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FXCM Discussion

Jason
I have two questions for you regarding your move to NDD for micro accounts and the subsequent increase in spreads.

Firstly, as the spreads are now the same as standard spreads does this mean that micro accounts will receive full customer service support, rather than just the email support currently available? I ask this as the constant reason you gave for only having email as the level of support on Micro accounts was the fact that Micro was your “discount brokerage”? Obviously this will not be the case for the vast majority of Micro customers come the 21st March.

Secondly, you mentioned in previous posts, that those who trade a higher volume would receive a discount. Yet I can see no mention of this anywhere? All that it says is that those who have $10,000 in their accounts by the 18th March will receive a 1 pip discount. My question is what happens if you get $10,000 after this date or how to you receive a discount if you trade large volumes and what is the structure of this discount?

Thank you in advance for your answers.
Quoting wwwin
Even the E-Trader commercial toddler nows that the STP/NDD gives the trader no advantage, it is an excuse to charge higher spreads.
STP/NDD is just a smokescreen for the newbies and other supposedly more experienced traders that just can't see through it. In both cases, we are trading against a dealer located somewhere.
Quoting Vikyng
Jason
I have two questions for you regarding your move to NDD for micro accounts and the subsequent increase in spreads.

[font=Calibri][size=3]Firstly, as the spreads are now the same as standard spreads does this mean that micro accounts will receive full customer service support, rather than just the email support currently available? I ask this as the constant reason you gave for only having email as the level of support on Micro accounts...
They are still a discount brokerage, only now they discount your profits...and support...why do you need support...."We are STP/NDD, we do not manipulate price...what you see is what the banks send...the spike to take you out came directly from the liquidity providers...therefore, we can't do anything about it....but remember, we want you to make money...when you make money, we make money....and when you lose money...we make money..."
So why do they want the trader to make money, if they make the same money either way? And the liquidity providers want to make money, and they are in bed together....Payment for order flows?? Hmm?
Quoting Adal
Jason, is there any difference between trading forex through a normal FXCM UK account versus a CFD one?

I seem to remember that on CFD accounts you had a minimum distance from the market where you could put your limit orders.
Hi Adal,

No there is not. NDD is used for the forex execution on both the CFD specific accounts and the normal accounts.

Previously, we had two account types: Spot Forex and CFD. The spot forex account only had forex, and the CFD account had spot forex and CFD's.

If you check the website now, there is only one regular account type which includes all products. We will automatically everything in one account (excluding accounts setup by US residents). An exception to this is MT4 and Active Trader. Those two account setups will not include CFD's.

The minimum distance for stops and limits only applies for the CFD products.

Quote
So, what are the differences for trading EUR/USD between a regular and a CFD account?
There's no difference.

-Jason
Quoting PipStar
STP/NDD is just a smokescreen for the newbies and other supposedly more experienced traders that just can't see through it. In both cases, we are trading against a dealer located somewhere.
Again from my previous post...

There's a big difference between trading directly against one market maker, your broker, and trading anonymously against multiple.

With a dealing desk you can get re-quotes, order restrictions, and intervention because your broker can see exactly what you're doing. They're taking the other side of the trade, and when push comes to shove, their profitability trumps your trading because their end goal as a business is to make a profit.

On NDD, you trade against 10 separate banks, and you're anonymous. That's why you can scalp without re-quotes or order restrictions. Your profit or loss doesn't impact FXCM's bottom line because we earn the pip mark-up regardless of the outcome of your trade so we're neutral.

It'll be hard to convince anyone who has experienced the frustration of being requoted constantly during trading that this is simply smokescreen.
Quoting Vikyng
Jason
I have two questions for you regarding your move to NDD for micro accounts and the subsequent increase in spreads.

[font=Calibri][size=3]Firstly, as the spreads are now the same as standard spreads does this mean that micro accounts will receive full customer service support, rather than just the email support currently available? I ask this as the constant reason you gave for only having email as the level of support on Micro accounts...
Hi Vikyng,

Thanks for the questions.

The support methods for micro accounts will remain the same. The small trading sizes and $25 starting balance will still not cover the operating costs of providing live chat and phone support. Additionally, operating costs as a whole are going up due to changes in regulations for margin requirements and capital requirements, and those considerations are taken into account as well. FXCM Micro will continue to act as an entry level option for traders wanting to start off with small amounts as low as $25 and small trade sizes to test trading.

