FXCM Launches FXCM Forex Execution Center: FXCM Explains Their No Dealing Desk Forex

[brocklanders]

Great, thanks for taking the time to answer, this is good to hear.

 

[Jason Rogers]

Quote from rosy2:

are limit orders that better the best bid/offer shown to the world?

Hi rosy,

The dealing rates quotes will display the best bid/offer coming from the banks, so limit orders will not appear as a part of the best bid/offer shown to the world. But as mentioned to Brock, your limit orders can be filled at a better price than you requested by means of positive slippage. http://www.fxcm.com/forex-price-improvements.jsp.

Key times for price improvement on limit and limit entry orders is during news events, weekend gaps, and general volatile market conditions, but it can really occur at any time since the price improvement is subject to available liquidity.

-Jason

 

[intradaybill]

Quote from Jason Rogers:

Hi Bill,

With NDD forex execution, there is no dealing desk taking the opposite side of your trade and managing that risk. Every order is hedged immediately therefore your profit is not FXCM's loss, and your loss is not FXCM's profit. It is a big issue because the conflict of interest is eliminated. Whether you make a profit or a loss on the trade has no impact on FXCM's bottom line since you automatically pay the pip mark-up on each trade. The pip mark-up is essentially a commission.

Thanks. A few questions at this point:

(1) Who hedges the order and what happens if they decline to hedge it?

(2) Do you sell the order flow to a market maker? If so, the market maker then becomes essentially the dealing desk. The conflict of interest is just moved to another agent.

(3) Are trades marked to identify the account owner before they are passed ot market maker?

 

[moarla]

i personaly prefer Forex broker who are:

1. Non dealing desk Broker
2. ECN broker

like Interaktive brokers.



I dont like it how FXCM it does: adding 1 pip to a quote....

Go study IBs FOrex, thats how it has to work.

 

[Jason Rogers]

Quote from intradaybill:

Thanks. A few questions at this point:

(1) Who hedges the order and what happens if they decline to hedge it?

(2) Do you sell the order flow to a market maker? If so, the market maker then becomes essentially the dealing desk. The conflict of interest is just moved to another agent.

(3) Are trades marked to identify the account owner before they are passed ot market maker?

All orders appear to the bank as market orders from FXCM and contain no information about the trader, and neither can the banks see any stops or limits set by our traders. Your trading is anonymous.

Every order is hedged with one of the banks providing liquidity on the platform. If you haven't watched the NDD video, I would definitely recommend viewing it since it goes through the process step by step. Below is a screenshot taken from the video explaining how the NDD system works, and I go into more detail below explaining the process:

On the left hand side you have the banks providing pricing and liquidity into FXCM's platform. You, the trader, then see the best bid/ask price with a pip mark up displayed on the platform. To simplify the example, there are two banks: Bank A and Bank B.

Bank A is quoting the best sell price of 1.3523 (which you see as 1.3522), and Bank B is quoting the best buy price of 1.3524 (which you see as 1.3525 on the platform). If you place an order to buy at 1.3525, your order is offset immediately with Bank B. You then have a long position at 1.3525 and Bank B has a short position at 1.3524. FXCM has made a 1 pip commission off of the trade and the trade is hedged without any conlflict of interest between FXCM and the trader. Bank B can't distinguish whether the trade is coming from your account or one of the other thousands of accounts with FXCM.

What happens if Bank B can no longer hedge or offset trades at the price you clicked on? If the order is specified as an At Best market order, the order will be sent to the bank with the next best available price for execution. Bank B cannot send a re-quote. You have the option to choose different order types which can impact whether the order is filled at the next best price (slippage) or cancelled. More information can be found here: http://www.fxcm.com/order-types.jsp.

So yes, of course the banks you're trading against are hoping their short position is profitable just as you want your long position to be profitable. This is how it works with any speculative trading. The buyer wants the price to go up and the seller wants the price to go down. The difference with NDD is you know that the market maker on the other side of your trade (the bank that has the sell position) is also not the one controlling the trading environment through deciding solely deciding the spread, pricing, liquidity, re-quotes, dealer intervention, etc. NDD ensures trading is fair and transparent.

The complete video taking you through the steps of NDD execution can be found here: http://www.fxcm.com/fxcm-forex-execution.jsp

 

[alpha_hunt]

Quote from intradaybill:

Thanks. A few questions at this point:

(1) Who hedges the order and what happens if they decline to hedge it?

(2) Do you sell the order flow to a market maker? If so, the market maker then becomes essentially the dealing desk. The conflict of interest is just moved to another agent.

(3) Are trades marked to identify the account owner before they are passed ot market maker?

As for Point 2 that is exactly what I was thinking in my post on page 1 !

 

[intradaybill]

Quote from alpha_hunt:

As for Point 2 that is exactly what I was thinking in my post on page 1 !

