MB Trading really an ECN?

You're welcome.

You're welcome opie999!

Thanks for the question. It’s always been my policy not to talk directly about other platforms. In some instances, I keep up with what they are offering and in other instances, it is not possible, so I wouldn’t want to say something that maybe is no longer true. Therefore, I prefer to mostly address this question based on what we do have and in terms that relate to what other platforms might not. In other words, if I were a customer, what am I looking for in a broker? I would agree that you have essentially named the brokers that we feel would qualify as our competition, and competition is good, right? The other brokers that call themselves ECN’s really aren’t. So let’s just focus on a few points.

Liquidity. It might not matter a ton to someone trading a few minis here and there, although it certainly can’t hurt them either when trading in active times. I would argue that whether you are paying $3 or $5 for an execution, if your executions on average are half a pip or a pip or even more worse than what you could get with us, then you are paying more. The “headline” commission is a sales gimmick. Net cost of trading over time is what matters to larger traders. We feel that by having the banks that we have, we have top-of-the-line liquidity available to our customers. Is it always more or always less than the competition? I don’t know. When you add all of the customers, black box trading systems, and banks together that trade through our systems, that is a lot of liquidity, and our larger traders have always commented on that to us, so we feel like we are in the right direction here. There has been a study done by a third party comparing our average spreads based on tick activity over many months versus some of the competition that you mention. That study demonstrates that we have tighter spreads on average, which means by default, more liquidity and competition at the bank level to getting your fills. Our commissions have to cover the cost of the bank execution (which is a big piece), technology (servers, hardware, backup systems), and customer service, not to mention a few other areas.

Speed and technology. We have 15 or more order types with more coming that give traders a lot of control and flexibility. This is because we have written our own engine to handle all of this stuff, something that MB did initially on the stock side many years ago and translated over to the forex markets back when the only other options out there were deal desks. You can’t get a bad fill on our system if you use the order types correctly for what you want. You can control slippage, etc. People who get “slipped” were just placing market orders, which defeats the purpose of what we’ve built. We’re now working on much more complicated order types that suit this liquid, 24-hour market, and that certainly takes time and has costs in terms of development and hardware. We also feel that our speed of execution, especially for orders that execute between two parties directly on the TDFX ECN, is very fast. There have been posts recently on the EFX thread showing execution differences between us and other brokers, which is measured in time, but really translates into price in a moving market.

Account sizes and leverage. You’d have to look for me, but do other brokers that you are mentioning give you 100:1 leverage with $400 account minimums? If their minimums are significantly higher, it puts their platform out of reach to the average trader. If you can’t do 100:1, which is currently pretty standard in the industry, you can’t trade forex like most people do. Our goal was not to create an institutional platform for institutional-level customers and prohibit others from trading on it. Our goal was to create an institutional platform for everyone to use. In some ways, to not do that makes no sense if the platform is truly an ECN. Keep in mind that EVERY ORDER from another customer on an ECN adds to your chances of getting filled. Doesn’t matter who the customer is or why they are trading. It’s a simple fact that if people are selling and you are buying, you get better, faster fills, and at better prices. Our job isn’t to judge who should be able to open an account with us because of a product they use, a trading style they employ, or whether they have enough in their account to make us a bunch of money. Our job is to make a platform that gets everyone that is looking for it the best execution possible.

I can’t tell you whether the competition has the same mindset as what I’ve just described. We focus on what we are trying to do and what we are trying to build because we think it is adding a huge value for the customers and hopefully for the industry. We just keep pushing and pushing, and we have many more technology pieces in the works.

Liquidity isn't a problem with real ECNs. ;-)

You claim that MBT offers more liquidity and customers than other competitors.

But your spreads are mostly 1pip+ higher than the others especially versus Hotspot - that's a little bit strange. ;-)

I doubt that big daytraders deal with you.

htbreaker ~

Do you have live account with us?

I only ask because if you were actually watching our quotes you would see many times the majors on our system are less then a pip and the GBP/JPY has been averaging 2-3 pips....do you know another broker who can offer the GBP/JPY at that spread?

Each trader needs to find a broker they are comfortable with and if HotSpot is your choice - I hope you find great success with them.

