Is there an official exchange rate?! | Forex Factory

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Is there an official exchange rate?!

  • #1
  • First Post: Dec 20, 2006 11:26am Dec 20, 2006 11:26am
Different brokers have different bid and ask prices for every cross or pair. However, the bid and ask price is based on something...I am assuming some official rate of exchange set by something? What is this something and where can we get this official data?
  • #2
  • Dec 20, 2006 11:29am Dec 20, 2006 11:29am
Quoting clam61
Different brokers have different bid and ask prices for every cross or pair. However, the bid and ask price is based on something...I am assuming some official rate of exchange set by something? What is this something and where can we get this official data?
Thsi might help with your question:
http://www.forexfactory.com/forexfor...ead.php?t=7484
Stubbornly persistent
  • #3
  • Dec 20, 2006 11:35am Dec 20, 2006 11:35am
?
  • #4
  • Dec 20, 2006 11:40am Dec 20, 2006 11:40am
Quoting clam61
?
What do you i mean by bigest (funds, customers etc.)?
Why do you think that's important?
Stubbornly persistent
  • #5
  • Dec 21, 2006 2:12pm Dec 21, 2006 2:12pm
i want to be trading in the biggest market.

Quoting sergiu
What do you i mean by bigest (funds, customers etc.)?
Why do you think that's important?
  • #6
  • Dec 22, 2006 3:14am Dec 22, 2006 3:14am
Quoting clam61
i want to be trading in the biggest market.
In forex, you are already trading in the biggest market regardless of the broker or market maker you are trading with....


Thanks,

Nader
  • #7
  • Dec 28, 2006 12:21pm Dec 28, 2006 12:21pm
yeah the spot forex market overall is huge, but each broker has different prices. close, but not exact.



Quoting narafa
In forex, you are already trading in the biggest market regardless of the broker or market maker you are trading with....


Thanks,

Nader
  • #8
  • Dec 28, 2006 12:28pm Dec 28, 2006 12:28pm
Quoting clam61
yeah the spot forex market overall is huge, but each broker has different prices. close, but not exact.
Because there is no set trading floor or exchange. That is just their best fit of the market, especially in regards to their fiscal policies (they have to make money too, what are spreads for after all).
  • #9
  • Dec 28, 2006 1:15pm Dec 28, 2006 1:15pm
I think Clam wants to know where the broker gets it's price feed from. Better yet, where does the quote provider get the quotes since there is no trading floor. My understanding is that there is an interbank market (a fully electronic trading system between about 20 huge banks) and THAT is where quotes come from. That's why all broker's quotes are similar.... they have to have the same source, even if it get's distorted along the way to your chart.



All that said, the second question is "Where is the biggest market?" I thought the same thing to myself. When I trade with FXSOL, who is taking my money when I lose a trade? Is it an FXCM trader? Is it a bank? I believe it will be another FXSOL trader. I don't know if each broker creates its own market, but I think it might. Your money may never actually leave the broker's bank account that you fund.... and you might be trading strictly with others at your brokerage.
  • #10
  • Dec 28, 2006 1:23pm Dec 28, 2006 1:23pm
Quoting tdion
I think Clam wants to know where the broker gets it's price feed from. Better yet, where does the quote provider get the quotes since there is no trading floor. My understanding is that there is an interbank market (a fully electronic trading system between about 20 huge banks) and THAT is where quotes come from. That's why all broker's quotes are similar.... they have to have the same source, even if it get's distorted along the way to your chart.



All that said, the second question is "Where is the biggest market?" I thought the same thing to myself. When I trade with FXSOL, who is taking my money when I lose a trade? Is it an FXCM trader? Is it a bank? I believe it will be another FXSOL trader. I don't know if each broker creates its own market, but I think it might. Your money may never actually leave the broker's bank account that you fund.... and you might be trading strictly with others at your brokerage.
When you trade with FXSol I would bet money that they're the ones taking your money. As for the actual exchange, there is an interbank electronic exchange networks. There are two actually. One is run by reuters, and the other is...well I forget the other, but I know there's two. This are the networks that the Tier 1 brokers/liquidity providers trade on and it trickles down from there. Your trading "pool" is simply the liquidity providers that are intermingled with each other that you happen to be a part of. To truly be a player in the game you have to trade with an ECN who are members of those networks, or with an actual bank itself like RBS. Then you trade the banks and other Tier 1 entities.
  • #11
  • Dec 28, 2006 1:39pm Dec 28, 2006 1:39pm
Quoting clam61
i want to be trading in the biggest market.
The best thing to do here is read all the stickies in the broker section of FF in regards to the liquidity question.

