FX MOST liquid Crosses top ten..

Guys, it doesn't really matter. In the end, we are all just trying to skim the market for some green. The DD vs ECN issue is, as we all know, an emotionally charged topic.

The honest, objective stance on this issue is: It depends.

The forex market as we know it today is still fairly young and as such still in flux (including access methods). Add the fact that is has only been recently accessible to the retail trader for a decade or so and you have the perfect breeding grown for opinions on how this market might/should be structured in the future.

I gave my opinion on why the futures market will not overtake the spot market anytime soon (not technically at least). So, IMHO, the next step in the spot forex saga (and in the financial world at large, considering what has happened in the past 6 months) is global regulatory reform. Once this is on place, I believe that many of the technical issues (ECN vs DD) debated on these forums will fall by the way side.

We need a better foundation before errecting a higher building. And this foundation is what is lacking greately in the forex world.

I welcome all comments (and flames... hey we all need to let off some steam. This is a stressy business). :D
 
Quote from scexglobal:

So, IMHO, the next step in the spot forex saga (and in the financial world at large, considering what has happened in the past 6 months) is global regulatory reform.
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I can't see how that's possible for spot forex though, retailing by nature is a competitive business and consumers are a fickle bunch. The business has had to clean itself up a lot over the years as traders have become more astute, hopefully it's a trend.

Where's there's money, there's dishonesty (yeah I know, crap cliche but it's all I could think of :) )

If you were in charge what would you do to make it more transparent?

But I still don't really see where the problem is. I get quotes which are pretty close to the underlying market, spreads are reasonable, my orders get filled at the prices I want most of the time, and I somehow seem to make money. Sounds good to me.
 
Quote from fluttrader:

his insults towards me and RedDuke.
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I apologize profusely, I love you guys, you and Redp......RedDuke have been added to my Christmas card list.......now get over it and move on, sheeesh, anyone would think this is a vicars tea party :p

Only (roughly) on-topic posts replied to from here on so you best go and get your daily jollies somewhere else......
 
As you point out, unfortunately this has been a fact since the beginning of time. Just look at the South Sea scams... all because Britain needed to pay off its war debt. Ah yes, war debt seems to be a recurring theme...

But specifically for forex, there are things that could be done better. I'd start by making account segregation (not just in the UK, you guys have it a bit better) mandatory for all U.S. based brokers.

In terms of transparency, there is indeed little more to be done. Forex's decentralized nature makes this tricky. On the other hand, it gives it many of its benefits.



Quote from cabletrader:

I can't see how that's possible for spot forex though, retailing by nature is a competitive business and consumers are a fickle bunch. The business has had to clean itself up a lot over the years as traders have become more astute, hopefully it's a trend.

Where's there's money, there's dishonesty (yeah I know, crap cliche but it's all I could think of :) )

If you were in charge what would you do to make it more transparent?

But I still don't really see where the problem is. I get quotes which are pretty close to the underlying market, spreads are reasonable, my orders get filled at the prices I want most of the time, and I somehow seem to make money. Sounds good to me.
More...
:)
 
Quote from scexglobal:

As you point out, unfortunately this has been a fact since the beginning of time. Just look at the South Sea scams... all because Britain needed to pay off its war debt. Ah yes, war debt seems to be a recurring theme...

But specifically for forex, there are things that could be done better. I'd start by making account segregation (not just in the UK, you guys have it a bit better) mandatory for all U.S. based brokers.

In terms of transparency, there is indeed little more to be done. Forex's decentralized nature makes this tricky. On the other hand, it gives it many of its benefits.



:)
More...

War debt, yep, and guess who pays for it one way or the other.

Segregation of accounts would definitely be a good idea, even in the UK where clients are considered 'secured creditors' if the firm goes bust, it's still not ideal. The whole banking and investment industry needs a major revamp but it's in no-one's interest to do it (apart from the customer's, but since when did they ever matter).

In forex I think I would introduce some sort of minimum knowledge requirement, kind of like an exam of sorts that you had to pass before being allowed to open an account, and more disclosure about the very small percentage of people who actually make any money ie 'trading can damage your wealth' in big neon letters on the front page, in bold! There are so many people in this business who will lose everything and never quite understand why, it seems very unfair. And perhaps some form of credit scoring to limit how much people spend on trading, no-one pays any attention to risk warnings or 'only risk what you can afford to lose'.

Oh, and of course tighter spreads, frequent-trader air miles, plus bonus rewards for every 1m traded!

Well that's the forex market sorted out, what's next, sub prime mortgages?
 
Quote from cabletrader:

War debt, yep, and guess who pays for it one way or the other.

Segregation of accounts would definitely be a good idea, even in the UK where clients are considered 'secured creditors' if the firm goes bust, it's still not ideal. The whole banking and investment industry needs a major revamp but it's in no-one's interest to do it (apart from the customer's, but since when did they ever matter).

In forex I think I would introduce some sort of minimum knowledge requirement, kind of like an exam of sorts that you had to pass before being allowed to open an account, and more disclosure about the very small percentage of people who actually make any money ie 'trading can damage your wealth' in big neon letters on the front page, in bold! There are so many people in this business who will lose everything and never quite understand why, it seems very unfair. And perhaps some form of credit scoring to limit how much people spend on trading, no-one pays any attention to risk warnings or 'only risk what you can afford to lose'.

Oh, and of course tighter spreads, frequent-trader air miles, plus bonus rewards for every 1m traded!

