>>> Join the
Electronic Communications Networks (ECN) have revolutionised the Institutional FX market and many commentators believe ECN-style trading platforms are likely to do the same in Retail FX. Heather McLean explores the options available to Retail FX traders who might be looking to switch from a traditional market- making broker to an ECN platform provider.
bid and the ask prices on their trading systems and display them publicly on their quote screens. Tey undertake to execute transactions at the prices they have quoted to their customers. As counterparties to each FX transaction Market Makers must therefore take the opposite side of a customers trade. So whenever a trader sells, they must buy from them, and vice versa. Tis traditional DD trading model is the most commonly practicised throughout the Retail FX trading marketplace.
M
ECN platforms on the other hand pass on prices from multiple market participants, such as banks and Market Makers, as well as other traders connected to the ECN, and display the best bid/ ask quotes on their trading platforms based on these prices. ECN platform providers make money by charging customers a fixed commission for each transaction. Authentic ECNs do not play any role in making or setting prices. Tis means the risks of price manipulation are reduced for retail traders.
ost FX brokers are Market Makers (operating Dealing Desks) who “make” both the
professionals -
maximise your trading and investment potential with a Retail FX ECN platform
Once again ECN-style brokers serve as counterparties to FX transactions, but they operate on a settlement rather than pricing basis. Unlike fixed spreads, which are offered by some Market Makers, spreads of currency pairs vary on ECNs depending on the pair’s trading activities.
Why ECN?
Wael Salem, head of business development at FX Central Clearing, says the traditional market-making broker models offer higher leverage, lower deposits, up to 100% bonus, and the ability not only to trade micro, but nano lots. So the question always rises, why would a trader chose to switch to an ECN broker? “In the past decade, the ECN model was only within the reach of banks, hedge funds, and proprietary traders, where account sizes had to be in millions of dollars to get access to such liquidity pools, price streaming and execution models,” comments Salem. “Now ECN brokers utilise the latest technology and clients can trade in fair and realistic market conditions, trading on tier one liquidity provided by some of the biggest liquidity providers in the FX business. In addition to that, ECN brokers have no conflict of interest between their clients and themselves.”
Te number of non-dealing desk (NDD) FX trading facilities, either straight through processing (STP) or ECN plus STP brokers, has notably increased in the recent years, claims Vladimir Kisyov, head of business development at Deltastock. He says the shift from the dealing desk (DD) to NDD business model has accurately addressed the growing demand of the forex trading community for greater liquidity and best execution, so explaining the migration trend of retail clients from Market Makers to ECN-STP brokers.
october 2011 e-FOREX | 159
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166 |
Page 167 |
Page 168 |
Page 169 |
Page 170 |
Page 171 |
Page 172 |
Page 173 |
Page 174 |
Page 175 |
Page 176 |
Page 177 |
Page 178 |
Page 179 |
Page 180 |
Page 181 |
Page 182 |
Page 183 |
Page 184 |
Page 185 |
Page 186 |
Page 187 |
Page 188 |
Page 189 |
Page 190 |
Page 191 |
Page 192 |
Page 193 |
Page 194 |
Page 195 |
Page 196