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Market Makers & ECN’s, Is the grass greener?

  • #121
  • Mar 3, 2008 12:15pm Mar 3, 2008 12:15pm
Scex,

With regards to transparency of an ECN. I am heistant to say that they offer a transparent market. In fact I am hesitant to say there is such a thing as transparency in an OTC market. How do you know that the ECN is giving you the best price they have or where that price is being derived? I think transparency in the currency market is neither here no there. What should matter whether your dealing with a dealing desk or an ECN is first of all execution and second price. I can offer you inverted spreads but if you can execute on those spreads it doesnt really mean anything. Therefore execution is always the end all be all. The only thing that should matter to any of us traders is do we get what we were told we were going to get when signing up. If a dealing desk offers you a 1 or 2 pip spread on majors and during most markets you get that 1 or 2 pip spread then you should be happy. However, if an ECN offers you the best from their liquidity providers and they dont beat what the dealing desk firms offers you then you shouldnt be happy. This is truly all I care about. I could care less if they are bucketing the trade, offsetting with liquidity providers or doing anything else. As long as I get the execution it doesnt matter to me.
  • #122
  • Mar 3, 2008 2:13pm Mar 3, 2008 2:13pm
Quoting fxtrader42
Scex,

With regards to transparency of an ECN. I am heistant to say that they offer a transparent market. In fact I am hesitant to say there is such a thing as transparency in an OTC market. How do you know that the ECN is giving you the best price they have or where that price is being derived? I think transparency in the currency market is neither here no there. What should matter whether your dealing with a dealing desk or an ECN is first of all execution and second price. I can offer you inverted spreads but if you can execute on those spreads it doesnt really mean anything. Therefore execution is always the end all be all. The only thing that should matter to any of us traders is do we get what we were told we were going to get when signing up. If a dealing desk offers you a 1 or 2 pip spread on majors and during most markets you get that 1 or 2 pip spread then you should be happy. However, if an ECN offers you the best from their liquidity providers and they dont beat what the dealing desk firms offers you then you shouldnt be happy. This is truly all I care about. I could care less if they are bucketing the trade, offsetting with liquidity providers or doing anything else. As long as I get the execution it doesnt matter to me.

fxtrader, you have a good point about the execution issue, that's why I believe the only ECNs worth considering are ones that aggregate their liquidity providers (vcap, dukascopy)


Indeed, refering to ECNs as transparent was probably an overstatement. I agree. In general, I find that you simply can't beat the system, meaning that brokerage houses will cut you in one way or another. If it's not the pip spread, then the commission per mill, if not execution, then the swap rate (which most ECNs love to keep for themselves).

They WILL shave a pip here or there one every order... there is nothing to be done about that on the OTC market.

Take care!

scex
  • #123
  • Mar 3, 2008 3:02pm Mar 3, 2008 3:02pm
scex,

do you trade at all with vcap? To my knowledge they are just an introducing broker with relationships at hotspot and gain.
  • #124
  • Mar 4, 2008 1:02am Mar 4, 2008 1:02am
Quoting fxtrader42
scex,

do you trade at all with vcap? To my knowledge they are just an introducing broker with relationships at hotspot and gain.
No I have not, but I am familiar with dukascopy and it is clear that an aggregate ECN system has many advantages. Vcap is even more so. It doesn't act as an intermediary, but seeks out the best price from it's liq pool
  • #125
  • Mar 4, 2008 7:18am Mar 4, 2008 7:18am
Scex,

I would be interested if you know anyone that has traded with them. I am very curious because Vcap is an IB and not an FCM. They are only as deep as Hotspot or Gain capital from what I can tell. I know that they have their own platform so they call it but have you ever seen it? What do you know about Vcap?
  • #126
  • Mar 10, 2008 8:16am Mar 10, 2008 8:16am
Quoting fxtrader42
Scex,

I would be interested if you know anyone that has traded with them. I am very curious because Vcap is an IB and not an FCM. They are only as deep as Hotspot or Gain capital from what I can tell. I know that they have their own platform so they call it but have you ever seen it? What do you know about Vcap?

