Is anyone here an institutional trader?

ahh ..thanks for the explanation skenobi

Can I know which brokers are you ex-institutional traders using now that you are no longer with a bank? Do you use multiple brokers or you use just one broker to handle all the trades?

Speaking only for myself, I have only one personal live account with one broker. Accounts in two other brokers co-managed with partners. Would rather not reveal the broker names as I'd rather not be seen as endorsing anyone.

I can say that I would not choose a broker unless governed by regulations in the UK, Australia, Switzerland and/or Singapore, with higher priority given to outfits having bases situated within these domains.

For retired institutional traders, a question

May I ask what are you trading right now? Options, futures, equities, forex? And what is your trading style...intraday, short term (how many days-weeks), long term (how many months)?

Yes. Retail traders complain and whinge about how the market and their brokers con and scam them. Professionals accept the fact that it's they who need to change. The trading style is irrelevant, the only thing is we need to scale in large volumes over a range of prices rather than what retailers would buy or sell at an exact price.

Do you use market makers or only DMA.

As this is one arguement I keep seeing over and over. Conflict of interest being the contention.

Question to retired bank fx traders.

1. There are some market moving calendar news for each currency pair, like employment change, rate decision, non-farm, etc. After this news price can move several big figures, so the question how institutional clients play those moves, if at all they do. Is there a build up of market/limit/stop orders few hours before the move, or do they bet right after news announcement or they prefer to obstain from trading? Whos orders move the market? Is it low liquidity move, happen to happen because of low liquidity? Or volumes really big?

2. From what I understan market making fees almost non existant nowdays, and since banks banned from having their own prop trading (at least they say so), what is the point for banks to keep on making market for its clients, if they cannot get neither risk free fees nor move the market against them since they are not supposed to trade (I guess there is workoround concerning prop trading ban).

3. What happens if market maker finds out that he is big time in the red and shit just does not work by offsetting trades with more liquid currency pairs?

4. What funds does bank use for trading? Is it retail branch client current accounts and deposits or maybe its our retirement saving accounts? So in essence there is not bottom to how deep big bank's pockets?

5. Did you ever teamed up with other market makers to move the market or for whatever other reason? Do market makers stand each other in general?

6. You mentioned that you ran clients stops for your profits, do you feel regret of some kind?

7. As an institutional traders did you have some insider access to market data, somebody mentioned had a friend with reuters? Obviously that shit leaks on daily basis. But since you depict yourself as upright and standup guys, stating that you didn't front run clients orders because you were not allowed to, who the heck front run them? the "lucky" guy who happen to execute client order or he had to obstain either?

8. Since you had access to sensetive information, again yard orders, were you monitored not to leak it? Well, you were not allowed to take free ride, but you all could be very busy during that time SMSing to your fellows outside the bank, 200 pips is fortune especially with retail leverage! Were you forcefully locked in the room without phones and internet for the entire period of that 200 pips move?

9. From what you have written, I came to conclusion, that retail is utterly tiny business for banks, why do they bother providing liquidity to them? All major retail forex brokers have LPs, those are major fx banks as I get it. So if they do not run retail crowd stops, and turnover small, why bother? Maybe retail is not that small, giving its leverage?

10. What is the usual leverage you worked with, now being retail do you stick to the same leverage? You mentioned about budget, and also that funds were not an issue. Still to clarify what was you funds when you had to make 1 million, what was your funds when you had to make 20 millions?

11. What was your biggest annual return on equity trading with the bank? What is your annual return for 2013, 2014 as retail traders? Do trading conditions differ much from interbank, in what fovor?

12. If you e.g. sell cross gbpnzd big time, will other pairs with gbp and/or nzd react? Or to move the market all across the board you need to sell say also gbpusd, gbpaud, gbpcad etc.

13. Have you ever came across situation when you limit orders on very fast markets was not filled, is there such thing as last look on interbank market?

14. Why you prefer spot retail to futures market?

15. Best book on forex you came across?

16. What is your trading setup now, how many monitors? Do you pay for reuters or check news on forexfactory? How many hours a day you work?

17. What software used in the banks for trading? Is it similar to mt4, where you can write your ea and indicators? Or it is rather manual?

18. Do you trade big news? If no, why not? If yes, what is your strategy?

19. What is the biggest spread you seen on main currencies in interbank, anything outrageous like 60-100 pips for say gbpnzd, eurnzd and alike?