We do appreciate our clients who have supported FXCM Micro all this time. That is why we are extending a one-time special offer to existing clients. If you increase your balance to $10,000 by March 18th, then you will get a reduced spread even after our transition to No Dealing Desk. Under the No Dealing Desk model, FXCM makes its money from the trading volume our clients generate. Since clients with a higher balance have the ability to place larger trades and generate more volume for FXCM, we will provide a 1 pip spread discount to our existing clients who take advantage of this offer. This offer is only available to existing micro clients and the details are listed on the website http://www.forexmicrolot.com/ltd-spreads.jsp

Our regular reward program based on volume discount is through the Active Trader Program. You can find details here http://www.fxcm.co.uk/active-trader.jsp .

Please let me know if you have any additional questions.

-Jason
Quoting Jason Rogers
That's why you can scalp without re-quotes or order restrictions. Your profit or loss doesn't impact FXCM's bottom line because we earn the pip mark-up regardless of the outcome of your trade so we're neutral.
But is there any chance that one or more liquidity providers can notice that they are losing money due to a particular trading style/strategy and then complain to you (the broker acting as the middleman) and/or forbid such trading? It could especially be the case when an STP broker has only one liquidity provider, couldn't it?

This would dispel the notion that you can trade any way you like at STP brokers, including extremely aggressive scalping / high frequency trading.
Quoting Jason Rogers
Hi Vikyng,

The small trading sizes and $25 starting balance will still not cover the operating costs of providing live chat and phone support.
Hummmmm...lets see back in january.......
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Quoting Hyper
But is there any chance that one or more liquidity providers can notice that they are losing money due to a particular trading style/strategy and then complain to you (the broker acting as the middleman) and/or forbid such trading? It could especially be the case when an STP broker has only one liquidity provider, couldn't it?

This would dispel the notion that you can trade any way you like at STP brokers, including extremely aggressive scalping / high frequency trading.
naaa...the big liquidity providers will gladly lose money to scalpers as long as it is FXCM providing the order flow...LOL...they would not turn on their flash trading algos would they?

why is FXCM hiding who the liquidity providers are? it's a vaulted secret...when other brokers gladly reveal who they pass the orders to. I sure would like to know who is involved in this FXCM Liquidity Connection.
Quoting Hyper
But is there any chance that one or more liquidity providers can notice that they are losing money due to a particular trading style/strategy and then complain to you (the broker acting as the middleman) and/or forbid such trading? It could especially be the case when an STP broker has only one liquidity provider, couldn't it?

This would dispel the notion that you can trade any way you like at STP brokers, including extremely aggressive scalping / high frequency trading.
Hi Hyper,

I agree that having only one liquidity provider would create problems because then the spreads, pricing, and market direction could be controlled by that one liquidity provider.

Having competition amongst multiple liquidity providers ensures no one provider can control the spread, pricing, or market direction. While an individual bank may try to skew its prices off the market, the unattractive price on the bid or ask side will lose the price competition and as a result, not factor into the prices streamed to you. FXCM has 10 liquidity providers on NDD execution.

-Jason
Quoting wwwin
naaa...the big liquidity providers will gladly lose money to scalpers as long as it is FXCM providing the order flow...LOL...they would not turn on their flash trading algos would they?

why is FXCM hiding who the liquidity providers are? it's a vaulted secret...when other brokers gladly reveal who they pass the orders to.
DEAL DESK

Order Flow >> Broker

NO DEAL DESK

Order Flow >> Broker >> Liquidity Provider


Now, what if in a 'no deal desk' environment, the 'broker' has a buddy 'liquidity provider' who he allows to take the flow?

Kind've makes the 'no deal desk' model look a little more like the 'deal desk' model, doesn't it?

The whole idea behind ECN/NDD models is that the broker is not on the other side of your trades, but what difference does it really make? As long as you get executed at the price you want, when you want, then you're good, no?

Some of the best traders I know trade with deal desk brokers. Of course, their strategies are not scalable, but they are making money, consistently.

So what broker really does have the best execution?

FXDD

Quoting BostonForex
DEAL DESK

Order Flow >> Broker

NO DEAL DESK

Order Flow >> Broker >> Liquidity Provider


Now, what if in a 'no deal desk' environment, the 'broker' has a buddy 'liquidity provider' who he allows to take the flow?

Kind've makes the 'no deal desk' model look a little more like the 'deal desk' model, doesn't it?

The whole idea behind ECN/NDD models is that the broker is not on the other side of your trades, but what difference does it really make? As long as you get executed at the price you want, when you want,...
exactly, this STP means nothing...you want good execution and good spreads...FXDD TraderPro spread on EU usual .08 as low as 0...FXCM 2.3 typical....they are already trading against you the moment you place the trade, u r down 2.3.
Quoting wwwin
exactly, this STP means nothing...you want good execution and good spreads...FXDD TraderPro spread on EU usual .08 as low as 0...FXCM 2.3 typical....they are already trading against you the moment you place the trade, u r down 2.3.
will look them up..... sounds good..... nearly too good
This guy...Jason he is telling "technical" truths, not "acctuall" truths.

