Please recommend a true ECN or STP broker.
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There are some brokers that you must try. I would recommend Profiforex broker. commission for a whole deal is 0.3pips. Rebates is also available. This post would be useful http://www.singtip.com/showthread.php?tid=48
First of all, you must understand that in FX there is no STP or ECN broker in the sense of "direct access" to an exchange.
I guess you know how the interbank market works, so Straight Through Processing would direct your order to?....right, another shop/dealer.
Lets take FXCM for example. They have a dealing desk and an STP model. The STP model forwards your order to another dealer. It's just that this dealer is a subsidiary of FXCM. They were fined for this because they didn't disclose this, but it's happening still.
So even when you use "institutional" access or prime dealers, you never know who's on the other side and how your order is processed. Do you know if, let's say HSBC's quotes are bank to bank quotes or do they originate in some castrated feed for retailers? Do they involve last look or not (meaning they put your order on hold untill they know if they want to execute or reject) ?
The only way you can circumvent this, is by setting up individual credit lines with suitable counterparties, which you probably can't cause you lack a little dough to do so.
So accept that there are shitty dealers and that there are good dealers. Find the good ones (or those who ripp you off the least) and forget about this STP/ECN marketing shill...it doesn't exist.
I guess you know how the interbank market works, so Straight Through Processing would direct your order to?....right, another shop/dealer.
Lets take FXCM for example. They have a dealing desk and an STP model. The STP model forwards your order to another dealer. It's just that this dealer is a subsidiary of FXCM. They were fined for this because they didn't disclose this, but it's happening still.
So even when you use "institutional" access or prime dealers, you never know who's on the other side and how your order is processed. Do you know if, let's say HSBC's quotes are bank to bank quotes or do they originate in some castrated feed for retailers? Do they involve last look or not (meaning they put your order on hold untill they know if they want to execute or reject) ?
The only way you can circumvent this, is by setting up individual credit lines with suitable counterparties, which you probably can't cause you lack a little dough to do so.
So accept that there are shitty dealers and that there are good dealers. Find the good ones (or those who ripp you off the least) and forget about this STP/ECN marketing shill...it doesn't exist.
Fair point. Especially given that interbank ECNs don't deal in quantities less than 1 full lot. But in a sense there is always a counterparty trading "against you". Be that BNP Paribas trading desk or FXCM's.
So the question becomes where do you get the lowest execution costs? Have you noticed that on "retail ECNs" the spread is much lower? Even when you take into account commissions.
The problem with trading OTC as a retailer is the fact that the Market Maker can effectively shut down adverse selection risk, which basically is the small fry's edge.
Let's say you find a counterparty that gives you favourable execution, which in turn means that they bleed money when they trade against you. So you trade small and nimble but you make money....sooner or later, you will notice differences in execution or a complete shutdown of your account because you did not "comply with the terms and conditions"
Look it up. Examples are all over the net. People go to jail because they get sued by Bucket shops. Others make millions and don't get paid.
So when you look at the spread and other execution costs from this view, you probably understand why they can be so narrow against retail and why they are so wide b2b:
99% of retailers lose in the end, so if you hold the other side, it doesn't matter if the spread is 1 pip or 0.3. Think about that.
If you can say "you did not comply with the terms and conditions, because we think you used an arb bot and that's prohibited so we don't pay your 200k$ in profits", you can make the spread as narrow as you want. You keep the losers and dismiss or sue the winners.
Bank vs. Bank things are different. Credit Lines are set up an contracts signed. When you get ripped of by your counterparty, you cannot just not pay or sue them when they did nothing wrong....so they just quote wider.
Let's say you find a counterparty that gives you favourable execution, which in turn means that they bleed money when they trade against you. So you trade small and nimble but you make money....sooner or later, you will notice differences in execution or a complete shutdown of your account because you did not "comply with the terms and conditions"
Look it up. Examples are all over the net. People go to jail because they get sued by Bucket shops. Others make millions and don't get paid.
So when you look at the spread and other execution costs from this view, you probably understand why they can be so narrow against retail and why they are so wide b2b:
99% of retailers lose in the end, so if you hold the other side, it doesn't matter if the spread is 1 pip or 0.3. Think about that.
If you can say "you did not comply with the terms and conditions, because we think you used an arb bot and that's prohibited so we don't pay your 200k$ in profits", you can make the spread as narrow as you want. You keep the losers and dismiss or sue the winners.