Saw that. Yes, what they are saying is...lesten guys, we are not profiting from your loses....our market maker does...

Are they willing to disclose publicly whether they get paid for order flow? Even if they do not get paid for order flow all these NND stuff is irrelevant. It is you against the market maker dealing desk at the end of the day. So why not going with the market maker and skip FXCM all together. You will also pay less spread.

 

[Jason Rogers]

Quote from intradaybill:

Saw that. Yes, what they are saying is...lesten guys, we are not profiting from your loses....our market maker does...

Are they willing to disclose publicly whether they get paid for order flow? Even if they do not get paid for order flow all these NND stuff is irrelevant. It is you against the market maker dealing desk at the end of the day. So why not going with the market maker and skip FXCM all together. You will also pay less spread.

Hi Bill,

Speculation 101... if you want to buy something, there has to be someone on the other side selling to you. This is true in any market whether it be equities, futures, forex, etc. If not how would your orders be filled?

So there's going to be someone at the other end acting as the market maker who wants the price to go down just as much as you want the price to go up. What matters is whether the person (or broker) on the other side of your trade has control over the market to skew things in their favor. With a dealing desk broker the answer is yes. With FXCM's NDD forex execution, the answer is no. I answered your question previously in this post (http://www.elitetrader.com/vb/showthread.php?s=&postid=3079141#post3079141) in case you didn't have time to read it. Let me know if you have any questions.

-Jason

 

[Fishaman]

Looks like someone else has serious concerns about business practices at FXCM:

<b>FXCM slapped with a class action suit over claims of fraud and racketeering</b>

The Business Trial Group of Morgan & Morgan, P.A. filed a class action lawsuit today against Forex Capital Markets, LLC (FXCM) (NYSE:FXCM) alleging fraud and racketeering by the nation’s largest Forex dealer.

The lawsuit, filed in the United States District Court for the Southern District of New York (Manhattan Division), alleges that FXCM has bilked thousands of customers out of hundreds of millions of dollars using deceptive and unfair trade practices, including falsely portraying its Forex trading platform as a fair, transparent and true foreign currency exchange, when instead it is a “rigged game” designed to systematically separate customers from their money.

The Plaintiff, William H. Sanders, of Muscogee, Oklahoma, brought the action on behalf of himself and all other similarly situated FXCM customers, accusing FXCM of fraud by misrepresenting itself as a trading platform that is free from dealer intervention or manipulation. Instead, Sanders alleges, FXCM uses a number of devices and tricks, including software applications, designed specifically to interfere with customers’ trades.

The Complaint further alleges that FXCM engaged in a pattern of racketeering activity by collaborating with its software developers and programmers to develop a “diabolical” software application that provides FXCM with a myriad of tools and system commands with which to interfere with customers’ trades, including routing trades to “slow” servers and sending false “error” messages when customers attempt to close out profitable trades.

Finally, Sanders alleges in the Complaint that FXCM lured thousands of customers to its trading platform by promoting a “demo account” which was touted as providing customers with a true market trading experience. Instead, he claims, once “live” trading commences, FXCM deploys specially designed software to manipulate customers’ trades.

Lead Trial Counsel Tucker H. Byrd, of the Morgan & Morgan Business Trial Group of Orlando, Florida, stated, “We are proud to be representing Mr. Sanders in this action, which we believe will be an important step in bolstering accountability in an industry that has been largely unregulated since inception. We believe, as the Complaint alleges, that Forex Capital Markets, LLC has taken advantage of the trust placed in it by its customers, causing substantial financial harm to this group of people, and we are committed to working to recover those losses.”

FXCM is the nation’s largest Forex Dealer Merchant. The company recently went public and trades on the New York Stock Exchange.

The Business Trial Group teamed up with the renowned Morgan & Morgan Class Action Group headed by attorneys Scott Weinstein and Andrew Meyer in filing this lawsuit. Attorneys James Byrd, Jr., J. Carlos Real and Damien Prosser of the Business Trial Group and Rachel Soffin and Tamra Givens of the Class Action Group round out the Morgan Forex team.

Update 1: FXCM’s stock is down 7% since Thursday.

Update 2: FXCM Intends to Vigorously Defend Lawsuit

NEW YORK, NY, February 10, 2011 – FXCM Inc. (NYSE: FXCM) today announced that a purported class action lawsuit was filed in the United States District Court for the Southern District of New York by a single former customer against Forex Capital Markets, LLC alleging claims under Federal and New York State law with respect to trading through the company’s platforms. FXCM comments, “While it is FXCM’s policy not to comment on pending litigation, FXCM intends to vigorously defend itself against the allegations in the action.

source: http://forexmagnates.com/fxcm-slapp...n-suit-over-claims-of-fraud-and-racketeering/

 

[cvds16]

why trade with these guys when there is oanda ? ? ?