EFX Group - Welcome

[efx_justin]

Hello Everyone ~

This is Justin LeBlang from EFX group. A client of ours recently informed me of this site and said there might be some users who have questions I may be able to answer - so here I am.

I'm not here to promote EFX....however I will make myself available to anyone who has questions, concerns or just wants to talk about Forex in general.

I look forward to hearing from you.

 

[tayser]

Hi justin,

Sorry, broken record first question

Any update on offering AUD denominated accounts? Or at least some reporting mechanism which can historically report our profit / loss (which is currently recorded in USD) in AUD on our statements?

And also, this is slightly more technical: can you confirm how the akamai technology will work? i.e from my understanding the price quotes we'll see in the FX Board and Level II - in Navigator or Remote Trader - are streaming from a proxy farm in Australia, yet our orders need to travel to your data centre somewhere on the US west coast - is this correct?

thanks again.

cheers.

 

[nizar]

Hello Everyone ~

This is Justin LeBlang from EFX group. A client of ours recently informed me of this site and said there might be some users who have questions I may be able to answer - so here I am.

I'm not here to promote EFX....however I will make myself available to anyone who has questions, concerns or just wants to talk about Forex in general.

I look forward to hearing from you.

Hi Justin,

I have been following your FF Thread with interest.

I have a question for you:
Does EFX have server-side automated trading and if not yet when will this become available?

Thanks.

 

[KamiCrazy]

I recently asked MBT/EFX about forex accounts in AUD denominations and they said no.

It didn't seem like they had any plans to implement it either.

 

[efx_justin]

Hi Justin,

I have been following your FF Thread with interest.

I have a question for you:
Does EFX have server-side automated trading and if not yet when will this become available?

Thanks.

nizar ~

At this time we do not offer server-side automated trading in house, though some third party providers do offer such services via our API.

It is our goal in 2008 to offer automated trading....stay tuned for that announcment. NO ETA though.

 

[efx_justin]

Hi justin,

Sorry, broken record first question

Any update on offering AUD denominated accounts? Or at least some reporting mechanism which can historically report our profit / loss (which is currently recorded in USD) in AUD on our statements?

And also, this is slightly more technical: can you confirm how the akamai technology will work? i.e from my understanding the price quotes we'll see in the FX Board and Level II - in Navigator or Remote Trader - are streaming from a proxy farm in Australia, yet our orders need to travel to your data centre somewhere on the US west coast - is this correct?

thanks again.

cheers.

tayser ~

No word on non-USD denominated accounts, though it is a goal of 2008.

With regards to your next question;

Actually, this is not correct. First of all, this does not apply to Navigator. Secondly, in regard to Remote Trader, the Akamai technology speeds the process of finding a more direct route between our servers and you. Typically, there is a fixed way that information will route throughout a country. So to us the US as an example, if I’m in New York and connected to LA, the information might pass through 25 routers back and forth. Each touch of a router slows information slightly (all measured in milliseconds). The concept of the Akamai technology is that it hops out of the local chain and looks for faster ways to get there. This might involve catching a direct route from New York to LA. The key is that it gets out of the country as fast as possible in making the connection. Having said that, obviously, the further away from us you are, the more distance information has to travel. That is unavoidable. We are an ECN, which means that there is a lot of benefit to having your orders sitting on our server when possible as you can be hit on the bid and ask. However, outside of that type of scenario, you would obviously have a slight degradation in time between when you click a button and when the order gets to us versus someone down the street from us. But it should all still be in milliseconds and should not affect your trading.

Hope this helps.

 

[tayser]

Thanks for clarifying.

I might end up biting the bullet and opening a standard account in a month or two, I'll hold out for AUD though.

 

[efx_justin]

Thanks for clarifying.

I might end up biting the bullet and opening a standard account in a month or two, I'll hold out for AUD though.

Hopefully by then I'll have some good news for you.

 

[nizar]

nizar ~

At this time we do not offer server-side automated trading in house, though some third party providers do offer such services via our API.

It is our goal in 2008 to offer automated trading....stay tuned for that announcment. NO ETA though.

Hi Justin,

2008 looks like its gonna be a great year then!
But what do you mean by "ETA" ?

 

[Stormin_Norman]

Thanks for clarifying.

I might end up biting the bullet and opening a standard account in a month or two, I'll hold out for AUD though.

What makes you want to wait for that company in particular? I have been dealing with www.gft.com.au/ and they seem quite good, and have AUD accounts.

 

[Sean K]

But what do you mean by "ETA" ?

Must have an Army background.

ETA: Estimated Time of Arrival
FLOT: Forward Line Own Troops
FOB: Forward Operating Base
BSG: Brigade Support Group

....

You get the picture.

All useful terms for discussing the market...

 

[tayser]

What makes you want to wait for that company in particular? I have been dealing with www.gft.com.au/ and they seem quite good, and have AUD accounts.

I have a feeling that their retail accounts are only a deal desk / market-making platform, these kinds of brokers actively deter people from scalping.