Bank vs. Bank things are different. Credit Lines are set up an contracts signed. When you get ripped of by your counterparty, you cannot just not pay or sue them when they did nothing wrong....so they just quote wider.
Another fair point.
OTC as opposed to exchange? If that's what you mean would say trading let's say FX futures eliminates the "bucketshop risks" we're facing OTC?
That depends on who the counterparty is and how legit they are. IB sold their stock orderflow to Timberhill (who they owned 100%) who always took the other side, yet no one would think to accuse IB of shutting down your account if you make too much money. Selling orderflow to a dealing desk or even being a dealing desk yourself does not necessarily mean they will screw you if you make money in your account. Unfortunately, in retail FX it's been an issue - mainly because your broker is the counterparty. But what if retail FX ECN sends their flow somewhere else (yes another dealing desk but not their own) and they don't care if those guys win or lose because they just skim commissions off the top? Well, then the incentive to close your account is gone.
It's quite rare for retail FX traders to make millions
Could you please point me to the cases? Not doubting you whatsoever, just very curious how it went down.
They're not wide b2b For EURUSD the spread is 0-0.3 pips on legit institutional ECNs.
True but the question is what do you do with the 1%? Do you screw them or do you write them off as cost of business and let them be? Do you shutdown their account? Do you take their profits, deposits or both?
OK, my question is this. A lot of these retail FX dealers are regulated by legit agencies - such as US, Australia, etc. Has any of these retail traders attempted to fight unjust profit confiscation either via these agencies or via courts? I know most retail traders are pussies and would rather complain about it on some lame "forex forum" than fight but I'm curious.
OTC as opposed to exchange? If that's what you mean would say trading let's say FX futures eliminates the "bucketshop risks" we're facing OTC?
That depends on who the counterparty is and how legit they are. IB sold their stock orderflow to Timberhill (who they owned 100%) who always took the other side, yet no one would think to accuse IB of shutting down your account if you make too much money. Selling orderflow to a dealing desk or even being a dealing desk yourself does not necessarily mean they will screw you if you make money in your account. Unfortunately, in retail FX it's been an issue - mainly because your broker is the counterparty. But what if retail FX ECN sends their flow somewhere else (yes another dealing desk but not their own) and they don't care if those guys win or lose because they just skim commissions off the top? Well, then the incentive to close your account is gone.
It's quite rare for retail FX traders to make millions
Could you please point me to the cases? Not doubting you whatsoever, just very curious how it went down.They're not wide b2b
For EURUSD the spread is 0-0.3 pips on legit institutional ECNs.True but the question is what do you do with the 1%? Do you screw them or do you write them off as cost of business and let them be? Do you shutdown their account? Do you take their profits, deposits or both?
OK, my question is this. A lot of these retail FX dealers are regulated by legit agencies - such as US, Australia, etc. Has any of these retail traders attempted to fight unjust profit confiscation either via these agencies or via courts? I know most retail traders are pussies and would rather complain about it on some lame "forex forum" than fight but I'm curious.
Selling orderflow in options or equities is a different game. It creates a monopoly for those who are allowed to pull it off, but nevertheless they HAVE to execute (regNMS) and they HAVE to report.
When a dealer figures out he doesn't like your order, he just doesn't execute or gives you a requote. And it's not like there is a committee deciding over it, it's a simple algorithm.
Also, they might not target you in person, but when a dealer buys flow from a bucketshop, he knows that those orders are low alpha and trades accordingly.
I believe that not getting paid is more of a problem with bucket shops and less with upmarket dealers.
But it still happens: https://www.bloomberg.com/news/arti...-460-000-fight-with-retired-bulgarian-teacher
What I'm trying to say is that you are responsible for figuring out which counterparty you can trade against and which is screwing you over.
When you trade an exchange traded product, you don't need to decide which exchange you trade it on. It's centralised and transparent.
When you trade OTC you need to figure out which dealer is giving you the best execution as well as cost of service for YOUR needs.
When you are like the average retail guy and trade 100K in and out two times a day, I don't think that it matters which dealer you're at. Spreads are low, software is flashy and you're going to lose anyway, so who cares..
But when you trade 100M-1Yard two/three times a week, you're in for a nasty surprise when it comes to execution and spreads.
You alway have to remember that you trade directly into the dealers book, STP or not, doesn't matter. The execution quality depends on how much size your dealer can stomach before he needs to adjust his book and hedge the position.
Let's say your cyprus bookie has a book of 30M USD notional against various currencies. Now you come along and buy 20M EUR/USD. If he doesn't have last look or some protection system in place, you'll jeopardise his entire book within a second.