Well that's the forex market sorted out, what's next, sub prime mortgages?
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cabletrader,

The above could also pertain to voters.
Oh yes, and tighted up the USD/MXN please so I can scalp it! :D

Btw, I'd be interested in knowing about the deficiencies of the FSA's 'secured creditor' laws. Why are they not ideal? Would like to hear more...

Take care.
 
Quote from scexglobal:

cabletrader,

The above could also pertain to voters.
Oh yes, and tighted up the USD/MXN please so I can scalp it! :D

Btw, I'd be interested in knowing about the deficiencies of the FSA's 'secured creditor' laws. Why are they not ideal? Would like to hear more...

Take care.
More...

Scalping 40 pip spreads, that's positional trading for me :)


The FSA protection is like everything in the financial industry, a maze of legal definitions and exclusions all designed to give the public as much grief as possible when it comes to unreasonable requests like 'can I have my money back please'. It's the usual story, corporates always have the upper hand.

Specifics:

The FSA is supposed to be the watchdog who regulate these companies and although legislation is in place to protect deposited funds by requiring them to be segregated from company assets, if a company gets into difficulty then desperate times may call for desperate measures like dipping into the client funds pot.

Let's say BigFX goes into liquidation. If it's adhered to the FSA regulations and kept client funds segregated then pretty much no problem, funds are returned. But let's say worst case it had used client funds to prop up the business hoping for a turn-around (hey, we've all done it, 'just a few more pips...'!), that probably leaves zero company assets and a big hole where clients cash should be. This is where it gets tricky. The treasury (tax man) gets first dibs, after all he's the government. Then comes Larry the Liquidator and his entourage of shysters, then other preferred creditors, then secured creditors (us!), and finally unsecured creditors. Depending on how much was in the pot to start off with, and how much the treasury and Larry want, it would end up we'd get x pence in the pound.

But just to complicate it even further there is something called the FSCS, the Financial Services Compensation Scheme, which the FSA describe as a 'fund of last resort'. They will compensate clients for any shortfall up to a maximum of £35k but only if the client meets certain criteria such as how they deposited funds with the now-insolvent company in the first place. The standard procedure when funds are deposited isn't exactly segregated and doesn't meet FSCS regulations, you have to request a segregated account to be eligible for the FSCS compensation scheme, something the majority of clients are unaware of and for some reason not information freely offered at the time of opening an account and depositing cash (probably more paperwork and red tape and therefore takes longer)

And that's about as far as I got, it became too complicated after that so I opted for the second (simpler) choice which was to withdraw excess funds once gains had been made. Funding an account is so quick nowadays (under 30 mins) that there really isn't any need to have any more deposited than margin requirements and unrealized loss, I'd rather keep it in a bank or building society such as Northern Rock......hang on, they nearly went bust too, I can't win!

Moral of the story, get a real job :)
 
Quote from cabletrader:

Scalping 40 pip spreads, that's positional trading for me :)


The FSA protection is like everything in the financial industry, a maze of legal definitions and exclusions all designed to give the public as much grief as possible when it comes to unreasonable requests like 'can I have my money back please'. It's the usual story, corporates always have the upper hand.

Specifics:

The FSA is supposed to be the watchdog who regulate these companies and although legislation is in place to protect deposited funds by requiring them to be segregated from company assets, if a company gets into difficulty then desperate times may call for desperate measures like dipping into the client funds pot.

Let's say BigFX goes into liquidation. If it's adhered to the FSA regulations and kept client funds segregated then pretty much no problem, funds are returned. But let's say worst case it had used client funds to prop up the business hoping for a turn-around (hey, we've all done it, 'just a few more pips...'!), that probably leaves zero company assets and a big hole where clients cash should be. This is where it gets tricky. The treasury (tax man) gets first dibs, after all he's the government. Then comes Larry the Liquidator and his entourage of shysters, then other preferred creditors, then secured creditors (us!), and finally unsecured creditors. Depending on how much was in the pot to start off with, and how much the treasury and Larry want, it would end up we'd get x pence in the pound.

But just to complicate it even further there is something called the FSCS, the Financial Services Compensation Scheme, which the FSA describe as a 'fund of last resort'. They will compensate clients for any shortfall up to a maximum of £35k but only if the client meets certain criteria such as how they deposited funds with the now-insolvent company in the first place. The standard procedure when funds are deposited isn't exactly segregated and doesn't meet FSCS regulations, you have to request a segregated account to be eligible for the FSCS compensation scheme, something the majority of clients are unaware of and for some reason not information freely offered at the time of opening an account and depositing cash (probably more paperwork and red tape and therefore takes longer)

And that's about as far as I got, it became too complicated after that so I opted for the second (simpler) choice which was to withdraw excess funds once gains had been made. Funding an account is so quick nowadays (under 30 mins) that there really isn't any need to have any more deposited than margin requirements and unrealized loss, I'd rather keep it in a bank or building society such as Northern Rock......hang on, they nearly went bust too, I can't win!

Moral of the story, get a real job :)
More...

Great post cabletrader. I think we can put the "cabletrader doesn't know what he is tallking about" thread to rest once and for all.

As you said, the solution, for now, is to only keep as many funds as are need to trade. This, of course, does hinder compounding one's trades a bit, but that is just how things are right now.

I had a hunch, without knowing any specifics, that the FSA protection was not all it seemed to be.

So if BigFX decides to adhere to the FSA rules, all is well, if not, clients are in the same boat as all the other NFA US clients. Sounds like the good 'ole financial world to me.

Seems like the UK is having particular problems, since its economy is heavily tied to the financial sector. :(

Good stuff.

scex
 
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