, wish to speak with industry professionals, as to what steps are be undertaken to complete my goal
I've thought of the the same thing before. If you decide to pull it off, I'll apply as a programmer ;-)

Quoting Moe
i don't know how atcbrokers does it but they offer currenex feed into mt-4 platform, so yes you can use mt-4 with ecn.
I don't see why it shouldn't work. The only thing you're probably missing out on are the Level II quotes / market depth info.
Quoting Moe
i don't know how atcbrokers does it but they offer currenex feed into mt-4 platform, so yes you can use mt-4 with ecn.
Daraknor is dedicated to finding ways to trade through an ECN with automation but doesn't think much of atcbroker after talking with them as he says on the first page of this thread:

http://www.forex-tsd.com/metatrader-...ght=atcbrokers

EFX, an ECN is making it clear their metatrader replacement to trade through them will be ready before the end of this year and expects the majors to have spreads less than a pip before long (plus of coarse EFX's commision). Post #672:

http://www.forexfactory.com/showthre...=10002&page=45
Quoting mrmikal
How do you know that MT4 can't work with an ECN platform? I could have sworn someone spoke of a currenex platform integration with MT4, and I know there was an MBT effort to get order processing through MT4.
MBT abandoned their attempt to integrate with MT4. I think there are some MBT reps who troll these forums so they might be better suited to answer this question, but in another forum I read a lengthy post from one of them explaining that they threw in the towel. I don't know exactly what the technical hang-up was, but their explanation alluded to the fact that the MT4 solution is (somehow) specifically architected to work with a dealing desk broker and it just wasn't working to use it through a direct ECN provider. Sorry to be cryptic, but the specifics would have to come from someone at MBT. (I specifically remember reading about this because I am an MBT client and was interested to see what they could do with MT4.)
I did hear that as well a while back, but I wasn't sure if it was just a rumor or not...doesn't matter, there is a currenex interface to MT4...

The real issue is that it probably doesn't take $10 million to do start this up...I think that's an extreme over-exaggeration of the capital requirement.

Quoting Bytebodger
MBT abandoned their attempt to integrate with MT4. I think there are some MBT reps who troll these forums so they might be better suited to answer this question, but in another forum I read a lengthy post from one of them explaining that they threw in the towel. I don't know exactly what the technical hang-up was, but their explanation alluded to the fact that the MT4 solution is (somehow) specifically architected to work with a dealing desk broker and it just wasn't working to use it through a direct ECN provider. Sorry to be cryptic, but the specifics would have to come from someone at MBT. (I specifically remember reading about this because I am an MBT client and was interested to see what they could do with MT4.)
Im sure that there is a way to do this. . . I would be interested in helping out. but the requirements would look more like this.

1. Licencing and Funding according to NFA requirements.
2. Setting up a credit line with a bunch of banks.
3. Use currenex for the backbone..Provide best market price available through MT4. (will take some work but shouldent be that hard to do) MT4 clients would execute directly on interbank.... MT4 might be able to handle this as a stand alone with multiple liquidity providers.
4. Get some customers...MT4 traders
5. Charge a small comission per trade ($50 per million.)

Clients orders would be passed through MT4 directly to the bank, no need to cover. Just charging a fee to provide a service.

Make some money....

Might be an interesting conversation to have with the metatrader folks...
Keep it simple stoopid....
the big problem with most of the retail brokers is that they only have credit lines set up 1-5 banks...
Keep it simple stoopid....
Quoting mrmikal
Actually, I wasn't assuming anything...I was just trying to figure out where you got your information from. $10M as a round seems a bit off when the majority of the start-up brokers have quite a bit less than that.

My thought was that most start-ups that wanted to start an ECN model would probably just use currenex anyways.

Like I said, you just sort of put numbers out there, and I wasn't sure if they were just you exaggerating or if you actually had some hard proof to back up any of your claims because you've done something like this before.
The number is accurate. You're assuming that it would be used for net cap, and that's why start-ups have less. It's true that you could start up an ECN with Currenex, but that wouldn't really give you anything that others don't have. To get a lot of banks to show their liquidity through your system, you'd have to post a deposit with each of them and negotiate what they will show your customers. You need to spend a lot of money on software in terms of routing those orders.

