# Which FX provider for an Aussie?



## Stormin_Norman (27 February 2008)

It would be a good idea, I feel, to get people's opinions regarding various FX providers that would be suitable for Australians to use.

I have done some research but will present it after some people have their say.

Lets judge each one in the following categories. Can each company be rated in the 6 areas to give a total score out of 40:

1. Financial Security (x/10)

2. Market Trading System. ie How they operate (Trade desk, straight through, bucketshop etc) Do they have AUD trading?(x/5)

3. Costs. Spreads + Commission (x/10)

4. Platform functionality (x/5)

5. Customer Service (x/5)

6. Personal Conclusion (Synergy of parts) (x/5)


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## Stormin_Norman (28 February 2008)

From my blog:

My first thing to consider when looking for a broker is its financial footing. I thought I would share some information about the financial state of the main forex brokers in the market.

I have sourced the data to help people make a sensible decision. No good making money if some swindler makes off with it!

The following firms are not regulated and as a customer you have no rights in a dispute or if the firm gets into trouble and goes bankrupt:

Unregulated Brokers
Finex
Tradex Swiss AG
ACM
WestCapFX
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex
GCI
Northfinance
FXDD


Ok. Now we have wiped out all the extreme nasty brokers off the list. Here is a ranking of the net value of some of the leading retail forex players.

These are CFTC Net Capital figures from December 2007. The US Government recently increased capital requirements of forex brokers to $5 million.

The US Government is close to passing a law which would require firms to have a minimum of $20 million to stay in business. Should it pass the industry may only have about a dozen firms left.

The Big Six (Above $20 Million)

1. Oanda $156 million
2. RJ O'Brien $92 million
3. FXCM $75 million
4. GFT $69 million
5. Gain Capital $50 million
6. I Trade FX $34 million

Below $20 Million

7. PFG $19.7 million
8. Interbank FX $19.2 million
9. FX Solutions $17.9 million
10. IFX $15.5 million
11. CMS $13.8 million
12. GFS Futures & Forex $10.2 million
13. CMC $8.7 million
14. Alpari $8 million
15. Ikon $7.9 million
16. Easy Forex $7.6 million
17. Friedberg Mercantile $7.5 million
18. Forex Club $7.4 million
19. MB Trading $7 million
20. ODL $6.9 million
21. Hotspot $6.1 million
22. Money Garden $6 million
23. Bacera $5.4 million
24. Advanced Markets $5.2 million

of particular note should be this popular broker:

E FX Group $5,128,233. That is only $128,233 above the current reserve requirement. Their parent company MB Trading is not much more financially secure.

The US Government raising reserve requirements to $20mil would have a big effect on the market.

http://www.brokerontop.com/


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## >Apocalypto< (28 February 2008)

Most Dealing desks are just glorified buck shops Oanda included. Alpari UK, has gotten very good reviews on the net, for a MM they look the best to me they offer Meta Trader 4 as their platform. I have only had demo experience with them.

HotSpot Fx looks the best to me, ECN half the commission costs of EFX. they do require 7500 US$ deposit to open a account.

Interactive Brokers also looks good but i have read that their customer service sucks and FX platform is not very user friendly!


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## Kauri (28 February 2008)

Stormin_Norman said:


> From my blog:
> 
> 
> of particular note should be this popular broker:
> ...




Also note that there is a lot of shuffling going on already where the brokerages. particularly the smaller ones, are looking to amalgamate, to get over the reserve requirements...  (if they haven't already...)


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## Stormin_Norman (28 February 2008)

>Apocalypto< said:


> Most Dealing desks are just glorified buck shops Oanda included.




From what I can understand Oanda is automated and is NOT a dealing desk broker. 



			
				https://fxtrade.oanda.com/trading-forex.shtml said:
			
		

> *  There's no dealing desk to mess with your trades
> 
> * We're not trading against you - we hedge all positions
> 
> ...


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## Stormin_Norman (28 February 2008)

>Apocalypto< said:


> Most Dealing desks are just glorified buck shops Oanda included. Alpari UK, has gotten very good reviews on the net, for a MM they look the best to me they offer Meta Trader 4 as their platform. I have only had demo experience with them.