20. What is trader base salary, and how much bonus for the performance? Are perks good?

21. Do you believe markets changed a lot since inception of HFT, and its much harder to make money today vs say 10 years ago, notwithstanding the fact that commission/spreads got smaller.

Regards,

Denis

Hey...retired bank fx traders...you got a home work to do
No offense, denis...p-e-a-c-e

Thank you skenobi. Can I assume you are trading using ECN/DMA accounts and not the normal retail accounts where the broker is the counter party?

Yes, I feel also like I am exploiting their kindness, which is not making me happy, but on the other hand, its not for my personal satisfaction (otherwise I would pm), its questions everyone will see answers on.

Question to retired bank fx traders.

Wow that was a mouthful.....Let me see if I can answer those questions.

1. The ones you mention are probably the biggest with US nonfarm payrolls the biggest other than Interest rate decisions. What we did as market makers is to check our orders before those number to see what was close. Then you prepare for the client business that follows which is very challenging .... liquidity dries up completely after a big number so when a custy comes in asking for a price you do your best to "not get killed" or shade the price so the custy passes your price. These are the worst times to be a market maker bc there are no prices in the market and invariably every custy wants to play from the same direction (momentum) which means bank dealers are always on the wrong side of the market.

2. They are not "fees" rather its like trading on your retail platform. There is a spread you take on the customer. Those spreads have indeed contracted significantly over the years which makes it harder for banks to make money and from my perspective customer business became more of a liability than an asset. We all prop traded but the bank did not have a stand alone prop desk, we all made markets and we all prop traded. Not sure how that is monitored now with the Volcker rule.

3. Every dealer has limits in terms of dollars. I you are in breach of that then you need to explain your loss to your boss. You may or may not have to close out your position.

4. Every bank has a funding desk that goes out and borrows money or issues short-term paper, etc. Not sure what the make up of those funds are but every bank borrows money and leverages that borrowing. For example, before the 2008 crisis most banks use about 15-20:1 leverage, Lehman was the most aggressive they were at more like 33:1 I believe.

5. No comment on that one. That has become a very sensitive subject amongst banks and regulators. Friends of mine are losing their jobs over this issue.

6. No, because they feel no regret when they run me over with their orders. There's no crying in trading.

7. Inside information: no never but that's bc my def of inside information would be finding out what the US non-farm payrolls is b4 it comes out or any other significant economic release. Now that's information that could make a person rich. Everyone has a Reuters machine.
Early in my career dealers front ran customers to a certain extent. It's not the kind of conspiracy you imagine it to be. for example if say EurUsd is 54/55 when a custy calls and says I need to buy 200 mio eur if you came back with a fill at say 61 bc you bought some for yourself b4 you bought any for the customer you will never ever see that customers business again. Customers now know where markets are, 9 out of 10 will not give you an at best order, they will give you a limit. going back to the eurusd example, what you typically see now is that same customer say I need to buy 200 mio eurusd no worse then 56 or work to buy at 54. Also, you couldn't front run an order bc your books are monitored so its easy to see who on the desk or in the bank bought ahead of that order.

8. You could sms if you wanted to risk it. Our phones were bank phones...they could and did check any and all incoming and outgoing calls and texts. I'm not saying there weren't people who didn't do that. You have to ask yourself if its worth losing your job over. The people who did things like that were probably desperate to begin with. For myself, there were no deals or inside information that was worth losing my job for.
Customers don't leave yards worth of orders on banks books especially not Hedge Funds, they are way too smart for that.

9. Incorrect, Retail is HUGE business. I think what myself and Skenobi said was we didn't deliberately target retail stops, they were probably just clustered around s/r levels where most players had there orders.
Retail is huge because we have to cross these (compared to interbank markets) grand canyon wide spreads, we are not allowed to sit on the bid or offer. The platforms also make a fortune on the rollovers (for those who trade overnight). There's is big money in the funding aspect, but funding issues are also the reason platforms won't let you trade THB or the NDF's. Retail is the only business in the banks where there is any spread left. And that is why they are more than happy to give us huge leverage.
Note: if any of you feel like you're doing descent volume you should ask for a reduction in brokerage and or spread, I did. Or threaten to go elsewhere it may be worth a shot.

10. Dealers are not allocated capital, in simple terms it always available to us as long as we stay in limits.

11. return on equity is hedge fund terminology not used by banks. I won't go into my own performance but I'm happy. I do use a lot of leverage though.

12. Yes, if a dealer gets a chunk of gbp/nzd he/she will most likely cover that with some gbp/nzd, but probably mostly gbp/usd and nzd/usd.

