MarketMakers | Page 12 | Forex Factory

Options

Go to
Permalinks
Print Thread
Attachments: MarketMakers
Exit Attachments

MarketMakers

  • #221
  • Oct 23, 2009 6:07am Oct 23, 2009 6:07am
Quoting kengur
thank you Jason, your last post is understandable, but I don't see hedging in it? Where is the hedging gone now?
no matter how they paint it they're still not an ECN broker......
  • #222
  • Oct 23, 2009 8:34am Oct 23, 2009 8:34am
Quoting kengur
thank you Jason, your last post is understandable, but I don't see hedging in it? Where is the hedging gone now?
Hi kengur,

The example itself is the hedging (offsetting) process. Risk is offset or hedged by sending orders straight to the banks for processing.
  • #223
  • Oct 23, 2009 8:50am Oct 23, 2009 8:50am
Quoting >Apocalypto<
no matter how they paint it they're still not an ECN broker......
The term ECN is thrown around liberally by forex traders and brokers alike. Most often it is used to indicate the opposite of a dealing desk or a broker profiting from a traders losing position; however, most forex "ECN's" are only ECN like if you are comparing it with what traders are used to in equities. This is why our execution is listed as NDD and not as ECN.

In a true ECN you would be able to see other traders orders in the market depth view and hit those individual orders. In other words you can make a market yourself. On NDD and STP setups, you're still a price taker not a price maker. This is why the bid/ask quote from the bank has to touch your order price for the order to execute.

In the end, the contrast between market maker and STP/NDD brokers still rings true in that the conflict of interest between broker and trader is removed. Traders want to trade in a fair and transparent environment.
  • #224
  • Edited 6:43am Oct 24, 2009 6:11am | Edited 6:43am
Quoting Jason Rogers
The term ECN is thrown around liberally by forex traders and brokers alike....
I trade with Interactive brokers they're an ECN, no offense but FXCM anit even close to em.

no matter what you spin on here, they anit in their league....... open an account and you will see what I mean....

cheers
  • #225
  • Oct 25, 2009 3:22am Oct 25, 2009 3:22am
Quoting Jason Rogers
Hi kengur,

The example itself is the hedging (offsetting) process. Risk is offset or hedged by sending orders straight to the banks for processing.
So If I buy 100K EUR/USD, FXCM is short(virtually) the same amount(FXCM is on the other side), but FXCM is hedging that by buying 100K EUR/USD with the interbank?
  • #226
  • Oct 25, 2009 5:24am Oct 25, 2009 5:24am
Quoting kengur
So If I buy 100K EUR/USD, FXCM is short(virtually) the same amount(FXCM is on the other side), but FXCM is hedging that by buying 100K EUR/USD with the interbank?
The promotional info that FXCM is putting out says that your order is NOT held in house, as would be the case with your average bucket shop, but goes straight to the next level, at least.

I don't think they are claiming to be a true ECN but are stating that they do not take the other side. The point is that at any one time you aren't the only one placing an order at that level so I would expect it's fairly easy for them to aggregate all the orders and pump them into standard lots, at the very least.

They make a 1-pip profit (at worst) on every order X 1000s of orders every day without the risk of taking the other side.

I will be trying a small account with them soon, so the proof will be in the pudding, as we say over here.

I'm sure Jason will correct me if I have misunderstood anything but I accept that FXCM are not a true ECN but are offering us the promise of no trade intervention via the STP aspect of their model.
  • #227
  • Oct 26, 2009 11:19am Oct 26, 2009 11:19am
Quoting PeterFM
The promotional info that FXCM is putting out says that your order is NOT held in house, as would be the case with your average bucket shop, but goes straight to the next level, at least.

I don't think they are claiming to be a true ECN but are stating that they do not take the other side. The point is that at any one time you aren't the only one placing an order at that level so I would expect it's fairly easy for them to aggregate all the orders and pump them into standard lots, at the very least.

They make a 1-pip profit (at worst)...
Hi Peter,

Your point about not taking the other side of clients positions (thereby not profiting off of trader losses) is correct. The distinction means the conflict of interest and incentive for traders to lose money is gone.

One correction is that orders on NDD/STP are individually sent to the banks. So if you place a trade for a mini lot of 10k, that order is sent to the bank for processing rather than being aggregated into a 100k order with other traders. We have put together a webpage here where you can learn more about NDD/STP vs. Market Makers.

And you put it nicely when saying the proof is in the pudding. I can explain how execution on STP, NDD, and ECN differs from a market maker, but the actual trading experience matters as well. Compare any trading restrictions, spreads, execution, intervention against or restrictions on trading strategies, etc.

