An FX Broker that pays for LIMIT orders?

I ran across the MB Trading broker about a week ago. (Not affiliated). I noticed a couple of things.

 

1. They have tight pip spreads
2. They pay you for placing 'Limit' orders.
3. They are a US based broker
4. They trade multiple markets - FX, Futures, Stocks, Options.
5. There is No Dealing desk
6. Free EXN network trading. This takes the dealing desk out of the equation.

I opened a DEMO account. They use the MT4 platform (modified). It takes a little dance around to set up but it works great. I have a couple of scalping EAs and so far they seem to work good.

The part I don't understand is their "MBT Pay For Limits" program. I guess if you place limit orders they pay you $2.95 p/100,00 units (1 Lot).

I doubt if I'll ever take advantage of it because I can not remember the last time I used a limit order to enter a trade.

They have a lot of accolades on their site praising how really great they are. I did a simple check and didn't find any bad press about them.

I'll keep the FX Factory posted on how they preform.
Good trading
RT...

BS! I made over thousand of trades in last 6 months but never received any requote.

Paying for limit order is not something new in equities but just fx. It is fair to get paid for providing liquidity and you paid for consuming liquidity.

Most people have no clue about ECN credits in equities since retail brokers don't give DMA (and even the ones who do often don't do pass-through on credits.)

It's because of both this and another issue (below) that I don't think we'll see a surge of ECN brokers offering credits anytime soon.

The main issue comes down to non-centralized exchange and a lack of NBBO.. the only way the ECN credit business model works on the equity space is that every order that is issued in to the ECN will be a source of revenue once executed (even though they are paying out for the limit order, they are charging whoever hit the order slightly more and capturing the spread. This is how ATS'/ECNs make money.)

In forex, however, there is no NBBO rule and there is no central source of execution reporting. Worse yet, the largest market entities that provide liquidity are banks and they don't deal with ECN style credits as they simply act as a market maker with their own buy and sell side quotes.

Why does this matter?

> ECN offers to pay for limits
> market price moves near your order making you the bid/offer price
> no one crosses the spread to hit your order
> market price moves into your limit price.. You're filled by a bank since the price crosses the spread in the market.
> ECN has to pay you for the limit order (since market price is at your limit) but did not make any revenue from someone executing on your order. In fact, they probably paid a small commission to their LP to fill the order atop of what they paid you.
> To compensate for this, they widen the spread a bit, shifting the payoff of offering limit order credits to the client (notice how MBT's free exn account spreads aren't much more expensive than P4L? Yeah, there's money being made in the spread.)


The ONLY way to make this type of setup work so more brokers adopt this model is to get a lot of banks, and exchanges on the same network. You'd have to make the exchange network an entity jointly owned by all who access it or some type of setup where the exchange itself is a neutral entity.

This type of shift on the tier 1 bank/LP level doesn't happen overnight and most are very happy with their own methods of exchange (Reuters Dealing Desk, direct dealing, interbank networks, etc...)

I commend MBT on the idea, it's an awesome marketing ploy to get something new in front of retail FX traders (and to woo over equity credit traders.) But until I can drop a 10Million dollar limit order on the inside quote and have someone hit me (not because the market moved into my price, but because someone market ordered that size and crossed the spread to me) on a regular basis, I'd rather stick to other exchange setups that don't punish me for market ordering out of a position. (edit, i say this because from what I've observed, getting filled by traders crossing the spread is limited to within MBT's ECN and the activity isn't enough to do so efficiently..)

Why can't a consortium of brokers just share an exchange network? Give up that extra bit of control?

rtsurvivor,

Remember, it is not just limit orders when entering a trade, but rather every non-marketable Limit order that you place that gets filled.

Since launching the program in early 2011, we have paid out almost $850,000 to our clients.

You should also note that when you attach a Take Profit to your trade in MT4, it counts as a Limit and you get paid when filled.

Good point Indy.

Thanks for that Indy. For what ever reason it never occurred to me that a 'Limit' is used to exit a trade. I just assumed that the "LIMIT" meant to enter a trade.

RT...

So your venues for that are limited to EBS, FXall, and Reuters/RTFX.

The question is, if you're limit positioned inside a 1.5 pip spread, how often are you going to get hit by a cross fill vs the market moving to your price? From years of equities/futures on actual ECNs, the amount of limit orders I've had filled across the spread is probably 10% at best (the other 90% of the time, the market moves to my limit).

Whatever cost savings you might achieve by cross spread fills will be eaten up by paying commissions on both legs of the trade.

Then again, at 10M/clip & higher, it's more about fills/liquidity than trade costs anyway, in which case DMA (EBS, FXall) is going to be beat out ESP (MBT, HS, CNX, Barx, etc) every day of the week.

Super pleased with MBT! Have used them for almost 3 years and they keep getting better. I use their mt4 currently and am extremely pleased with their data accuracy and spreads.........esp. during news. I've tried IBFX, FXCM, and IKON live accts and MBT beats them in all categories.