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MB Trading's forex announcement next week -just hype or possible game changer?

  • #21
  • Jan 26, 2011 9:01am Jan 26, 2011 9:01am
Quoting Cocoflanel
Earning the spread ?
Isn't this only the case when the market takes you out at your limit price and turns immediately the other way ? Most of the time this won't happen...
The whole point of what they are doing is that it will be more likely to happen now, and keep in mind that if you bid and ask a couple of tenths of a pip apart and get filled in relatively short order, the 1.95 per 100k credit makes you profitable. That's why what they are doing is so revolutionary.
  • #22
  • Jan 26, 2011 2:37pm Jan 26, 2011 2:37pm
Quoting Cocoflanel
Earning the spread ?
Isn't this only the case when the market takes you out at your limit price and turns immediately the other way ? Most of the time this won't happen...
Not if another trader fills your resting limit order. Yes, it certainly won't happen most of the time, but it will theoretically happen some of the time.
  • #23
  • Jan 26, 2011 2:50pm Jan 26, 2011 2:50pm
Quoting shrike
One possible problem tho: i guess there will now be much more small orders from clients on the inside mkt, so when you want to trade more (say 500k) its not immediately obvious what price you pay. Now the top-of-the-book quote is good for +1m in 99% of the cases. The navigator depth window should get an option to display a user-defined vwap-quote, like currenex or hotspot. The quoteboard will be much less useful when people constantly post 1000 unit orders between bid/offer.
Good point.

I'm also curious who is paying the fee if an LP fills the order (which I imagine will be the case the vast majority of the time, i.e. market trades-thru and LP fills). Assuming the LP pays the fee, did MBT manage to get all of their LPs to sign new agreements, which called for giving up their commission on limit order fills, and paying rebates on top? That's impressive, considering the LP banks have no such model either internally or externally at any other broker.

If MBT is paying, I wonder if they'll end up putting in a cap, should the algo's take advantage. It won't be as lucrative as rebate trading say Citigroup (500M shares/day at <10c range, 0.27cent rebate per share, the smartest guys are literally printing it). Nonetheless, there's money to be made here for shops like that.
  • #24
  • Jan 26, 2011 4:39pm Jan 26, 2011 4:39pm
JLB said that MBT payed LPs for adding liquidity even before this change. I think this only makes sense if they also pay a fee as aggressor(like on ebs), otherwise this sounds totally uneconomic. My guess is that an LP still comes out way ahead, i assume they fill mkt and stop orders more often than customer-limits. And they probably pay way less than a retail customer.

Still, even if LPs pay the fee, this sounds a bit strange. Banks obviously want orderflow from the retail space, otherwise they wouldnt be in the game at all. I would have thunk that means they pay MB a commission for routing orders their way, not the otherway round. In the equities space retail-brokers get good money for selling their orderflow to firms like Getco. MB does this as for their option-trades as well (see their payment for orderflow disclosure).
  • #25
  • Feb 5, 2011 11:04pm Feb 5, 2011 11:04pm
So I decided to place a limit buy to close a small EURAUD position. I was really intrigued by the peculiar price movement on my chart after this order is placed.

On the chart where the left red arrow is pointed, I placed a limit that was within the bid-Ask range, and the bid price immediately exceeded my bid. so I upped the bid by just .1 pip from that bid, and immediately got bumped out again. I tried this manually several time, but my bid always got bumped out. I think the market marker was competing with me for the spread on that tiny order! LOL.

So later on I placed the order fixed at 1.33851, and look what happened on the blue area!

I can only assume there is no other buyer is trading at that time. So It the liquidity really that thin?


Does anybody's chart on MBTrading show the same price on that period? Very interesting indeed.

Look at what happened after my buy order was filled. The price had a sudden drop! So for these who try to take the advantage of limit order, beware of this if the market is trading thin!
Attached Image (click to enlarge)
Click to Enlarge Name: MBT_limitOrder.PNG Size: 58 KB
  • #26
  • Feb 6, 2011 2:44am Feb 6, 2011 2:44am
Quoting shrike
JLB said that MBT payed LPs for adding liquidity even before this change.
Interesting, I didn't catch him mentioning that. I was under the impression the LPs are just "displaying" liquidity in MBT's book, any orders against that liquidity are routed externally to the LP for execution (this latter part was confirmed by JLB).

I don't see why MBT would be (previously) paying them, unless the liquidity was made directly executable on MBT's book (a la other DMA venues - Hotspot, CME, etc).

Quote
Still, even if LPs pay the fee, this sounds a bit strange. Banks obviously want orderflow from the retail space, otherwise they wouldnt be in the game at all. I would have thunk that means they pay MB a commission for routing orders their way, not the otherway round.
Quite likely the case. Recently saw FXCM's SEC filings where they state they receive payment from their LPs for order flow (alas, no breakdown of the revenue proportions - spread markup vs order flow payment).

I concur with you that MBT likely has a similar payment for order flow arrangement.
  • #27
  • Feb 6, 2011 2:49am Feb 6, 2011 2:49am
Quoting neomn
On the chart where the left red arrow is pointed, I placed a limit that was within the bid-Ask range, and the bid price immediately exceeded my bid. so I upped the bid by just .1 pip from that bid, and immediately got bumped out again. I tried this manually several time, but my bid always got bumped out. I think the market marker was competing with me for the spread on that tiny order! LOL.
Possibly the case, happens all the time in the equity ECN space.

Quote
Look at what happened after my buy order was filled. The price had a sudden drop! So for these who try to take the advantage of limit order, beware of this if the market is trading thin!
Price simply paused at the level of your order range and then pierced thru in a continuation move. It might look odd on the chart, but was without a doubt a mere coincidence.
  • #28
  • Last Post: Feb 16, 2011 10:25pm Feb 16, 2011 10:25pm
Quoting neomn
On the chart where the left red arrow is pointed, I placed a limit that was within the bid-Ask range, and the bid price immediately exceeded my bid. so I upped the bid by just .1 pip from that bid, and immediately got bumped out again. I tried this manually several time, but my bid always got bumped out. I think the market marker was competing with me for the spread on that tiny order! LOL.

This is actually an opportunity especially on the pairs with wider spreads.

There are certain firms out there who like to do this sort of thing on purpose on very illiquid stocks to manipulate (tighten) the spread and, as the other party competing for the spread steps in front again, takes out their new bid, effectively selling to a better price than what would've been there before this. If you're already in a long position and looking to get out, or are looking to get in short, you can do this on purpose to close the spread in your favor -- on pairs that, on average, have much wider spreads, this should even be worth paying the 2.95 per standard lot fee for removing liquidity... but that's assuming this happens often enough here for it to work as well as it does on said stocks.

I haven't tried this yet but it sounds like it might be worth exploring if it happens often enough on less liquid pairs during slow hours (plus I doubt there will be any rules against this sort of "spoofing" on retail forex any time soon...)

For the record, I did get some pretty decent fills on MB this morning during the first few hours of the NY session. Granted, these were very liquid pairs during the most liquid time of day (London/NY overlap) so I know this is a whole different ball of wax than the scenario you're talking about. But if the above works here, then it'd just be a matter of using different strategies at different times and/or on different pairs
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