Jason
  • #228
  • Oct 26, 2009 4:30pm Oct 26, 2009 4:30pm
@ Jason

What about hedging, you were mentioning hedging...to me it's not necessary if FXCM routes my order directly to the intebank market...

I thought interbank market allows only 100K amounts..?
  • #229
  • Oct 27, 2009 10:33am Oct 27, 2009 10:33am
Quoting kengur
@ Jason

What about hedging, you were mentioning hedging...to me it's not necessary if FXCM routes my order directly to the intebank market...

I thought interbank market allows only 100K amounts..?
Hi kengur,

By hedging, I mean the process in which orders are offset with the banks described in this post http://www.forexfactory.com/showpost...&postcount=219 .

Banks will take 10k lots directly in addition to 100k lots, and 2 out of the 10 banks we deal with will take micro lots as small as 1k. Keep in mind brokers can negotiate one on one with banks for individualized services such as the acceptance of micro lots.

In general, banks like retail trade volume. What they don't like is the amount of tickets it creates, particularly with micro lots. Reason being is because from an operational stand-point it costs the same amount to process a micro ticket as a standard lot ticket.

Jason
  • #230
  • Edited 11:06am Nov 1, 2009 10:56am | Edited 11:06am
Hi all,

Just to share what i've just heard from a broker - MF Global, about their Forex trading. Pls note i have no association with this broker, neither do i use them.

The MFGtrader platform offers STP trading, whereby they internally match orders at each price (example, at the exact price 1.4750, if there are 1,000k buy orders for the Euro and 850k sell orders, the 850k volume will be offset internally). Any unmatched orders (150k in this example) will be sent directly to the Currenex platform.

The broker acknowledges that they earn from the spreads, for instance the spread for Euro and Cable on the said platform seems to be 3 pips and 5 pips respectively.

If the above is true, then it seems a little different from the same NDD / STP model that Jason from FXCM has described, though the description provided by the MF Global representative was a little vague and not as detailed as Jason's description in this thread.

Note: They also offer ECN accounts with direct execution to the Currenex platform, for accounts with minimum $25k funding.

Hi Jason,

Any comments you can add to the workings of NDD / STP brokers would be helpful. Noted that you have a clear example here:
http://www.forexfactory.com/showpost...&postcount=219
  • #231
  • Nov 2, 2009 3:32pm Nov 2, 2009 3:32pm
Quoting TraderT
Hi all,

Just to share what i've just heard from a broker - MF Global, about their Forex trading. Pls note i have no association with this broker, neither do i use them.

The MFGtrader platform offers STP trading, whereby they internally match orders at each price (example, at the exact price 1.4750, if there are 1,000k buy orders for the Euro and 850k sell orders, the 850k volume will be offset internally). Any unmatched orders (150k in this example) will be sent directly to the Currenex platform.

The broker acknowledges that they earn...
Hi TraderT,

I agree the details are a little vague. The typical MO of a market maker is to aggregate positions internally and then manage the remainder of the risk which sounds like what you described. Would be interesting if they would have given you a more detailed example of the inner workings of the system.

-Jason
  • #232
  • Nov 3, 2009 5:23am Nov 3, 2009 5:23am
I wonder what FXCM micro does with long term profitable traders, i dont understand how they could earn the spread with such tight spreads so their profit must come from their customers losses to a degree.... so how do they deal with consistently profitable traders. I have no issue with a broker taking the other side of the trade.....if they give me good execution and are happy with me trading profitably then i dont care where they get their "commission" from.

I would love to know the exact details of how marketmakers manage their risk and extract profit from running a book. Im sure its nothing like all the myths that abound on forums
  • #233
  • Nov 3, 2009 7:32am Nov 3, 2009 7:32am
market makers are hedging themselves like any financial institutions, lowering risks
  • #234
  • Nov 3, 2009 8:07am Nov 3, 2009 8:07am
Here's what the said representative told me about one particular marketmaker which i shall not name. Whether this is true or not i do not know, comments are welcome.

One particular marketmaker will tag traders into 3 categories:
A - Consistently profitable
B - Consistently losing
C - Breakeven

If you fall into A, they will take the same trade as you (presumably this would be extremely selective and less than 1-2% of traders)

If you fall into B, they will marketmake and take the opposite side of your trade, so orders are not sent to the interbank network.

If you fall into C (which means neither A nor B), they will match the books internally for each price level, and send the excess orders to the interbank network.

Hi Rise,

Both STP-brokers and marketmakers will definitely earn the spread, and this itself is already big money considering the volume of trades.

Note: neither references are to FXCM. Jason has explained their workings, and i respect them for being upfront.

