FXCM has just announced the launch of its Forex Execution Center which "will provide Forex traders with detailed information regarding forex execution practices. FXCM will continue to update this area over the coming months with insightful information and analysis."
However unlike many other brokers who chose to become more transparent and show various types of metrics (arguably useful or not) all FXCM does for now is just show explanatory videos. Granted these videos are nice and user friendly this is more of a educational feature rather than a useful one. Only yesterday Gain Capital released its execution metrics for December 2010 (albeit it's not very useful as we do not know how many orders out of all are REJECTED) and Interbank FX has a long standing metrics page showing its spread, execution percentage and times. Oanda too shows its spread in comparison to other leading US brokers and so does MB Trading.
Unless FXCM beefs up this page with some hard data such as percentage of executed orders, average slippage or average execution times, the page will remain as just another educational page for forex newbies. Furthermore FXCM which is proud of its Non Dealing Desk and Agency model is not as transparent as it would like to appear - we do not know who these '10 banks who compete for best pricing' are and furthermore just because you don't have a dealing desk doesn't necessarily mean you are not a market maker or that you don't use an automated Risk Management software with various trading configurations. It's only natural for ECN brokers to compete with their clients for pricing, for instance when they spot market inefficiency and can perform arbitrage trades or at times keep some of the deals in house. All this can be done without a dealing desk.
Until this is cleared I just don't see any advantage in a non dealing desk model except of the obvious marketing advantage.
FXCM Launches FXCM Forex Execution Center: FXCM Explains Their No Dealing Desk Forex Execution Model vs. Competitors Dealing Desk
New York, February 1, 2011—FXCM Inc., (NYSE: FXCM) launches the FXCM Forex Execution Center. With numerous requests for transparency in the forex market, the FXCM Execution Center will be a central hub on the FXCM websites that will provide forex traders with detailed information regarding forex execution practices. FXCM will continue to update this area over the coming months with insightful information and analysis.
The first step is to explain the different forex execution models. Unlike most other forex brokers, who act as market-makers, FXCM operates on an agency execution model.
FXCM takes the best bid and ask prices streamed to them from multiple large financial institutions, adds a markup (commission) on top of those prices, and shows them to clients. FXCM makes an identical amount of money in the form of pip markups (which are really commissions) regardless of whether the customer makes or loses money on a trade. As a result, FXCM earns consistent and transparent revenue per trade.
This is significantly different from brokers who operate a dealing desk execution model, where the revenue per trade is not as transparent. There are common practices, many times unknown to customers, which allow dealing desk firms to make more than just the mark-up attached to the prices streamed from large financial institutions. These practices include, but are not limited to, re-quoting customer trades, taking the opposing side of customers trades, and even preventing customers from trading or managing their positions during news events.
Many experienced forex traders may find the concept difficult to grasp. And it is especially hard for those new to the forex industry.
No Dealing Desk (FXCM): Learn How FXCM Executes Your Forex Trades
Watch Now: https://www.fxcm.com/fxcm-forex-execution.jsp
Dealing Desks (most of the other guys) learn about the potential conflict of interest between dealing desks and traders
Watch Now: https://www.fxcm.com/fxcm-forex-execution.jsp
FXCM has just announced the launch of its Forex Execution Center which "will provide Forex traders with detailed information regarding forex execution practices. FXCM will continue to update this area over the coming months with insightful information and analysis."
However unlike many other brokers who chose to become more transparent and show various types of metrics (arguably useful or not) all FXCM does for now is just show explanatory videos. Granted these videos are nice and user friendly this is more of a educational feature rather than a useful one. Only yesterday Gain Capital released its execution metrics for December 2010 (albeit it's not very useful as we do not know how many orders out of all are REJECTED) and Interbank FX has a long standing metrics page showing its spread, execution percentage and times. Oanda too shows its spread in comparison to other leading US brokers and so does MB Trading.
Unless FXCM beefs up this page with some hard data such as percentage of executed orders, average slippage or average execution times, the page will remain as just another educational page for forex newbies. Furthermore FXCM which is proud of its Non Dealing Desk and Agency model is not as transparent as it would like to appear - we do not know who these '10 banks who compete for best pricing' are and furthermore just because you don't have a dealing desk doesn't necessarily mean you are not a market maker or that you don't use an automated Risk Management software with various trading configurations. It's only natural for ECN brokers to compete with their clients for pricing, for instance when they spot market inefficiency and can perform arbitrage trades or at times keep some of the deals in house. All this can be done without a dealing desk.
Until this is cleared I just don't see any advantage in a non dealing desk model except of the obvious marketing advantage.
FXCM Launches FXCM Forex Execution Center: FXCM Explains Their No Dealing Desk Forex Execution Model vs. Competitors Dealing Desk
New York, February 1, 2011—FXCM Inc., (NYSE: FXCM) launches the FXCM Forex Execution Center. With numerous requests for transparency in the forex market, the FXCM Execution Center will be a central hub on the FXCM websites that will provide forex traders with detailed information regarding forex execution practices. FXCM will continue to update this area over the coming months with insightful information and analysis.
The first step is to explain the different forex execution models. Unlike most other forex brokers, who act as market-makers, FXCM operates on an agency execution model.
FXCM takes the best bid and ask prices streamed to them from multiple large financial institutions, adds a markup (commission) on top of those prices, and shows them to clients. FXCM makes an identical amount of money in the form of pip markups (which are really commissions) regardless of whether the customer makes or loses money on a trade. As a result, FXCM earns consistent and transparent revenue per trade.
This is significantly different from brokers who operate a dealing desk execution model, where the revenue per trade is not as transparent. There are common practices, many times unknown to customers, which allow dealing desk firms to make more than just the mark-up attached to the prices streamed from large financial institutions. These practices include, but are not limited to, re-quoting customer trades, taking the opposing side of customers trades, and even preventing customers from trading or managing their positions during news events.
Many experienced forex traders may find the concept difficult to grasp. And it is especially hard for those new to the forex industry.
No Dealing Desk (FXCM): Learn How FXCM Executes Your Forex Trades
Watch Now: https://www.fxcm.com/fxcm-forex-execution.jsp
Dealing Desks (most of the other guys) learn about the potential conflict of interest between dealing desks and traders
Watch Now: https://www.fxcm.com/fxcm-forex-execution.jsp