The operating model of a MM will never change because of the system structure. MM will always sort their trades one against the others, and will only tap liquidity from their providers when they need it. That's the MODEL and it did not change, and it WILL NOT CHANGE. If they could get away from it (profitably) they would, in a heart beat, because they would be free from the CFTC.

If you look a few posts back this guy stated the biggest BS I ever heard about how they handle your order. Your micro order does not go "alone" to the banks. What a silly bank would handle micro lot positions.

Oh ...wait...he did not specified the order size ...right? He just suggested a hypothetical GBP/USD....right.

Yep... that's right and that's why it is a "technical" truth. The truth is that, quite contrary to the suggestion, your order will stay in the bucket feeding winner or sucking the losers until the MM has to go to their banks and hedge their lack of liquidity.
Quoting Platypus
This guy...Jason he is telling "technical" truths, not "acctuall" truths.

The operating model of a MM will never change because of the system structure. MM will always sort their trades one against the others, and will only tap liquidity from their providers when they need it. That's the MODEL and it did not change, and it WILL NOT CHANGE. If they could get away from it (profitably) they would, in a heart beat, because they would be free from the CFTC.

If you look a few posts back this guy stated the biggest BS I ever heard...
Hi Platypus,

In case you didn't get a chance to read my post from last week or need to re-read, I gave a detailed overview of how no dealing desk execution works. No Dealing Desk execution is used on all standard 10k accounts at the moment, and those accounts trade in lot sizes of 10k and 100k. Micro accounts will be switched to NDD execution as well in the coming months at which time all forex transactions will be executed by NDD. Every order on NDD execution is executed back to back with a global bank.

Here it is again for you to read:

How are the quotes determined?

FXCM receives pricing and liquidity from 10 banks. So there are 10 separate prices being quoted on the bid side (sell price) and 10 separate prices being quoted on the ask side (buy price). The execution engine on our backend sorts the prices and displays the best bid/ask on the trading platform. Here’s a short example using two banks and without fractional pips to make things simple.

Let’s suppose Bank A and Bank B are each quoting prices for GBP/USD. For simplicity I'll use 2 banks in the example rather than 10. Here’s what each bank is quoting.

Bank A: 1.5025 x 1.5027
Bank B: 1.5024 x 1.5026

The best price being offered by the banks on the sell side (you sell and bank buys) is at 1.5025 by Bank A, and the best price being offered by the banks on the buy side (you buy and bank sells) is at 1.5026 by Bank B. Therefore the bid/ask is 1.5025/1.5026. There’s a 1 pip spread between the buy and sell price. FXCM then adds a fixed mark-up which is our compensation. Assuming there is a pip added to the bid/ask means the final price displayed on the FX Trading Station is 1.5024/1.5027. You then see a 3 pip spread.

This process is occurring very quickly and with 10 separate feeds to sort through. It’s mind-boggling sometimes to think of how fast it occurs. To give you an idea, take a look at a tick chart from Marketscope showing tick history in EUR/USD over a 3 second period. In the screenshot below, there were 18 separate price updates.

http://img43.imageshack.us/img43/6321/tickhistory.jpg


This is also why the spread is variable. As banks compete for the best price, spreads will fluctuate. Whoever has the best price, gets the volume.

How does NDD work when placing a trade?

Continuing with the previous GBP/USD example, let’s say you want to buy GBP/USD and decide to click on the price 1.5027. When you submit the order, the order is sent to FXCM for the price 1.5027 and FXCM routes the order to Bank A offering to sell at the price 1.5026. If the order is accepted, Bank A has a short position at the price 1.5026, you have a long position at the price 1.5027, and FXCM has gained 1 pip in revenue. Each order is offset in this fashion individually to be offset. The trades are not aggregated like you would have with a market maker so at no point is FXCM taking on the risk of trading against clients as a market maker or dealing desk would take.

What if there is slippage?

We can take the example one step further. If multiple orders are submitted or are waiting for the same price, there is then a queu for the orders to be executed. There is also a limited amount of liquidity at each point. For example, Bank A may be offering to sell 1 million notional amount of GBP/USD at the price 1.5026. If there is 1.2 million notional of traders orders waiting to be executed, that means 200k worth of orders will be slipped or cancelled depending on whether the trade is setup At Best or Market Range order. For this example, let’s say the order is submitted as an At Best market order. Your order arrives at Bank A, but the price 1.5026 is no longer available. The order is then re-submitted at the next best available price which happens to be 1.5027 from Bank B. The trade is executed so Bank B has a short position at 1.5027, you have a long position at 1.5028, and FXCM has gained 1 pip in revenue. Despite the slippage on the trade, FXCM’s revenue remains the same.