Quoting Rise
I wonder what FXCM micro does with long term profitable traders, i dont understand how they could earn the spread with such tight spreads so their profit must come from their customers losses to a degree.... so how do they deal with consistently profitable traders....
  • #235
  • Nov 5, 2009 8:47am Nov 5, 2009 8:47am
Ok,
Well it s not entirely false, It makes sense
But you know opening the same position is enough it s hedging both cases, you have no loss possible only balance yourself or make profit.
I have a question for u:
How do they know how to attribute each trader to which category? what do they do before they figure out the category?

Quoting TraderT
Here's what the said representative told me about one particular marketmaker which i shall not name. Whether this is true or not i do not know, comments are welcome.

One particular marketmaker will tag traders into 3 categories:
A - Consistently profitable
B - Consistently losing
C - Breakeven

If you fall into A, they will take the same trade as you (presumably this would be extremely selective and less than 1-2% of traders)

If you fall into B, they will marketmake and take the opposite side of your trade, so orders are not sent to the interbank...
  • #236
  • Edited 4:21am Nov 6, 2009 3:46am | Edited 4:21am
Quoting Jason Rogers
Hi TraderT,

I agree the details are a little vague. The typical MO of a market maker is to aggregate positions internally and then manage the remainder of the risk which sounds like what you described. Would be interesting if they would have given you a more detailed example of the inner workings of the system.

-Jason
Hey Jason,

this is what a ECN 's spreads look like.

as you can see FXCM is a fair way off.

enjoy
Attached Image (click to enlarge)
Click to Enlarge Name: Interactive Brokers Spreads..jpg Size: 88 KB
  • #237
  • Nov 6, 2009 8:53am Nov 6, 2009 8:53am
Quoting >Apocalypto<
Hey Jason,

this is what a ECN 's spreads look like.

as you can see FXCM is a fair way off.

enjoy
The spreads are comparable to FXCM Active Trader. Here's a website that compares active trader spreads to other brokers www.fxintel.com . Maybe you want to start a new thread to discuss spreads so as to stay on topic?
  • #238
  • Nov 6, 2009 9:17am Nov 6, 2009 9:17am
Quoting Jason Rogers
The spreads are comparable to FXCM Active Trader. Here's a website that compares active trader spreads to other brokers www.fxintel.com . Maybe you want to start a new thread to discuss spreads so as to stay on topic?
you're a great employee Jason, but mate FXCM anit nothing to Interactive Brokers and you know it.

have a nice weekend.
  • #239
  • Nov 6, 2009 6:52pm Nov 6, 2009 6:52pm
Quoting Jason Rogers
The spreads are comparable to FXCM Active Trader. Here's a website that compares active trader spreads to other brokers www.fxintel.com . Maybe you want to start a new thread to discuss spreads so as to stay on topic?
Stay on topic? you work at a market maker Jason, this is the market maker thread, I am discussing Market makers to ECN spreads.

Comparable??? they're your words. so a standard Interactive Brokers account is only comparable to the top level product at FXCM is it? lol, you said it J.R, not the same not better but comparable.

I looked at that site you linked, well it's hard to compare when Interactive Brokers is not there!

FXCM Active Trader Platform:
Shows Market Liquidity and Gives You the Speed to Exploit It

 

  1. Minimum: $25,000 deposit OR trade more than 10M per month in notional volume

So I have to do 10 million a month or open and account with 25K to have a service that's comparable to a 10K Interactive Brokers account. the spreads are not better or the same they're comparable..... lol great joke Jason.

For an account trading more than Fee per side per 100K lot 10M / Month $5 100M / Month $3.5 Note: Commissions are negotiable based on trading volume Typical Spread for Major Currencies*

EUR / USD: 0.7 PIPS GBP / USD: 1.8 PIPS USD / JPY: 1.2 PIPS USD / CHF: 1.8 PIPS
now if you gave a $5 round trip on the GBP/JPY per 100K with a typical spread of 2-2.5 then I will say well done to you.

FXCM is doing well to make these new products, but you still profit form losing clients in the form of FXCM mini. so no matter what you say or spin, the fact is FXCM still profits form clients losing money!

Interactive Brokers Dukascopy MB Trading to the best of my knowledge don't they're true ECN brokers, FXCM is not...

Hey Jason did you know that FXCM was/is one of the main reasons the word Market Maker has a bad rep now......

Have a nice Saturday.

  • #240
  • Nov 7, 2009 2:36pm Nov 7, 2009 2:36pm
Quoting >Apocalypto<
For an account trading more than Fee per side per 100K lot 10M / Month $5 100M / Month $3.5 Note: Commissions are negotiable based on trading volume Typical Spread for Major Currencies*
$5 per side? Like $10 round turn? Not so good. Dukascopy, FXOpen, MB and pretty much everyone else have way lower commissions plus real interbank spread. FXCM's spread seems a tad high.
6 traders viewing now