100+ pip spread

Gcapman · Dec 25, 2009

Quote from PlusMinus:

In a true ECN, the answer is yes. This is also true on an exchange, such as the CME, or Eurex, with regards to futures.

As for spot FX brokers, I have no idea, but I would not expect everyone to see the same price, because the broker is not obliged to show the same price.

The charts and candlesticks for the Euro spot and futures appear pretty much identical.....

I've never traded fx futures before but what you are telling me (or at least I am asking) is that the pip spread has never gone ballistic? It has never been 15-20 pips spreads on fx futures?

I would be very interested in knowing the pip spread action on fx futures - whether it stays a consistent spread or jumps just as the spot fx spreads do

Thanks

PlusMinus · Dec 25, 2009

Quote from Gcapman:

The charts and candlesticks for the Euro spot and futures appear pretty much identical.....

I've never traded fx futures before but what you are telling me (or at least I am asking) is that the pip spread has never gone ballistic? It has never been 15-20 pips spreads on fx futures?

I would be very interested in knowing the pip spread action on fx futures - whether it stays a consistent spread or jumps just as the spot fx spreads do

Thanks

All you need to know is that when trading FX futures all trades are streamed with quotes. You'll never see this on 99.9% of FX Spot brokers, and even if you did unless it was a regulated or self audited broker, it would be useless and unreliable.

Let me explain, you can and probably should effectively ignore the quotes on FX futures when it comes to evaluating the market value of an FX contract. Because actual trades are streamed in real-time, you know for a fact that the currency pair traded at that price, and at that volume. Obviously the more volume there is, such as in liquid pairs, you more certain you can be that the exchange rate is fair at that print.

If there is a spike, it is only because someone actually wanted to trade at that price. There is no other way for the price to jump unless there is a trade.

Do not confuse this with quotes. Market makers and traders can quote whatever the hell they want, they can send orders far outside the last trade. But you have the actual trades, along with sizes of each trade, to tell you whether the quotes you're seeing are reasonable.

As for the prices of pairs jumping around in futures, this happens for reasonable reasons, that are not due to a broker jacking you around. Now it's a tricky thing because FX futures are tracking spot rates, for all intents and purposes, what's being traded over EBS. So if you see a trade that is wildly far from the last one on the CME, either two parties actually agreed to trade at that price, meaning it's not a broker yanking you around, or it is a bad tick from the exchange, or a busted trade or an error on your data vendor's part.

As for your spot feed matching the futures feed, they should be very close, but they are definitely not going to match tick for tick. It can vary quite a bit depending on the spot broker, especially for brokers who only offer fixed spreads. There are no fixed spreads with futures, and there is an order book that is visible to all traders (who pay for the L2 data).

Hope that helps.

bstay · Dec 25, 2009

Quote from Gcapman:
so I have one question: Is everyone's bid/ask deal rates the same or different?
For example, if I see EUR bid 1.5000/ask 1.5005 ---- does everyone using the same broker and trading platform as I am see the exact same quotes?

the broker actually hired a team of specialists to specifically target each client ..... hunt their stops and deal the spreads to effect the losses. actually the team works 24hrs to keep up with clients all over the world who trades at various times, and keep a record of your P&L to decide who and how to kill your account.

PlusMinus · Dec 25, 2009

Quote from bstay:

the broker actually hired a team of specialists to specifically target each client ..... hunt their stops and deal the spreads to effect the losses. actually the team works 24hrs to keep up with clients all over the world who trades at various times, and keep a record of your P&L to decide who and how to kill your account.

The sarcasm presents a straw man argument. A broker can use software to do all of those things. I'm not saying they do, I'm just saying your rational for rejecting the theory is week.

cabletrader · Dec 26, 2009

Quote from Gcapman:

If I had been over-leveraged, I surely would have been margined out!!

cabletrader · Dec 26, 2009

Quote from PlusMinus:

A broker can use software to do all of those things.

davidmaria1 · Dec 26, 2009

Quote from bstay:

actually the team works 24hrs to keep up with clients all over the world who trades at various times, and keep a record of your P&L to decide who and how to kill your account.

Just like Santa.

puretruth · Dec 26, 2009

Quote from cabletrader:

LOL , brilliant !

NetTecture · Dec 26, 2009

Quote from bstay:

the broker actually hired a team of specialists to specifically target each client ..... hunt their stops and deal the spreads to effect the losses. actually the team works 24hrs to keep up with clients all over the world who trades at various times, and keep a record of your P&L to decide who and how to kill your account.

Tis is criminal when foud nout.

Even with a bucket shop:

* The quotes must have SOME Relation to the ECN market and
* The quotes must be identical for basically all customers.

If the customer can even provide SOME proof that his account was singled out this is outright fraud. Criminal.

Not saying bucket shops are fair, just that they probably do not target individual customers with different spreads / quotes. They will give all customers the same - possibly depending on bid / ask size and their exposition. But singling out indivisual customers is a big "no".

They have every right to widen spreads - even more for example for larger lots - but if I can proove that I got a worse spread for the same lot size and direction than another customer.... guess what happens then

Court of law.

PlusMinus · Dec 26, 2009

Quote from NetTecture:

Tis is criminal when foud nout.

Even with a bucket shop:

* The quotes must have SOME Relation to the ECN market and
* The quotes must be identical for basically all customers.

If the customer can even provide SOME proof that his account was singled out this is outright fraud. Criminal.

Not saying bucket shops are fair, just that they probably do not target individual customers with different spreads / quotes. They will give all customers the same - possibly depending on bid / ask size and their exposition. But singling out indivisual customers is a big "no".

They have every right to widen spreads - even more for example for larger lots - but if I can proove that I got a worse spread for the same lot size and direction than another customer.... guess what happens then Court of law.

What law prevents a market maker from pricing an instrument for one client differently than another when the instrument is being traded OTC? If you walk into a store and buy an apple, is there a law that says the storekeeper has to sell you the apple at the same price as the next person who walks in?

And more importantly, even if this were a law, spot fx brokers are not audited, nor are they regulated on a transaction basis, so it would be very difficult to prove this.

Spot fx essentially lacks transparency.