To address your previous point though...I have yet to hear or see any supporting data of another broker offering tighter spreads then MB/EFX...that doesn't mean there aren't any, but independent studies by 3rd parties have constantly shown MB to offer tighter spreads and execution.

Justin,

Is there any chance MBT/EFX could lower their commissions to be more competitive with IB, Dukascopy, and HotSpot? What about offering a second tier of service maybe for minimum order sizes of $100k and above?

if only you guys can come down on your commission.

What are the benefits of MB Trading over HotSpotfxr?

MB trading is marketmaker, because no one marketplace will not offer you start trading with 400$. Only marketplaces in the world is lava, hotsop, curenex and Dukascopy swiss marketplace

there realy ain't none, if you take mb trading commission and there rollover your be paying more.

your wrong, its not how much you deposit.

trades with the AUD and NZD?

Good thing you don't trade Swedish Krona or Norwegian whatcha hoozit I could only imagine your crying and gnashing of teeth with the commission on those pairs.

The only advantage of efx over Hotspot i can see is the more flexible(small) position-sizes. But its the same everywhere, the small traders have to pay more. Commissions in stocks and futures are volume-dependant too..

I agree, if MB is really an ECN as they claim it is a joke. Without the volume of the Forex Made Easy suckers on their platform they would not have any real volume or decent spreads. No real ECN in the world has all the trading based on Mini lots. Real ECNs have everything set up in millions, not $10,000 mini size contracts. They sure as hell don't allow people to invest with $400 accounts, no bank would even touch a $10,000 order, all real ECNs require a minimum trade of at least $50,000. HotSpot's FXi feed is garbage as well in my opinion with no market orders but at least they can name the banks that are on it and trade sizes which the banks accept when they pass the trades through.

A couple of observations / clarifications for you:

HotSpot DOES have a limitation of not modifying a STANDING order which THEY hold on their servers if it is 10 pips from the market. This limitation does NOT affect orders you put in, in real time, or via your own trading system. So, to that end, there is a technical advantage in using MB if you make heavy use of standing at-broker orders such as limits. For any orders you manage at your own PC / server, HotSpot does not have such limitations. This affects orders you leave on their servers only. I have personally spoke with a HotSpot VP about this, so unless this has changed since Sept 07, I assure you all the above I have said is 100% fact.

As for commission, the out-of-box comish offering from HotSpot kills MB hands down. It's nearly half to begin with. You can negotiate commission with either broker assuming you are generating some reasonable volume (micro lots hobbyists need not apply).

While I have observed some spread superiority with MB, I can tell you that HotSpot is way deeper in terms of liquidity. I have observed that at any given time you will see around 3 mio on either side of the price with MB, and at most 10-30 mio on either side of the price, with some brief exceptions. HotSpot on the other hand is way deeper. 10s of mios on either side of the price at any given time. I'm not going to go into detail as to why this matters, because anyone trading big enough sizes for it to matter understands. and it does matter if you are trading big enough sizes.

As for the MB secret banking relationships, I'm not quite getting that. Legally no bank could (or would) provide liquidity to TDFX if they were in violation of exclusivity contracts with other dealers in doing so. So the only thing I can figure is that TD / MB perceives some sort of strategic operations protection in not disclosing them. I don't think it's to cover up a secret deal desk operation, but I guess we can't know for 100% sure about any of the ECNs until the CFTC comes to town and cleans house. After all, deal desks are saying they aren't deal desks these days. And ECNs (so we believe) are saying they are not deal desks. Yet nothing stops any of them from running a deal desk legally, and completely lying about it... yet. So who knows. The best thing to go on is broker reputation, and I have yet to hear of any alleged ECNs running stops.... also yet.

As for the swap, as I understand it, MB is coughing up a portion of their commission, or their swap as commission (or both perhaps) to BANKS in order for them to give out liquidity at all to MB. It seems to be part of the deal. I don't think most people realize this is happening at MB, and I'm not sure that it's happening with all ECNs actually. No I've never worked at any of these brokers, this is just what I've gathered from talking to broker execs. As for this comish / swap sharing, in one regard, this is the liquidity providers holding MB by the balls, but sometimes that's the price you pay for being small and trying to break into the biz. It's costing them a lot more to do biz, and they're passing it to you directly if you aren't able to negotiate a better comish rate.