13. Limits orders should always be executed if it's through the level.

14. It's just what I'm use to.

15. Never read any books on Forex I guess bc I lived it.

16. 4 monitors, I would like a Reuters machine its not worth the cost, I can do without it. I think I spend way too much time in front of my screens.

17. Banks used their own software developed in house at least mine did.

18. I'm not an event risk kind of guy I usually like to let the dust settle first. But I'm constantly watching news and econ releases and anticipating scenarios in my head to try to get some clues about how the market is trading a certain pair or overall trend.

19. Nothing that outrageous in a normal mkt. Maybe UsdZar can trade that wide after news but in general no. If spreads were still that wide interbank there would still be a lot more traders and sales people employed. That's goes back to my previous pt banks love retail business.

20. Base for a senior dealer is probably between 175-225k USD. Bonus is usually about 6% total compensation. Brokers provided the perks back in my day. Not so much now.

21. It's not just HFT it's, in my opinion, technology that change the landscape for banks. When I started prices were not as transparent and the average corporate really didn't have a clue or cared what we took on certain deals. But as market levels became more common place corporates and other institutions knew pretty much where the markets were so they would complain if they though you were trying to take too much. Also, there's completion, other banks want the business too, so they offer tighter spreads. That starts entire domino effect which continues to this day. It won't be long before spreads on retail platforms tighten up too. Some of you may not want to wait that long, tell you provider you want a better bro/spread schedule, see what happens you may be pleasantly surprised.

regards,

JFx ( I'm going to ice my hands now)

Forex only for me. Style? I don't scalp unless I have lots of time on my hands. I don't keep my trades more than 1-3 days at most.

Ditto that.

I've never bothered myself with that question so I don't consciously look for market makers or otherwise. Maybe I should? I dunno.

But for now I don't care because it would seem my strategies are not dependent on the brokers being one way or the other.

I've read Jacob's response, and found that I disagreed with SOME of what he wrote. But then I realized the disagreement was more due to differences in regional and cultural perspectives (he's from a First World center, and I'm from the AsiaPac region) so there was really nothing wrong with what he replied with.

My answers below are directed to Denis (unless otherwise mentioned).

1.Dunno what to say. Sometimes it's some of the things you mentioned. Sometimes it's the other things. It's never the same each time. I personally don't give a sh!t either way. I'm never in the market for the targeted pair 2 hours prior and 30 minutes after any scheduled event.

2. I don't think you even understand what market making is. Market making is not trading. It is a service we provide to our clients and counterparties. Someone needs a price? Market makers make a price for them. There are no fees. We make from the spread i.e. customers sell to us at our bid, and buy from us at our offer. Prop trading ban? What prop trading ban?

3. Again, because you don't understand what market making is, I will answer to your point: market makers are usually never in the red BECAUSE they make money purely from the spread. If you're talking about TRADERS, losing traders rarely work in silos. Their losses will usually be noticed early (either by colleagues and/or risk managers) and if nothing is done to mitigate the losses (trader acting like a deer in the headlights), his trades will be closed out by seniors and the trader is chewed out, fired, or worse.

4. We use whatever capital (accounting textbook definition) is allocated by the Bank's management. Not a complicated answer.

5. Yes. And Dunno.

6. We're not in the "pity" business; we're in the "making money" business. If the shoe is on the other foot, we can be sure our counterparties and customers will screw us Johnny-on-the-spot without fail. That is the price we pay for the Life we lead.

7. Economic data is "insider information". That's clearly illegal. Front-running your own clients' orders, on the other hand, is not black-and-white illegal. And I don't remember saying that it was illegal. Hope you can point to me the post (if any) so I may comment further.

8. There was no continual monitoring during my time. Spot checks only crop up when "concerns" crop up. In any case, I do not leak orders left to me (as a matter of principle) nor would I solicit such info from my counterparties. But I have no qualms using unsolicited info. Life is unfair. And I thank God for it.

9. Jacob says retail business is huge. I'm assuming he meant retail FX traders. Jacob could be right on its huge-ness, but my perspective is that it's still insignificant relative to the overall market. In the AsiaPac, for instance, I don't SEE retail orders per se. I see clusters of MANY Bank-only orders (which, come to think of it, may contain tiny elements of retail trades). Retail stops (if they even exist in the Bank's universe) are just tiny parts of the "turnover" you talked about.