I totally get what you are getting at here but the reality is that it only really matters with prime brokers and bank trading platforms such as currenex via ODL or Bank of America and such. The reason is the difference between how a market maker and how a true ECN operates. When you start dealing with a true ECN then the size and structure of thier liquidity pool becomes a very important factor in markets that are thin, fast or if you are trading size.

As far as market makers prices go, it is really a their choice as to what they show you. Their prices could be a composite of their liquidity providers, one of thier liquidity providors (or in some cases)-their only liquidity provider. The thing that makes this interesting is that just because a market maker is the largest or has the largest liquidity pool does not neccessarily mean they are going to show you that market. In fact many make substantial profit by showing you one market while covering your trades in another at a better price.

The key to this is knowing how to combat this. Knowing how to measure a brokers pricing and price movement. The best way to do this is to have access to multople brokers. You can do this by having several demos or have a charting system like e-signal that has price feeds from dozens of major banks and brokerages.

You should look at these composites and eliminate potential candidates when their feeds consistently lag behind or trade outside the majority. Another good thing to look for is alot of small increment changes in the price action. A common broker practice is to "smooth" out price movement. which means that while other brokers might have a tick change every second or so, a smoothing broker might just hold the same price until the price has moved 3 or 4 pips then they "catch up". Elimanate the brokers who practice smoothing. This is obvious price feed manipulation and is a sign of more problems to come.
Profit is where readiness meets Opportunity
  • #12
  • Dec 28, 2006 2:54pm Dec 28, 2006 2:54pm
I read somewhere, and maybe someone can clarify, that mini accounts have nothing to do with the interbank system and are strictly an "in-house" account. True?
"Its not where your at, but where your coming from"
  • #13
  • Dec 28, 2006 3:07pm Dec 28, 2006 3:07pm
Quoting athalon7
I read somewhere, and maybe someone can clarify, that mini accounts have nothing to do with the interbank system and are strictly an "in-house" account. True?
This line is getting blurrier every day. By this I mean that brokers relationships with banks are changing and evolving. Some brokers "cache" their mini positions and then pass the greater average position on to thier liquidity providers, some have even supposedly created relationships with their banks that allow them to pass smaller positions on directly to said banks. This means that all of these positions in one form or another are eventually washed in the greater market. How many steps there are between the mini orders and the greater market has a great variety of answers. In the end you cannot really know definitively since there is no tranparecy in retail forex. The catch 22 is that just because your trade has a shorter or straighter path to the greater forex market does not neccessarily mean that you are receiving better fills or trading environment. You may have a retail broker fill you faster and better than an almost ECN in fast or thin market. Which in the end means you have a better trading environment with an old school market maker. WHile I am not advocating market makers over ECNs, the fact is that ECNs do not always perform better or even as well.
Profit is where readiness meets Opportunity
  • #14
  • Dec 28, 2006 3:49pm Dec 28, 2006 3:49pm
http://www.cme.com/images/cme_logo.gif

Yes, you can go with the retail brokers....
Or you can trade like normal traders.

CME man. check it out.
  • #15
  • Last Post: Dec 28, 2006 6:42pm Dec 28, 2006 6:42pm
Ahh, the Ole Merc'. Like the Ole Me. Still functioning {and regulated} 100% but too Dull for the 'NEW Fast Lane'

Forgive me please... I apologise for scanning not only the thread, but also the links {sincere apps DS, I appreciate how much work that was... and the reason I scanned the link to you was because I thought it was you that posted point # 1 originally}

Two points come to mind.

1) We are {at least most of us} not dealing with THE Spot rate. The only legislation I am aware of on Borker Pricing 'Suggests' that "All Borkers be in line with each other (the Spot) twice a day." Noon EST and {I believe} Midnight EST. This means at 18:00 EST My Borker can be 50 Pips away from yours and still be in compliance.
{Single Borker Arbastrage Anyone?}

Folks, From this perspective, trading FX is still Back Alley Monty. Keep most of your money out of sight.

2) Q? I want to trade the Mexican Peso. Which Borker, {nea, Index} has the most volume connected to the Peso?
2a) I actually don't want to trade the peso but does anyone know of a website that posts "Traffic & Time of Day" in various Minor Currencies?

Sorry I don't have that answer but would be interested to read any posts responding to it.

{no hijack intended}
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