I found this review of Alpari vs Oanda on forexfactory



			
				Xaron said:
			
		

> First I have to say that I have live accounts at Oanda and Alpari UK.
> 
> So I know the differences.
> 
> ...


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## tayser (28 February 2008)

OANDA Electronic Market Maker = Deal Desk.


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## tayser (28 February 2008)

http://www.forexfactory.com/showthread.php?t=70582




Why would you want to trade with a market maker??


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## >Apocalypto< (28 February 2008)

Stormin_Norman said:


> I found this review of Alpari vs Oanda on forexfactory




they are still a MM Norman,

I have have read some great reviews about them and some really shi%ty ones. slippage disconnects and re quotes. all the news traders carry on about the spread widnening but that does not worry me I don't trade the news.

I was so close to opening a live account with Oanda till I googled them with reviews. after read as much as I coupld I got a 50/50 feeling about them and thought nup not for me. but they may be for u.

I agree the spreads are great but if u have to deal with reqoutes and disconnects and crappy fills + slippage then what's the point of that .9 spread! 

*Tayser*
How often and much were u slipped on Oanda?


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## Stormin_Norman (28 February 2008)

tayser said:


> OANDA Electronic Market Maker = Deal Desk.




not necessarily. to me collecting orders before hedging the net outcome makes sense. its done automatically and this method seems to result in lower costs for the customer compared to EFX. OANDA do not operate a dealing desk. they are a market maker - automatically.

i like the EFX system. but having only 100k of excess funds is extremely worrying for me. i put in $1000 and im contributing 1% of their working funds!!!! 

that is a bigger concern to me.

when i was using the efx demo for a while i was using charts with OANDA. the spreads on OANDA were pretty much the same, but with no commission.

as i sit here now OANDA is at 1.8 pips for the aussie; Euro/USD at .6. With no commission.

I think the OANDA system, an automatic hedge of client's net positions without a dealer desk is a more sensible and profitable way for the broker to service the client.

efx bang on about direct to market and all that; but i cannot find who their liquidity providers are; and why if they are dealing with the bank in the most efficient manner; are their total costs more?

i was going to go with efx, but once i found out theyre a 2 bob operation with no capital i quickly decided against using them.

OANDA have 150+ million in excess capital.

>Apocalypto<. I know OAnda are a market maker. but i think they have quite a different model to other market makers. you were talking about Alpari and I had just read a thread comparing the two market makers; so thought you might be interested in discussion thread.

if efx pass you trade directly onto a small 'barely' bank (banks in the US and other places arent the same to 'banks' in oz) and the 'barely' bank then hedge against another bank it is effectively no different to OANDA automating the hedges of their customers orders.

i like the theory of efx. but until they list the banks they directly deal with - i think theyre 50% true 50% talking it up.


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## Timmy (28 February 2008)

Good info in this thread - thank-you to all.

Statement of bias: I am dead-set against MMs ... having said that Oanda's model seems to be moving to a nice compromise ... an ethical MM?

Speads widening over news/announcements?  Seems like a no-brainer to me, of course spreads widen over news (volatility increase, risk increase ... even the interbank will widen spreads over news, if you can get a price at all).  Be great if they didn't, scalping would be so much easier ... but it would be even better if there was a little bell that would ring at the top and another at the bottom (different sounds please, I don't want to get confused).


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## Stormin_Norman (28 February 2008)

>Apocalypto< said:


> they are still a MM Norman,
> 
> I was so close to opening a live account with Oanda till I googled them with reviews. after read as much as I coupld I got a 50/50 feeling about them and thought nup not for me. but they may be for u.




regarding what people think of OANDA: 75% say Oanda is good. 5% say its bad in this poll.


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## >Apocalypto< (28 February 2008)

Stormin_Norman said:


> >Apocalypto<. I know OAnda are a market maker. but i think they have quite a different model to other market makers. you were talking about Alpari and I had just read a thread comparing the two market makers; so thought you might be interested in discussion thread.
> 
> if efx pass you trade directly onto a small 'barely' bank (banks in the US and other places arent the same to 'banks' in oz) and the 'barely' bank then hedge against another bank it is effectively no different to OANDA automating the hedges of their customers orders.
> 
> i like the theory of efx. but until they list the banks they directly deal with - i think theyre 50% true 50% talking it up.