The point I'm trying to make is this: we don't consciously target retail orders. When a commercial fisherman goes fishing with his nets, he doesn't target a specific fish; he nets up every single one of them. So retail traders should just relax: you're too insignificant for us to even give a sh!t about.

10. There is SOME element of "leverage" in Bank trades, but generally we HAVE to have the capital to trade i.e. 1:1 leverage i.e. no leverage. Jacob's reply is apt so I've nothing to further to add to that.

11. No comment. No comment. Dunno what you mean by trading conditions.

12. I don't keep odd crosses in my books if I can help it because I'm too lazy to manage P/L in different currencies. If I have GBPNZD exposure, I will manage it separately for as long as it's trending in my favour. Otherwise, I'd just square the damned thing.

13. I don't remember having problems getting limit orders filled to my specs.

14. Spot and retail combined is 24/5 and larger. Futures don't even compare.

15. I've read a lot on forex but nothing good on forex comes to mind.

16. Two monitors and a laptop, mostly for non-trading-related work. I don't pay for anything. News come from FF and Twitter. I spend maybe an hour a day looking for setups and leaving my orders, then I go about the rest of the day doing my own thing.

17. Dunno what software you're talking about. I used Bloomberg exclusively for news and analysis. I use Bloomberg and Reuters for trading. I actually did use MT4 on my own laptop for charting, and I think I'm the only trader on my floor who did that. We didn't have in-house software for our treasury systems but we did have custom-made ones from third-party vendors.

18. As a rule, I don't trade big news. "why not?", says you. "why should I?", says I.

If I DID trade news on occasion, I wait 30 minutes to an hour for price to settle down and find direction, and then I trade accordingly. I never, ever pay attention to the actual or predicted "direction" of the news... only the direction of price.

19. I see them in AsiaPac exotics. I don't keep track of such things so I don't remember.

20. AsiaPac salaries are maybe a lil bit less than what Jacob is used to due to the lower costs of living here. Dunno what perks you meant. For me, it's the little things. For example, I don't have to wear neckties to work (compared to other Bank employees). In one organization, I'm allowed to wear anything I want to work for as long as I don't have to meet customers or meet with Top Management. So I wear khakis and collared golf T-shirts almost every day. I get to have lunch anytime I want. Our comp structure is separate from the rest of the Bank. etc etc

21. Dunno. Had not noticed, to be honest. Harder to make money? For institutionals making markets, maybe. For the pure traders? I think the opportunity to make money has always been the same for these guys.

Skenobi has got it right ..." I spend maybe an hour a day looking for setups and leaving my orders, then I go about the rest of the day doing my own thing."

I spend way too much time in front of the screens

JF, I suppose you are talking about the swap rate? This is one aspect of spot forex which I'm thinking how to deal with, I don't scalp. I can be paying quite a good part of my profit if I have to keep my positions overnight. Any effective way to handle this for a retail trader?

How deep commercial fisherman goes fishing? 100 pips deep doable? And when he does it, is it like very rapid movement and then price slowly retrace everything or it is going slowly towards stops and then retrace fast, or maybe conbination of two? (they say picture worth 1000 words, maybe screen shot of yours doing it in the past). Does he do it out of the blue, or he likes to do it during calendar news not to attract much attention of regulators? Jacob mentioned that big clients are too smart to leave sensetive info on your books, so there must be no way for you to figure out what it will really take to run stops, obviously there were situations when you could not do it, and instead of getting easy money you end up sucking big time, true or false?

Does it mean no matter how big it is, it will be filled at exact price or better? If it is so, then it is very strange to say the least! You see, if for example, you have 200 million long position in gbpusd, and your take profit was at 1,6830, price having moved above it could not go below it until your order filled, right? but what if there is not enoght buyers at that level to fill your take profit at exact price or better? Do you want to say it will not move below untill your 200 millions filled completely? (you see retail limit orders are filled only when price cross the level, and on the way back the order is filled, it might be different on interbank market though).

So, before big news announcement, for currency pairs you had open positions in, you are out of the market completely? Because if you don't, you trade them .

Is it possible to move liquid currency pair like gbpusd with less liquid currency pairs manipultations like gbpnzd and nzdusd? Or such tricks won't work? The point is you need much less money to move illiquid pairs, than targeting directly liquid one?

Unfortunately there isn't, it just one of the ways that these retail platforms make easy money

There is no easy way if you enjoy eating pork, otherwise its easy

Still enjoying this thread....
Jacob, what would a trader with a base such as this be expected to make during the course of the year in terms of P&L these days?

well said