Trading 20M against a prime dealer does nothing, but depending on market conditions, you probably will look at 0.8-1 pip spread.
So again, I would not say that OTC forex is a scam, but you have to do your due dillingence and you have to understand how a dealer operates and where your order goes to pick the cherries.
Your turn
When a dealer figures out he doesn't like your order, he just doesn't execute or gives you a requote. And it's not like there is a committee deciding over it, it's a simple algorithm.
Also, they might not target you in person, but when a dealer buys flow from a bucketshop, he knows that those orders are low alpha and trades accordingly.
I believe that not getting paid is more of a problem with bucket shops and less with upmarket dealers.
But it still happens: https://www.bloomberg.com/news/arti...-460-000-fight-with-retired-bulgarian-teacher
What I'm trying to say is that you are responsible for figuring out which counterparty you can trade against and which is screwing you over.
When you trade an exchange traded product, you don't need to decide which exchange you trade it on. It's centralised and transparent.
When you trade OTC you need to figure out which dealer is giving you the best execution as well as cost of service for YOUR needs.
When you are like the average retail guy and trade 100K in and out two times a day, I don't think that it matters which dealer you're at. Spreads are low, software is flashy and you're going to lose anyway, so who cares..
But when you trade 100M-1Yard two/three times a week, you're in for a nasty surprise when it comes to execution and spreads.
You alway have to remember that you trade directly into the dealers book, STP or not, doesn't matter. The execution quality depends on how much size your dealer can stomach before he needs to adjust his book and hedge the position.
Let's say your cyprus bookie has a book of 30M USD notional against various currencies. Now you come along and buy 20M EUR/USD. If he doesn't have last look or some protection system in place, you'll jeopardise his entire book within a second.
Trading 20M against a prime dealer does nothing, but depending on market conditions, you probably will look at 0.8-1 pip spread.
So again, I would not say that OTC forex is a scam, but you have to do your due dillingence and you have to understand how a dealer operates and where your order goes to pick the cherries.
Your turn
Selling orderflow in options or equities is a different game. It creates a monopoly for those who are allowed to pull it off, but nevertheless they HAVE to execute (regNMS) and they HAVE to report.
When a dealer figures out he doesn't like your order, he just doesn't execute or gives you a requote. And it's not like there is a committee deciding over it, it's a simple algorithm.
Also, they might not target you in person, but when a dealer buys flow from a bucketshop, he knows that those orders are low alpha and trades accordingly.
I believe that not getting paid is more of a problem with bucket shops and less with upmarket dealers.
But it still happens: https://www.bloomberg.com/news/arti...-460-000-fight-with-retired-bulgarian-teacher
What I'm trying to say is that you are responsible for figuring out which counterparty you can trade against and which is screwing you over.
When you trade an exchange traded product, you don't need to decide which exchange you trade it on. It's centralised and transparent.
When you trade OTC you need to figure out which dealer is giving you the best execution as well as cost of service for YOUR needs.
When you are like the average retail guy and trade 100K in and out two times a day, I don't think that it matters which dealer you're at. Spreads are low, software is flashy and you're going to lose anyway, so who cares..
But when you trade 100M-1Yard two/three times a week, you're in for a nasty surprise when it comes to execution and spreads.
You alway have to remember that you trade directly into the dealers book, STP or not, doesn't matter. The execution quality depends on how much size your dealer can stomach before he needs to adjust his book and hedge the position.
Let's say your cyprus bookie has a book of 30M USD notional against various currencies. Now you come along and buy 20M EUR/USD. If he doesn't have last look or some protection system in place, you'll jeopardise his entire book within a second.
Trading 20M against a prime dealer does nothing, but depending on market conditions, you probably will look at 0.8-1 pip spread.
So again, I would not say that OTC forex is a scam, but you have to do your due dillingence and you have to understand how a dealer operates and where your order goes to pick the cherries.
Your turn
No my turn because I generally agree with what you said. The Bulgarian case is interesting. I applaud the fact that they weren't pussies and sued. I think what screwed them is getting the wife to trade after the husband was banned, not the actual latency arbitrage. I think if the ruling was made on whether latency arbitrage is "abusive" the plaintiff would have a good chance of prevailing.
BTW, how shitty must the bucketshop's feeds be if two Bulgarian senior citizens can outgun them with their "fast feed"? Or FXCM's whole case is bullshit and they're just using it as an excuse to void?