Could you set up an "ECN" that just routes to Currenex? Sure, but that will get you about 5 customers compared to what is really emerging out there. Just my two cents.
FXChant Singing the World of Forex
Quoting mrmikal
How do you know that MT4 can't work with an ECN platform? I could have sworn someone spoke of a currenex platform integration with MT4, and I know there was an MBT effort to get order processing through MT4.
There was an MT4 effort to do this, and they disclosed on these boards that it could not be done, and they tried hard.
FXChant Singing the World of Forex
Quoting Kurka Fund
Im sure that there is a way to do this. . . I would be interested in helping out. but the requirements would look more like this.

1. Licencing and Funding according to NFA requirements.
2. Setting up a credit line with a bunch of banks.
3. Use currenex for the backbone..Provide best market price available through MT4. (will take some work but shouldent be that hard to do) MT4 clients would execute directly on interbank.... MT4 might be able to handle this as a stand alone with multiple liquidity providers.
4. Get some customers...MT4 traders
5. Charge a small comission per trade ($50 per million.)

Clients orders would be passed through MT4 directly to the bank, no need to cover. Just charging a fee to provide a service.

Make some money....

Might be an interesting conversation to have with the metatrader folks...
That's a great post about what would be involved. I suspect that that is exactly the conversation that MB/EFX had with MT4. Here is what I think:

MT4 is paid a rebate from all deal desks that use their software (on top of the expensive licensing fees). So the question becomes, would they rather continue to make that type of money, or give all of that up to let customers of MT4 get a true ECN execution with a commission where they clearly wouldn't make enough. I think the answer is obvious, and I think this is exactly why MB/EFX gave up, as someone said in this thread. Their Project Omega platform is basically going to be their way to do this, would be my guess. They'll just take the best pieces of MT4 and offer it directly themselves. I have accounts with Oanda (for carry trades) and EFX (for active trading) and Currenex (which I don't use anymore). EFX's quotes have been just amazing lately. Half a pip on the EURUSD through much of the session, and the GBPUSD is under a pip too (plus their commissions, of course, but it's nicer to have the tight spreads and see where the buyers and sellers show size). So, if EFX gets it right, Project Omega will be the "killer-app" for this industry.

Then again, maybe I'm wrong and they aren't really heading that way at all. It seems like MT4 was a hotter thing 6-12 months ago. Either way, this is why the topic of this thread is so strange to me. With stuff like that coming, I think it is odd that anyone would think that they could just set up as an ECN through something like Currenex, all offering the same feed, and get many customers. You'd need a lot more money to get a lot of different liquidity feeds, plus develop software that is at a level that no one has. It's a $10,000,000 plus proposition to make it something that could become profitable, in my opinion.
FXChant Singing the World of Forex
OK...At this point, I think I'd like to presented with some hard evidence that the start up requirements for an ECN is $10 million. I don't think this is accurate, but I really don't know and you're adamant that the requirements you set forth are accurate...I suppose it could be...but that's why I'd like to know where your source material is from and some proof that I couldn't start a successful ECN business with only $5 million or 3.5 million? Why do I need exactly $10 million.

Quoting fxchant
The number is accurate. You're assuming that it would be used for net cap, and that's why start-ups have less. It's true that you could start up an ECN with Currenex, but that wouldn't really give you anything that others don't have. To get a lot of banks to show their liquidity through your system, you'd have to post a deposit with each of them and negotiate what they will show your customers. You need to spend a lot of money on software in terms of routing those orders.

Could you set up an "ECN" that just routes to Currenex? Sure, but that will get you about 5 customers compared to what is really emerging out there. Just my two cents.
Quoting mrmikal
OK...At this point, I think I'd like to presented with some hard evidence that the start up requirements for an ECN is $10 million. I don't think this is accurate, but I really don't know and you're adamant that the requirements you set forth are accurate...I suppose it could be...but that's why I'd like to know where your source material is from and some proof that I couldn't start a successful ECN business with only $5 million or 3.5 million? Why do I need exactly $10 million.
Read the rest of my posts. I think I already explained it pretty well. Again, you COULD open an ECN with one routing source for $3.5 million, and I don't think you'd be very successful since there are plenty of those out there.
FXChant Singing the World of Forex
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