I am trading with dukascopy, till today everything is ok, real prices real market, liquidity is great. I am satisfied and do not want to change to someone else.
  • #127
  • Mar 10, 2008 8:19am Mar 10, 2008 8:19am
Awesome, I trade with Deutsche Bank on their Autobahn platform but I still look for new and better.
  • #128
  • Mar 10, 2008 10:18am Mar 10, 2008 10:18am
Quoting fxtrader42
Awesome, I trade with Deutsche Bank on their Autobahn platform but I still look for new and better.

Just out of interest, what are the spreads like on Autobahn?
  • #129
  • Mar 10, 2008 11:14am Mar 10, 2008 11:14am
I dont know if it is the same for everyone considering they can probably cut deals for more high volume clients. For example I rarely see half pips eventhough they quote in half pips sometimes. For example they might show EURUSD 1.53745/ 1.53755 but I rarely see 1.53745/ 1.5375. However, EURUSD is almost always 1 during NY and London. It varies from 1 to 3 sometimes 4 during Asian hours. All the majors are fairly similar to that. I love trading GBPJPY and during NY that is anywhere from 3 to 4 sometimes 2. These prices are pretty constant as long as you are doing less then 7M per trade. If you do more they start to widen out for obvious reasons. However, when they widen out the spreads are reasonable.

The only thing that sucks is doing all of the swap and interest calculations to make sure your not getting screwed. So you need to find a great PB and you still need to be able to do the calculations yourself so you know the PB isn't screwing you. If you can afford it, it is worth dealing with a bank.

They have the great pricing and great swap rates. You can find better pricing with some of the ECN models but the ECN models cant compete with their depth of liquidity and the level of execution.
  • #130
  • Mar 10, 2008 12:33pm Mar 10, 2008 12:33pm
That sounds pretty good, unfortunatly im not big enough for Autobahn.
  • #131
  • Mar 11, 2008 4:00am Mar 11, 2008 4:00am
Quoting shrike
That sounds pretty good, unfortunatly im not big enough for Autobahn.
Can someone do a summary of the minimum practical size for each ECN/Broker/Bank so we know who we should, or shouldn't, be considering depending on our trading size

eg; start off with EFX, then progress to IB, then Dukascopy etc as your trading size grows

Also, when you move ECN's do you also move chart providors so that you see the exact same prices on your charts as you do on your trading platform.

I am with EFX and my charts are eSignal with the TDFX feed and the 2 tally pip for pip. But If I were to move to another ECN then I'd want my charts to be the exact same as my trading platform so isn't that a restriction when considering moving ECN's too ?
  • #132
  • Mar 11, 2008 6:35am Mar 11, 2008 6:35am
Quoting fxtrader42
News traders:
If an economic announcement comes out with what seems to be bad news for the US economy do you really think all of the banks are going to be willing to buy dollars when everyone else wants to sell? The answer is no and that is why they pull bids and offers and widen spreads to cover their risk. News traders still think that they are smarter then the banks and they get the information before everyone else. All your doing is trying to catch the banks or broker with their pants down. I will bet that anyone trading news can tell you that it is getting harder and harder to do as more traders are trying to make easy money off news events. I am not saying you will never be able to get in a trade around a news event but what I am saying is that if you do either the broker/bank messed up or they allowed because it was within their risk parameters.
the problem with most 'news traders' is that they all try and do the same thing. Hit the mkts when economic data is released. Some may get in, most will not. Why bother trading at a time when it's obvious everyone is scrambling around for the limited liquidity available.