I agree Oanda have a different model to the normal dealing desk. Regards to Alpai and Oanda thread I have read it. I am also a FF member. that thread did not really give a good comparison. from looking at reviews Alpai they look ok for a MM. Like I said all MM's are similar(apart from Oanda to a degree), end of the day u just need to find the fairest if u plan on trading with a dealing desk! Alpari look the best of the MT4 brokers to me.

I would not trade with Efx reason commissions are way to high. IMO if you want a retail ECN you have Currenex brokers. IB & HotSpot FX.


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## Stormin_Norman (28 February 2008)

I found this good summary of Market Makers vs ECNs on ForexFactory by a poster called -The FxOpportunist-.

Thought I'd paste it on here for others' reference.



> *Market Makers & ECN’s Is the grass greener ?*
> 
> This topic is discussed constantly by traders, journeyman and newcomers alike. And to answer the question we have to get to the truth, examine the differences and define our needs. This writings purpose is to bring what I have learned together in a manner that will save many from hours of searching, reading, trial and error.
> 
> ...




_continued next post..._


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## Stormin_Norman (28 February 2008)

_continued from above:_



> *The ECN experience*
> 
> Let’s face it. We all create our expectations based on what we know. And, the fact is, most of us did not really know what to expect out there in the “real” market. So we thought the ECN style brokers will be just like the good ol’ days only days but with tighter spreads and no lousy, cheating dealing desk. This is where we come to terms with those ever present expectations.
> 
> ...


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## Trembling Hand (28 February 2008)

Stormin_Norman don't really agree with that. A real market with correct mechanics(working orders rather than just hitting the market) is always better. The advantage of having a true market rather than the MM is the ability to get orders taken out on limit. If your trading lots their is no way in the world you would trade MM you are two to three pips down opening every trade. If you are trading often with size imagine the disadvantage that adds up to over a year. If you want the best chance of keeping your expectancy positive not only do you need a good system you need to know how to work orders. Something that cannot be do with a MM.

This example is SPI Futs and MM CFDs showing how bad the MM are but the same thing goes for Forex.
http://tremblinghandtrader.typepad.com/trembling_hand_trader/2007/06/the_real_cost_o.html


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## Stormin_Norman (28 February 2008)

it costs meabout the same on OandA as EFX. 1.8 pips on the aussie. 0.9 pips on the euro.

i found i would have to be doing very well to beat that on an ECN.

i am not going to give my hard earned to a company worth less them half the price i am.

the forex market is not your usual market. there is no 'central market' therefore it could be viewed as a series of market makers. some maybe bucket shops and some might be a meeting of a few massive banks to transfer billions. but all are 'market makers'; because there is no central market in forex.

dealer desks which screw you over are bad; however hedging overall client positions with a big bank @ market is fine with me.

they can make money matching internal deals then hedge the remaining account with the bank. this way they can make their money on a spread (OandA Euro @ .9) on each matched deal and hedge out any that dont match up.

to me passing all the trades straight through to a bank market maker misses the profits available when trades are matched up by the broker. there should be plenty of profit in just matching up trades and hedging a small percent which dont match. and there must be if OandA are worth 160+million.

to my research OandA will cost me roughly the same price as EFX would. any difference would be tiny compared to me making 1 crap or good deal.


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## StockyGuy (1 March 2008)

Hi All,

Didn't want to unnecessarily add another thread to our subforum here, so apologies if my question is a lil bit off topic.

Anyone know an FX provider that allows opening an account for as low as, say, 1k that can be funded by B-Pay or credit card and is, preferably, denominated in Aussie dollars?  (I'm afraid I loathe the idea of wiring funds overseas or mailing cheques!)  I'm naturally most attracted to ECNs -- there's somthing unsettling about the "middleman" basically losing if you win as in MMs.  But I'm certainly not deadset against using an MM.

I would like to try scalping, but at first I'll probably attempt more medium term, fundamental trading based on tips from, maybe, http://www.compareshares.com.au/forex_news.php.  So if scalping is not OK I would still consider an otherwise acceptable MM.