If the market continues to rise, your long position becomes more profitable and the banks short position turns into a loss, and viceversa. If you close the trade at a $200 profit, the bank is booked with a $200 loss. If you have a $200 loss, the bank has a $200 profit. Your profit/loss doesn’t have an impact on FXCM’s bottom line. NDD eliminates the risk of traders being profitable, and eliminates the conflict of interest whereby it’s in the best interest of a dealing desk for its clients to lose.

Is FXCM the counterparty to my trade?

In retail trading, the broker will be the counterparty to your trade whether using NDD or dealing desk execution. The reason for this is because you don’t have credit lines setup with the banks. If something goes wrong or there’s a problem to settle, the bank will come to FXCM rather than knocking on your door. The forex market is decentralized so everything is based on creditworthyness and relationships.

What matters in terms of your counterparty is how then manages that risk (how the trade is offset). Is the broker taking the other side of the position and thereby running the risk or trading against clients, or is the broker offsetting trades immediately eliminating the risk and becoming neutral to a trader being profitable.

NDD also gives you the benefit of being anonymous. Why do you get re-quotes or order restrictions through a dealing desk but not with NDD? A dealing desk can identify individual traders and change tactics accordingly. On NDD, all orders goto the banks labelled as submitted by FXCM so they can’t single out individual orders or traders. Everyone plays by the same rules.

I know it’s a long post, so thanks for reading. If anything is unclear or you have additional questions. Please feel free to let me know.

-Jason
Quoting Platypus
That's the MODEL and it did not change, and it WILL NOT CHANGE. If they could get away from it (profitably) they would, in a heart beat, because they would be free from the CFTC.
That's right, if they were doing what they say they do and only that, they would not fall under the jurisdiction of the CFTC...they would not be the counterparty....they would just have the credit line guarantee to the bank to guarantee settlement, but would not be your counterparty. A computer STP connecting the banks with the trader is not a counterparty..what is their counterparty risk if they do what they say they do? According to them they have no risk, they just connect you to the bank...what's the trading risk? ZERO...and they have your funds and their computer would never allow an account to go to zero, so they have no risk on the guarantee to the bank...so they are not the counterparty if what they say is true...they are doing more than they would want you believe.
Quoting Jason Rogers
Hi Platypus,

In case you didn't get a chance to read my post from last week or need to re-read, I gave a detailed overview of how no dealing desk execution works....

I did read your post and after re-reading it.......

And again....thats a "technical" truth, or you prefer me to say that it is a "technical" lie?

If I have a 20M dollar account and I open a micro order, will my micro order be routed to the banks because of my account size?!?

I do understand that you work for them and you have to try to keep your job...but don't try to fool people...
I was thinking about not saying this but...whatever....

The banks I worked for never actively got on forex but I do have some friends in banks that provide liquidity for this bucket shops companies and I do know one thing or two about how this thing goes.

If a "liquidity provider" start to get his "liquidity" drained he would...errr...stop providing liquidity. It is all about cash flow !!

Based in this kind of info you can figure out in what side the MM is really playing.

What is more important for them? 50 bucks account or their beloved "liquidity providers"
Quoting Platypus
I did read your post and after re-reading it.......

And again....thats a "technical" truth, or you prefer me to say that it is a "technical" lie?

If I have a 20M dollar account and I open a micro order, will my micro order be routed to the banks because of my account size?!?

I do understand that you work for them and you have to try to keep your job...but don't try to fool people...
Technical Truth or Technical Lie? I'm afraid your statement doesn't make sense.

I think it was pretty clear from previous post as to what happens, but to reiterate again.

Currently, all micro accounts are executed via the dealing desk. So any order submitted is managed by the dealing. That will change once NDD is applied to micro accounts. All forex transactions at that point, micro and up, will be executed using NDD.
Quoting Jason Rogers
Technical Truth or Technical Lie? I'm afraid your statement doesn't make sense.

I think it was pretty clear from previous post as to what happens, but to reiterate again.

Currently, all micro accounts are executed via the dealing desk. So any order submitted is managed by the dealing. That will change once NDD is applied to micro accounts. All forex transactions at that point, micro and up, will be executed using NDD.
So if a newbie with a $25 micro sends an order for 1,000 euros after March 21 that goes straight thru to the liquidity provider? And why are they dealing in microlots when the minimum is 1OK in all currenex platforms that I have seen. Oh is the FXCM exception for being such good boys. LOL
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