EFX are an ECN and only care about the commission they get from your trades - the market-making is done at the bank / liquidity level (i.e EFX are like E*trade or CommSec: they route orders to the banks (exchanges in the equities example)) whereas brokers who are the market-maker need to hedge your positions in order for them to remain profitable and when you scalp & are only in the market for seconds, they don't have time to react.

Interactive Brokers are an ECN as well, but you need $10k to open an account, it's only $400USD at EFX. Put it this way, if a true blue Aussie FX ECN started up for retail-level accounts, I'd jump ship immediately, ASIC/APRA regulation, bank deposits in Australia, reporting all in AUD (as well as proper financial year end statements on June 30)... yes please.

 

[>Apocalypto<]

What makes you want to wait for that company in particular? I have been dealing with www.gft.com.au/ and they seem quite good, and have AUD accounts.

Mate please,

GFT are a market maker, EFX is a ecn. on top of that I would choose IG or CMC over GFT any day of the week. just compare their spreads!

On another note there XJO index is really rubbish I was on the phone with another member last year talking shop, he has a account with GFT we compared the xjo index price GFT and IG offered GFT showed a price 20 point above were the xjo went that day during our market times! (not overnight)

IG was 2 over GFT 20 over the day high of the actual xjo. Mate apart deal book 360 GFT are a joke. and yes I have had a demo with them.

Anyway sorry for the rant Justin. From a FX point of view you will save a fortune on over priced spreads trading EFX over GFT. That's a no brainer!

Norman not a personal shot.

 

[Stormin_Norman]

Mate please,

GFT are a market maker, EFX is a ecn. on top of that I would choose IG or CMC over GFT any day of the week. just compare their spreads!

On another note there XJO index is really rubbish I was on the phone with another member last year talking shop, he has a account with GFT we compared the xjo index price GFT and IG offered GFT showed a price 20 point above were the xjo went that day during our market times! (not overnight)

IG was 2 over GFT 20 over the day high of the actual xjo. Mate apart deal book 360 GFT are a joke. and yes I have had a demo with them.

Anyway sorry for the rant Justin. From a FX point of view you will save a fortune on over priced spreads trading EFX over GFT. That's a no brainer!

Norman not a personal shot.

no, that's why i asked the question.

on the practical difference between ecn's and market makers:

i take positions for a more extended period of time then many on here discuss. 2 or 4 point spread on the AUD/USD does not really worry me, as i am not looking to slice the edge of the inter hour cycles.

however, if being a market maker means that their price quoted is significantly different from the major bank market (in a negative effect) that is a concern.

and you say gft are a joke, ambit only after using a demo of their system. what led you to that conclusion?

 

[>Apocalypto<]

no, that's why i asked the question.

on the practical difference between ecn's and market makers:

i take positions for a more extended period of time then many on here discuss. 2 or 4 point spread on the AUD/USD does not really worry me, as i am not looking to slice the edge of the inter hour cycles.

however, if being a market maker means that their price quoted is significantly different from the major bank market (in a negative effect) that is a concern.

and you say gft are a joke, ambit only after using a demo of their system. what led you to that conclusion?

Hi Norman,

I think they're are a joke for two reasons. The spreads are two high. No matter what your trading style those 1-2 extra pips add up on all the stops and they know that.. 2 the sales people there are way too pushy, one guy there was calling me once a week to get me to go live even after I explained to him I want to run demo for a month to get to know the deal book. He did not listen and kept calling me. On the last call I told him I would not have money to trade for 3 months. He has never called back

They have to keep their price and the interbank as close as possible or customer would leave. Market makers are famous for re quoting and jacking spreads at news releases.

If u traded a pair like the Looney USD/CAD or the swissy USD/CHF then the savings you would get trading with EFX as opposed to GFT are quite significant. Like Tayser said EFX are commissioned based and GFT are spread based.

Apart from the data feed deal book is a good program I will give them that. It's very similar to Meta trader 4 as well. Look I don't hate them, based on my personal experience they're not for me.

If your happy and things are going well, then great.

 

[efx_justin]

I wrote this for another forum about a year ago...I have to break it into two parts for it to fit on the forum, but I think you'll find it very informative.

Part 1.

How Does a NDD Actually Work?

There are many keys to understanding the Forex markets, and there are many parallels between the Forex markets today and the stock market back in 1995 and 1996 when ECN technology like ISLD and ARCA were coming about. The non-deal-desk system is the really the beginning step of the process of making the Forex markets a truly “transparent” market with “best pricing” available electronically straight to the customer. In order for there to ultimately be a true market for Forex (such as exists for stocks and futures); companies will need to take several steps to move away from the traditional (and rigged) deal desk systems. I’d like to discuss many of those steps now.

I do want to say up front that I work for a non-deal-desk platform (EFX GROUP / MBTF). I don’t want there to be any confusion about that. If someone thinks that any of my points are biased because I work for a NDD platform and not a traditional deal desk platform, I’d be happy to discuss it with them here or in private, and I will respond to any comments/questions.

These are the things that I think separate a true NDD platform, such as ours, from other platforms, and then I have some comments about the Forex market and the average Forex trader beyond that.