Last of all is data availability. IB sucks like I've never seen or ever heard of a broker sucking in regard to their data. Utterly, completely, unadulteratedly terrible. You can't even get live quotes on demo, they are delayed. If you want to see live FX quotes with IB, you need to open a minimum 5K account. Screw that. If I can't even see what you're selling before I buy it, I'll pass on principal alone. And don't even get me started on IB historical data availability. Utter garbage. So this stuff puts IB out of consideration for me. As for MB vs. HSFX data availability, for the most part all things are equal there currently, though HSFX is planning something HUGE, and I won't say anything more than that so I don't blow MY competitive advantage

So that's what I've learned so far, as it is relevant to this thread. Top choices are MB and HSFX currently, and you've got pros and cons on each side.

Well in the asian market the minimum for interbank is 15 000 $. I am sure you can find banks that takes 10 000$ but the choice would be limited and the possibility to get your order filled smaller as well as the number of liquidity providers would be smaller.


RM is the Malaysian Ringgit. 50 000 RM is about 15 000 USD

http://books.google.com/books?id=2P4...EBHY#PPA228,M1

Interesting.. So any limit order placed into their system within 10 pips of the market can't be edited or canceled? I take it this is perhaps to help reduce bandwidth and/or deter multi-ECN scalpers/arb'ers, but I would find it very difficult knowing I couldn't cancel/alter my live orders.

Agreed. MB commissions are sky high. I'd like to see them come down to the $20 per million level:

MBT: $50
HSFX: $30
IB: $20
Duka: $18

MB's book is deeper than you describe. Here's a RT snapshot of the Aussie book and the inside is fairly large:

http://i26.tinypic.com/hs2rvc.png

Agreed. All of the ECNs are oddly secretive about their liquidity providers (Duka especially).

I'll agree that one year of daily data & 30-days of intraday is rather lacking, but from an ECN perspective, where is the competition in this matter? Last I checked, HSFX and MBT still don't have historical data/charting.

This has always been a factor better served by a 3rd party IMO.

Come on! At least give us a better hint than that.

That's right. A little troubling to me also. It actually sounded like it was one (I assume only one) of their liquidity providers that would hold the order. It almost sounded like they didn't have infrastructure of their own to hold orders, but I'm not 100% on that part. I do a lot on my end of things though, so for me it's not so bad.

* I should clarify: This is in regard to orders you want to LEAVE on their system with your trading system offline. If you were to want to bid or offer at a particular price, even inside the spread, and let the order sit while the trading platform is online... this is NOT restricted, and that amounts to placing a limit order. With MB, you can toss your computer out the window, and your standing orders are still actionable by MB. So as I said, this is a pro for MB if you use lots of standing orders.

That doesn't look bad at that moment, but the 2s and 3s you see below seem to be what I find more regularly toward either side of the price. I'm not usually watching AUD as much, but I'd think the ones I am watching (GBP/USD and USD/JPY for two) would be deeper that AUD/USD. Maybe not. So one of the secret banks is in Australia then. lol.

Yes, but you can score an equal amount of historical data for MB and HSFX from eSignal, whereas you can get no IB data from eSig. 120 days of intraday and 10 days of tick ain't too bad, and it's better than IB's in house provision. What you'll see from HSFX is in regard to historical data. MB is going to be crying the blues that they've been "planning" their historical data download for so long. It's going to be unprecedented. Really, truly unprecedented, I'm not exaggerating at all. Keep your ears open re: HSFX, and you'll see.

There is one technical limitation for me to trade with HSFX currently. If that's out of the way by the time HSFX drops what I'm referring to, I'm very likely going to be dropping MB. They really ticked me off with the handling of that recent power outage, but they've got a little time to redeem themselves yet. There's something to be said for being incumbent. We will see.

I talked to a Hotspot (euro division) rep 2 or 3 weeks ago, and apparently the 10 pip rule is no more(it isnt mentioned on their website too anymore). Also, euro and american divisions have different commissions, euro division is $30/mio dollars traded, american division charges $30 per base currency units traded (much cheaper). He also told me that they will allow more flexible position sizes in the near future (as far as i understand, minimum deal size will still be 100k, but you will be able to trade odd amounts above 100k).

That's great. Maybe they've added some infrastructure on the U.S. side too.