So yeah, who can I B-Pay or credit card pay starting at 1k opening balance (or a bit higher)?


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## traydor (1 March 2008)

Hi everyone I'm using gft just wondering what anyones thought on them are....secondly if your making consistant trades it would really matter about spreads and all that stuff would it?m thanks


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## tayser (2 March 2008)

StockyGuy said:


> Hi All,
> 
> Didn't want to unnecessarily add another thread to our subforum here, so apologies if my question is a lil bit off topic.
> 
> ...




Is there any specific reason why you loathe using EFT overseas?  Most Australian banks will allow you to send up to $5k in a day to another account be it domestic or international and bank wires directly through the SWIFT system ensure money is quickly transferred... i.e if you get your international money order in before COB on an Australian business day, it'll inevitably hit an American account (if your broker is US-based) around midnight depending on the system cut off and batch processing times by the various banks in the chain.  I bank with ANZ and have got US-based transfers completed within 24 hours no probs.  In terms of FX account funding, I've done it only with an AUD Oanda - the agent bank is JP Morgan in London (so with the timezones it takes longer) and there were no issues - in fact there were no receiving bank fees deducted which I was surprised about.

Foreign Exchange in Australia is very immature for retail brokers as such, you're more likely to be using an off-shore brokerage - the vast majority (and most credible) are in the US (best for latency if you're trading from Australia) or Europe.

And when you using Credit card to fund - like what FXCM offer - they will state that will only send you money the way it was received... can you imagine essentially getting a $10,000 "credit" to your credit card out of the blue?  Your bank's going to be raising a few eyebrows if you start doing large sums on a credit facility.


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## Trembling Hand (2 March 2008)

StockyGuy said:


> Anyone know an FX provider that allows opening an account for as low as, say, 1k that can be funded by B-Pay or credit card and is, preferably, denominated in Aussie dollars?  (I'm afraid I loathe the idea of wiring funds overseas or mailing cheques!)  I'm naturally most attracted to ECNs -- there's somthing unsettling about the "middleman" basically losing if you win as in MMs.  But I'm certainly not deadset against using an MM.
> 
> So yeah, who can I B-Pay or credit card pay starting at 1k opening balance (or a bit higher)?




I think for 1 K start, bpay or C-card and Aussie you are going to have to go with MM. CMC would fit that but many don't like them. I use them as a backup if a disaster hits with my Futures provider and think they are OK.


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## Stormin_Norman (2 March 2008)

traydor said:


> Hi everyone I'm using gft just wondering what anyones thought on them are....secondly if your making consistant trades it would really matter about spreads and all that stuff would it?m thanks




spreads are higher then a pure foreign exchange provider. but they do commodities and equities on the same platform. 

if you are holding positions for an extended time and not scalping then a couple of pips difference in the price of a spread is not going to concern you all that much.

they are a deal desk foreign exchange broker however. and all the bad things that come with deal desks.

their net worth is about $65 mil. which is more then all but a few foreign exchange dealers.

its hard to know which broker is the best for each person. but with GFT you could do a lot worse.


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## Stormin_Norman (2 March 2008)

StockyGuy said:


> I'm naturally most attracted to ECNs -- there's somthing unsettling about the "middleman" basically losing if you win as in *MM*s.  But I'm certainly not deadset against using an *MM*.




you are describing a dealing desk senario.

every meeting of more then two financial institutions to exchange currency could be concidered a new market made.

there is no market in the currency trade. there are multiple markets all 'made'. be it between the bank of england and HBOS or between broker and their bank.

matching clients positions up before hedging the residual makes more sense to me then passing all the trades directly through.

taking the opposite position and dealer desking all client's orders ARE a big problem to me.

i dont know which banks EFX deal with. the 'clean through to the bank' that EFX is claiming could be no more 'clean' then a non dealing desk MM.

i could set up a EFX like system where all the deals were sent 'direct' through to to the 'banking system' (efx's banks are not named. i suspect they are small state US 'banks' - similar to our credit unions). that bank then receives all the small orders, groups them all up to find their net positions; then hedges those positions against other banks to cover their risk.

no different to what a broker like OandA does. except OandA take the spread profits from any matched up trades. EFX give it to the 'bank/s' they deal with; who then hedge net positions and make the profit.

every currency exchange involves a 'market that is made'. EFX's relation to its small banks are also a 'made market'.

the bad things are dealing desks/stop loss hunting/ re-quotes/ mispricing and nonfilled orders. 

every participant, from retail $500 accounts to central banks dealings with each other create their own market. because of that the broad labeling of a 'market maker' as 'bad' doesnt quite sit comfortably with me. similarly i do not see 'straight through' trades as an advantage over a nondealing desk broker which aggregates customer's trades (as opposed to taking the opposide side - that's bordering a bucketshop).


