Do broker's give direct Interbank quotes? As in total transparency? | Forex Factory

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Do broker's give direct Interbank quotes? As in total transparency?

  • #1
  • First Post: Sep 28, 2006 9:17pm Sep 28, 2006 9:17pm
I thought Oanda quoted the interbank xchange directly, but their site is a little vague on the subject.

I'm a complete newbie. How does this work? Are brokers marking up and giving a "retail" quote or do they quote the actual interbank price?
  • #2
  • Sep 28, 2006 9:53pm Sep 28, 2006 9:53pm
Quoting tsicby
I thought Oanda quoted the interbank xchange directly, but their site is a little vague on the subject.

I'm a complete newbie. How does this work? Are brokers marking up and giving a "retail" quote or do they quote the actual interbank price?
In comparing Oanda with Currenex, I have found that asside from the spread, they are spot on. I'm not sure how Currenex compares to EBS or Reuters, but my guess is that it's identical or it would make for some sweet arb opportunities. So in short, with Oanda your effectively getting interbank quotes.
  • #3
  • Sep 30, 2006 12:16am Sep 30, 2006 12:16am
Quoting tsicby
I thought Oanda quoted the interbank xchange directly, but their site is a little vague on the subject.

I'm a complete newbie. How does this work? Are brokers marking up and giving a "retail" quote or do they quote the actual interbank price?
Tsicby,

retail market markers typically do not offer complete transparency. The rates you get from a market maker are the market maker’s rates, which will usually be wider but roughly synchronised with the rates they’re getting from their liquidity provider/s. The rates they get from their liquidity providers depend on the relationships they have with them (which is often determined by volume). Please be aware that the finer details of how retail market-makers generate their price-feeds are sometimes much more complicated than what I just described. It's usually not in their best interests for you to know who their liquidity providers are or exactly how they generate their price-feeds. So you may have a tough time getting detailed responses from them.
  • #4
  • Sep 30, 2006 12:22am Sep 30, 2006 12:22am
Quoting Darkstar
In comparing Oanda with Currenex, I have found that asside from the spread, they are spot on. I'm not sure how Currenex compares to EBS or Reuters, but my guess is that it's identical or it would make for some sweet arb opportunities. So in short, with Oanda your effectively getting interbank quotes.
Darkstar,
You speak of Currenex rates – there is no-such thing, since Currenex is not a liquidity provider; it's just a software company. For example, I use the Currenex platform with a couple of different brokers, and each price-feed is slightly different. So talking about "Currenex rates" is similar in principle to taking about "Metatrader rates", in that the price-feed depends on from whom the rates are coming, rather than which platform is being used. It also depends on whether the firm adds a premium to the spread or charges a separate commission.
  • #5
  • Sep 30, 2006 8:46am Sep 30, 2006 8:46am
Quoting mrcooldude
Darkstar,
You speak of Currenex rates – there is no-such thing, since Currenex is not a liquidity provider; it's just a software company. For example, I use the Currenex platform with a couple of different brokers, and each price-feed is slightly different. So talking about "Currenex rates" is similar in principle to taking about "Metatrader rates", in that the price-feed depends on from whom the rates are coming, rather than which platform is being used. It also depends on whether the firm adds a premium to the spread or charges a separate commission.
The skies have opened up and angels are rejoicing. Finally someone comes along who understands that Currenex is just software the quotes what participating banks tell it to quote. Any broker offering you Currenex can only quote the few select banks that they have relationships with. You really are mrcooldude.
  • #6
  • Sep 30, 2006 1:09pm Sep 30, 2006 1:09pm
Quoting mrcooldude
Darkstar,
You speak of Currenex rates – there is no-such thing, since Currenex is not a liquidity provider; it's just a software company. For example, I use the Currenex platform with a couple of different brokers, and each price-feed is slightly different. So talking about "Currenex rates" is similar in principle to taking about "Metatrader rates", in that the price-feed depends on from whom the rates are coming, rather than which platform is being used. It also depends on whether the firm adds a premium to the spread or charges a separate commission.
This is ofcourse all perfectly accurate, but it doesn't alter the point I was making. Quotes on institutional currenex networks are provided by banks. Most of the banks operate on multiple networks and are feeding the same prices to each prime broker. If they weren't it wouldn't require much effort to arb the different networks. Since those opportunities are few and far between, it is easy to generalize that "currenex pricing" at one prime brokerage is indicative of the quotes available on alternative networks.

Given that Oanda is spot on with "my" currenex feed, I don't mind simplifying the answer to tsicby's question by saying that their pricing is pretty damn accurate.
  • #7
  • Oct 1, 2006 2:48am Oct 1, 2006 2:48am
Quoting Darkstar
This is ofcourse all perfectly accurate, but it doesn't alter the point I was making. Quotes on institutional currenex networks are provided by banks. Most of the banks operate on multiple networks and are feeding the same prices to each prime broker. If they weren't it wouldn't require much effort to arb the different networks. Since those opportunities are few and far between, it is easy to generalize that "currenex pricing" at one prime brokerage is indicative of the quotes available on alternative networks.