It's understandable that if you've not worked in the industry it's hard to learn how to trade any other way apart from following how others trade. If ppl just applied a bit of thought into it I'm sure they can figure out other ways to trade news that doesnt include scheduled economic data.
  • #133
  • Mar 11, 2008 10:30am Mar 11, 2008 10:30am
sccz that is correct. Trading around news can be great but only 2 to 3 mins after a release. However, there are lots of ways to trade around news, there are however very few ways to trade the actual release.
  • #134
  • Mar 12, 2008 5:26am Mar 12, 2008 5:26am
Quoting fxtrader42
sccz that is correct. Trading around news can be great but only 2 to 3 mins after a release. However, there are lots of ways to trade around news, there are however very few ways to trade the actual release.
I agree, but I was talking more about ad hoc news that hits the wires, not scheduled data.
  • #135
  • Mar 12, 2008 5:50am Mar 12, 2008 5:50am
Quoting nqtraderman
Can someone do a summary of the minimum practical size for each ECN/Broker/Bank so we know who we should, or shouldn't, be considering depending on our trading size

eg; start off with EFX, then progress to IB, then Dukascopy etc as your trading size grows

Also, when you move ECN's do you also move chart providors so that you see the exact same prices on your charts as you do on your trading platform.

I am with EFX and my charts are eSignal with the TDFX feed and the 2 tally pip for pip. But If I were to move to another ECN then I'd want my charts to be the exact same as my trading platform so isn't that a restriction when considering moving ECN's too ?

All brokers you mention detail their minimum deposit on their website. For the various currenex providers minimum deposits vary alot, from 20k up to 500k or more. Most also impose a minimum trading volume per month. For an investment bank, i guess it needs a 7 figure account to get them to talk at least, and the question is also if they want to deal with individuals at all. For really big brokers like Fimat or interdealer platforms like icap, it takes even more.

As for charting, Hotspot and MBTrading (MB/Efx is called TDFX on eSignal, so no wonder they tally) are available on eSignal, Tenfore, CQG has hotspot too IIRC. Both are multibank feeds and should be fine even for short-termtrading on most platforms, in my opinion. Maybe they are off 0.5 or 1 pip from your charts, but does it matter?
  • #136
  • Mar 12, 2008 9:44am Mar 12, 2008 9:44am
Shrike,

I would say if you have a small account MB might be a good option. However, Oanda is cheaper. Plus, Oanda has a charting package eventhough it sucks, they still have one. Traders that want a better charting package should look at FX Trek or Tradestation. Not to mention plenty of others.
  • #137
  • Mar 13, 2008 5:40am Mar 13, 2008 5:40am
The mbt demo account does not reflect the live account. I have read up on the demo account which states "trades are trader to trader" my experience with the demo account is not an experience that would entice me to open a "live" account. There appears to be deficiencies with the demo account, not great PR for opening a live account. So where to from here ? I like the ecn concept and agree this is the way forward, yet I experienced many problems with the demo, such as seeing a profit booked on my live account (existing broker), yet shown as a loss in the mbt demo account, seeing the demo account show a negative balance, showing a zero balance on the total demo account etc. I have optimism for the ecn trades yet the demo account has a lot to be desired.
Without women, money would have no meaning - Aristotle Onassis
  • #138
  • Edited 5:59am Mar 13, 2008 5:50am | Edited 5:59am
It all reminds me of an experience at the Casino where my friend and I attempted to leave and cash in our chips for what we thought was a great night out. I had the duty of taking our chips (profits) to the teller, when out of the blue sky a "pit boss" was approaching me at a rate of knots, much like a shark to a nervious fish, if you please, obviously he had been observing us the entire time we made money from this casino, he planted himself in front of me and said quote "nobody leaves this casino with money" I actually thought he was serious and started to quake in my boots, until he broke into laughter and let me go....
Without women, money would have no meaning - Aristotle Onassis
  • #139
  • Mar 13, 2008 9:15am Mar 13, 2008 9:15am
Matt,

Why dont you try a different ECN broker? There are lots of better ones out there.
  • #140
  • Edited 10:34pm Mar 18, 2008 10:08pm | Edited 10:34pm
Very intuitive. Thanks.
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