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## tayser (2 March 2008)

sigh.

..........

Any market making broker (i.e you're just trading inside the market created by the broker) *is a deal desk broker*.  "Market Making" brokers will have either humans sitting on the deal desk accepting the incoming orders and hedging against their client's positions or they'll have a whole platform of hardware doing the same job, no matter which way you look at it, there is intervention by the broker on your order *because they are on the other end of it*.

again, a market maker broker = deal desk, full stop.

And I doubt very much EFX has little US state banks running liquidity for them 24/7 5.5 days a week, because little banks usually use larger ones as their agents for their FX transactions - and with a STP model you're actually getting filled on currency from a bank - the bank will have its own army of traders all trying to win / hedge for the bank as well - yes, this is how the financial world works, however the point is, *the broker is not taking the other end of the trade* - they're not trying to intervene for their own interests, they just want your commission, they're providing a platform for you to access a much larger market than your average bucketshop will be able to give you, your order is being filled by a plethora of banks all competing for your business.


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## Stormin_Norman (2 March 2008)

tayser said:


> sigh.
> 
> ..........




hello taser  replace your oxygen. clear your mind.





> Any market making broker (i.e you're just trading inside the market created by the broker) *is a deal desk broker*.  "Market Making" brokers will have either humans sitting on the deal desk accepting the incoming orders and hedging against their client's positions or they'll have a whole platform of hardware doing the same job, no matter which way you look at it, there is intervention by the broker on your order *because they are on the other end of it*.





ok. market making broker i can handle. but just calling them 'market makers' was sitting uncomfortably for me because technically with no main market, any collection of organisations for currency trade are 'making a market'. this point is an important one; i feel people compare currency trading with stocks or commodities. it is very very different market. there is no main market. the NASDEC is a formal market. there is no formal currency market.

if you ran a bucketshop doing CFD's for NASDEC shares you are making a market. if your broker matched trades before buying the balance of the equities from NASDEC they would be making a market.

with no formal market. everyone in currency is creating a market. there are different sizes of markets. but with no one formal market; by definition all the markets are informal markets made up by their participants.

the point is more then a definitional one.





> again, a market maker broker = deal desk, full stop.




by your definition, if a broker collates people's position to hedge the final result then all brokers are deal desks.

however there are clearly two kinds of deal desks. those which interfere with your trades; or those which pass them through at the quoted price. interference with your trades are not on and a major disadvantage and turn off for retail customers.

those which pass the quoted price and deals straight through their system to match up and hedge a residual are fine with me (eg OandA). they are not taking a side (another trader, *who has decided independently* has taken the opposite side to you is). they are not changing your price. they are taking advantage of a profit opportunity.

for eg.


there is a total position of 1000 long and 300 short at the broker for that moment in time (less then a blink of the eye).

a non interfering deal desk at a broker would match up these 300 short with 300 long and be left with 700 long. they pass the 700 on to the bank. the bank make a profit on receiving these 700 trades.

the 300 longs and 300 shorts are directly matched to each other. rather then passing these 600 trades onto the bank to profit from; the bank can match up these at the interbank quote rates they were given and 'pocket' the spreads. There is no market movement risk to this kind of broker (again my eg is OandA).

alternatively a broker could take 1300 trades and pass them through to their bank directly. they would be forgoing the ability to match up trades which are on opposite sides. they pass the quotes through to the banks who profit from these trades. you get charged a commission for the trades not to be matched up (so the company can make money).