Given that Oanda is spot on with "my" currenex feed, I don't mind simplifying the answer to tsicby's question by saying that their pricing is pretty damn accurate.
Darkstar, I wasn't disputing the point you made about Oanda. I just wanted to clarify what Currenex is since it is a common source of confusion.

Anyway, happy trading
  • #8
  • Oct 1, 2006 2:17pm Oct 1, 2006 2:17pm
thanks for the comments everyone. very enlightening.

i think i have found some evidence out there of how some brokers "cheat" the spread. in those instances the trader is setting up a house advantage just like a casino and still worse, some brokers take it even further by using a 15 second delay on "fills" to determine which side of the trade their on. In these incidences, it seems the broker is trading out of their own "inventory" or credit line and trying to trade against you. They like to say you're trading in a trillion dollar market with massive liquidity, yet you're really just playing in the broker's own sand box, in his own bucket and he's trading against you.
  • #9
  • Oct 1, 2006 2:20pm Oct 1, 2006 2:20pm
Quoting tsicby
thanks for the comments everyone. very enlightening.

i think i have found some evidence out there of how some brokers "cheat" the spread. in those instances the trader is setting up a house advantage just like a casino and still worse, some brokers take it even further by using a 15 second delay on "fills" to determine which side of the trade their on. In these incidences, it seems the broker is trading out of their own "inventory" or credit line and trying to trade against you. They like to say you're trading in a trillion dollar market with massive liquidity, yet you're really just playing in the broker's own sand box, in his own bucket and he's trading against you.
I meant the BROKER is setting up a house advantage.
  • #10
  • Oct 1, 2006 2:29pm Oct 1, 2006 2:29pm
Quoting tsicby
thanks for the comments everyone. very enlightening.

i think i have found some evidence out there of how some brokers "cheat" the spread. in those instances the trader is setting up a house advantage just like a casino and still worse, some brokers take it even further by using a 15 second delay on "fills" to determine which side of the trade their on. In these incidences, it seems the broker is trading out of their own "inventory" or credit line and trying to trade against you. They like to say you're trading in a trillion dollar market with massive liquidity, yet you're really just playing in the broker's own sand box, in his own bucket and he's trading against you.
tsicby,

I would venture to say a lot of what you suggest is true. In any market, someone "takes the other side". I wouldn't let that bother you too much. The cruel reality is that if there were no brokers, you wouldn't get to play in the Forex Sandbox at all. I don't know about the delays and can't speak about your broker. A broker can't decide which side to take. That is your decision. By defualt, he has to take the other side.

Yes brokers widen the spread. So does your grocery store when you buy an orange. There is the grower, the shipper, the distributor, and ultimately, the grocer. The more middlemen, the bigger the pie has to be for everyone to get a piece of the action.

I don't want to defend brokers but they let you participate in Forex and for that opportunity they charge a fee.
  • #11
  • Oct 2, 2006 10:45pm Oct 2, 2006 10:45pm
I understand, but I think I'm coming to a place where I would actually prefer a commission broker that matches the best interbank rates over these "spread doctors". I realize this is all somewhat nebulous, given how different this market is from equities, but if I felt the broker was totally transparant on their quotes and made their money only on commission and not a spread I would be inclined to go the commission route. I'm just not even sure there's a broker out there like that and, if there is, not really sure if the numbers back up that assumption.

I'm not sure there's really an answer to this right now.
  • #12
  • Last Post: Oct 3, 2006 10:43am Oct 3, 2006 10:43am
Quoting tsicby
I understand, but I think I'm coming to a place where I would actually prefer a commission broker that matches the best interbank rates over these "spread doctors". I realize this is all somewhat nebulous, given how different this market is from equities, but if I felt the broker was totally transparant on their quotes and made their money only on commission and not a spread I would be inclined to go the commission route. I'm just not even sure there's a broker out there like that and, if there is, not really sure if the numbers back up that assumption.

I'm not sure there's really an answer to this right now.
it seems as though what you want is access to a multibank platform, where participating banks are your counterparties. Currenex, as already mentioned in this thread, is one such multibank platform. but there are a few others which you'll find with a little research. i should mention that to gain access to a multibank platform requires a much higher opening balance and larger minimum trade sizes. i certainly wouldn't recommend this for a newbie. instead, i'd recommend that you try trading mini-lots with a few reputible retail dealers and make up your mind about them from your own experience. i imagine that you'd only experience major problems if you traded during major news releases, or enaged in scalping.

good luck.
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