The bank, who has received these 1000 longs and 300 shorts will then want to limit it's risk. So it will hedge with another bank the 700 longs it is holding. Effectively the same result as in the above scenario; except the broker is not involved in the hedging part because the trades are passed straight through.

don't mistake me. i like the idea of 'straight through' trading. but thinking about it a bit more; im unconvinced of its total domination. interfering trade desks everyone agrees are a spawn of satan. 

non interfering deal desks which hedge outcomes but do not take sides are operating as the bank the direct trade/straight through system does and makes perfect sense to me in a non centralised market.

the spread profits to be made in matching mean that the good matching-up brokers do not need to charge commission. the 160+mil value of OandA shows there must be a good profit in doing it efficiently.




> And I doubt very much EFX has little US state banks running liquidity for them 24/7 5.5 days a week, because little banks usually use larger ones as their agents for their FX transactions




exactly my point. EFX wont tell you which banks they are passing you onto. it might be a small bank who hedges the net position against a bigger bank. thats what all the market participants do. 

Small bank A deals its currency through international bank A

small bank B deals its currency through international bank B

etc.

EFX have a panal of several banks to make up its liquidity. probably like the above.

so small bank A gives a price to EFX. this price is the price they got off big bank A + profit.

small bank b,c,d,e,f and g do the same thing.

EFX display the best quote. and you get passed straight through to the small bank A. which hedges its net position with its big bank, who hedges its position with other big banks and other orders.

if (this is an assumption here) OandA and small banks a,b,c,etc hold the same relative place in the market, dealing with the large banks retail investors cannot access; it could be argued that rather then giving you 'direct access to the markets' EFX is infact just adding another layer to it.

back to the initial part of the post about there being no formal market and everyone a market maker. EFX pass your trade directly at quoted price through to a banks dealer desk who hedge your trade onwards throught the system.

EFX passes up profits and charges you commission to do that (and probably get commission kick backs from banks they put your order through to). 

you get flexibile quotes which can have 0 spread for short periods of times because the quotes come from multiple banks and the best one is displayed to you.

there is slippage if your order is not filled; and problems if the bank your order is put through to cannot fill it; requiring the deal to come back to efx and try bank option #2.

any broker offering 'fixed spreads' is a worry. OandA's spreads move too. AUD/USD at news time can go out to 3,4 or even 6 pips. 80% of the time it is 1.8. 

EFX you can occasionally get away with your trade for no spread, but usually EFX has the AUD/USD at around 2 (+another pip in commission). On average the pip difference between OandA and EFX is very similar, but because OandA match up deals before passing them on they do not need to charge commission.

I was using OandA for charting and EFX for trading there for a while; thats why I felt comfortable comparing them.





> - and with a STP model you're actually getting filled on currency from a bank - the bank will have its own army of traders all trying to win / hedge for the bank as well - yes, this is how the financial world works, however the point is, *the broker is not taking the other end of the trade* - they're not trying to intervene for their own interests, they just want your commission, they're providing a platform for you to access a much larger market than your average bucketshop will be able to give you, your order is being filled by a plethora of banks all competing for your business.




i hate brokers taking the other side of the trade too. that is entirely different however to 'matching trades'.

these type of brokers dont really want you to lose either. they want you to trade so they have more positions to match up.

i am not talking about your average bucketshop; i loath them. but a broker that behaves like a bank; taking trades and hedging the resultant risk out makes sense to me.

they can make a profit of deal matching and control their risk to basically zero. financial risk for dealing desk brokers is very real; because they take opposite sides. look for dramatic changes in a company's net worth for suspicions of taking other sides and winning/losing large.


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## traydor (2 March 2008)

Stormin_Norman said:


> spreads are higher then a pure foreign exchange provider. but they do commodities and equities on the same platform.
> 
> if you are holding positions for an extended time and not scalping then a couple of pips difference in the price of a spread is not going to concern you all that much.
> 
> ...



hi storman thanks for the reply mate i,m still new to this what would be all the bad things thanks


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## StockyGuy (2 March 2008)

Thanks, guys.  Interesting debate of MM vs ECN here, hehe.  Seems most popular, overall, is Oanda


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## Andy_aus (2 March 2008)

So in conclusion Oanda is probably the way to go as they offer lower overall costs (slippage only and no commision) compared to EFX.  Would i be correct in saying that?


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## tayser (2 March 2008)

Cost of doing business should not be your only concern when looking at a broker.

Oanda positives: AUD denomination, US-based, Rollover rates (calculated by the second and credited/debited after you close your trade), robust platform that's constantly updated, can open an account and don't have to fund immediately, interest paid on unused account balance.

Oanda negatives: a market-maker, poor selection of order types including no trailing stops, inability to trade inside the spread, no NZD/JPY, AUD agent bank is in London therefore funding/withdrawing takes upwards of 48 hours (*personal experience), servers are located on the US east coast (adds about 60-80ms to latency when you're trading in fast markets).

EFX positives: pure ECN at retail level which reflects the wider interbank market (the big participants in the interbank market are also in their liquidity pools & therefore EFX is more a truer reflection of the interbank than Oanda despite what Norm says), execution, ability to trade within the spread which can decrease your cost, enormous range of order types, commission discounts on the more volume you put through, servers are located on the US West coast (typical Melb-Syd-LAX/SFO round trip is about 180-200ms on my iinet connection), agent bank is Wells Fargo (US West Coast / PST Timezone bank) - funding/withdrawal is bound to be quicker for us (will eventually test this and let everyone know).  If you're an equities trader, you'll be more familiar with an ECN than a MM: ECN's have market depth for one.

EFX negatives: USD denomination (although that's likely to change), no interest paid on unused balance, rollover rates, commission is high when you first start off.

__________

At the end of the day, certain brokers are going to be better for different trading styles - EFX is by far the better choice for me personally.  If I scalp AUD/JPY on the short, the rollover is going to reduce any profit I make (remember: FX transactions take 2 business days to clear and each night at 5pm NY time you're credited/debited whichever rollover rate applies to the pair you're waiting on clearing), but the benefits (ECN, order types and real bank quotes that are not on a fixed spread) far outweigh the negatives (commission primarily).

I'm keeping my Oanda account open, as I'll probably use it for something else - Oanda's very good for carry trading (see rollovers) which is something I might look at sometime down the track.


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## Trembling Hand (2 March 2008)

There is also FX Futures which it seems no one uses except me.


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## lesm (2 March 2008)

Andy_aus said:


> So in conclusion Oanda is probably the way to go as they offer lower overall costs (slippage only and no commision) compared to EFX.  Would i be correct in saying that?




Andy,

In terms of ECNs, you may like to look at Hotspot, Interactive Brokers (IB) and DukasCopy, for a comparison between ECNs.

EFX/MBT is the most expensive, commission wise, at $50 million and DukasCopy the lowest at $18 milllion. Each have their pros and cons.

Hotspot and Lava are prime brokers for DukasCopy, and would give you lower entry costs, in terms of opening an account, as opposed to DukasCopy themselves. Hotspot offers both a retail and institutional platform.

If you are considering high frequency scalping you wouldn't want to be paying any more than $20 - $30 million.

EFX/MBT is targetted at scalpers or intra-day traders. Due to their atrocious swap(rollover) rates other brokers (ECN or MM) would be preferable for longer term or carry traders. They also close down their order servers each night for maintenance. They are trying to reduce this down time to about two minutes, but it has been as high as 15 minutes.

Tayser,

Have you managed to find out who EFX/MBT's liquidity providers are?

They have been very secretive about that to date. Their access to the interbank market will be restricted to the group of banks that provide their liquidity.

Cheers.


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## tayser (3 March 2008)

No, I don't think anyone has been able to.  Studying their market depth however reveals that even on AUD/JPY there's at least 7-8 banks in that specific pair - each usually offers 3,000,000-5,000,000 apiece at a guess with a spread of 4-5 pips and as there are so many of them, the spread narrows to the average 2 pips around the big opens & active hours and 3pips at other times.  This mornng (Monday), there'll only be a few banks in there guaranteed with a wider spread - probably just Australian banks and it won't narrow / pick up til the Asian banks join the pools.

As I've said in the cyrox thread, the ceiling you'll hit on EFX is roughly about 20,000,000 on AUD/JPY (all the majors: much higher) before you start soaking up market depth either side of the price you want (when using market orders) - based on my study of their market depth in active market hours.


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