1) Direct access to the biggest piece of the market possible. This is really the key to it all. A deal desk is basically a trader trading against a professional on a desk who can decide when and when not to sell to them. An NDD platform, before everything else, has no one working for the platform whose job and income are based on making money against the clients of the firm. When we execute a trade, it is executed purely electronically, without bias, without human intervention, and at the best price that our system could find at the time. I think this little fact is something that people overlook. We are paid on the commission on the trade, just like in the stock, futures, and options markets. Our incentive is therefore to get the best price possible to keep the customers happy. Deal desk platforms operate in an entirely different manner. They only make money when the clients lose money. Playing with a deal desk is like gambling in Vegas. It always favors the house because of the spread. They control if and when you get executed. We have interest in the spreads being tight and the executions being the best that they can be. In fact, the better that we do for our clients, the better that we do overall.

2) Execution should be no different whether you are closing or opening a trade. Many of the traditional deal desk platforms separate positions as “open” versus “closing,” which is what leads to something like “hedging.” The reason that they do this is because they believe that the average Forex client loses 6.7% per month in Forex (NOTE: that is the average based on their system, which means some people make and some people lose). Therefore, when someone is closing a position, they usually just accept the other side. When someone is entering a position, they might not. Why should this be the case? Why should someone who is long the EURUSD and selling it get a better fill than someone who is shorting the EURUSD at the same moment? They shouldn’t. I’ll talk about hedging in a moment.

3) A related point here is therefore anonymity. The system should not care where the trade is coming from. It should not care whether that person is starting a new position or closing an existing one in the same direction. Try opening an account with a deal desk platform and trading for six months. If you are making money, then open a second account under a different name. Try to buy in both accounts at the same time. The new account will get filled, while the account that is making money might get slipped or requoted at the same moment. Why is this the case? Because the platforms (all of them) profile their clients, trade against them, and make sure that the clients who are making money start to get worse fills. Remember that if you were the guy on the desk and you took the opposite side of every trade, you would want to slow down the people that were making money too because they are making money against you by default. A true NDD platform shouldn’t care who the trade is coming from when it executes. I can tell you right now that when it comes to the EFX GROUP / MBTF system, a sell order to close a long position and a short order that are put in simultaneously on the EURUSD will be filled at the prevailing market price together, period.

4) No requoting. Deal desks mark certain accounts as “A list” clients. This means that the clients are good traders that are showing signs of being successful. “B list” clients are the rest of the client base. “B list” clients are set to auto-execute against the platform because they lose on average. “A list” clients are not. In fact, "A list" clients in a fast market are often shown pop-up windows that say “The price is no longer here, would you prefer to pay this price.” NDD platforms never requote. Either the order is marketable, or it isn’t.

5) A non-deal-desk system lets you know everything that they are making off of you. Would I rather trade on a deal desk, where I spend 3 pips to buy the EURUSD, and then later, 3 pips to sell the EURUSD, or would I rather trade on a system that lets me get executed by the true market, which includes customers and banks, with the narrowest spreads possible, and get charged a fee. The answer is the latter.

6) ECN vs. STP vs. Deal Desk. It needs to be made clear that there are really more than two types of platforms. A deal desk is a fixed spread platform where the desk makes their money in the spread trading against all of their customers. This rigs the market against the retail trader because they aren’t seeing true market quotes. The platform can move their quote wherever they need if they want to fill the client. STP (Straight Through Processing) platforms execute directly from the retail client to the banks. The more banks and liquidity in the system, the better the fills for the customer. ECN (Electronic Communications Network) platforms let customer orders interact with other customer orders. Non-deal-desk (NDD) platforms are either the second or third type of platform. EFX GROUP / MBTF are both. We have over a dozen banks in our network which customers execute against directly (STP), but we now also allow customers to hit other customers (ECN) inside of the standard pip increments of the banks. We do not shave anything against customer executions.

 

[efx_justin]

Part 2:

Having said all of that, I’d like to make a few additional points about the Forex markets, execution, and our platform. In reality, the retail Forex world is made up largely of unsophisticated traders who have not traded anything before. You can usually recognize these people because they are looking to trade at higher margin levels and expect executions that the market cannot provide. The Forex markets are more highly leveraged than the futures market. We offer 100 to 1 leverage. Professionals rarely use 20 to 1 leverage. Retail traders with no experience are constantly looking for higher leverage, up to 400 to 1, which shows their lack of experience. Few of these traders last long in the Forex markets. In addition, there are many people who think that they are “entitled” to fills because they want to buy at certain prices. This happens most commonly on “news spikes” due to economic data. People try to place market orders on the news and then are surprised if their fills arrive within a split second, but 30 or 40 or 50 pips away from where the market was before the news. Few of these people actually understand what they are trading. Let’s consider a few points.

In exchange rate terms, $0.01 of movement between the Euro and USD is 100 pips. That means that if news comes out and the EURUSD moves 30 pips in a second, that’s $0.003. In other words, it is not measurable in real terms. However, a trader trading at 100 to 1 margin may expect that they should be filled at a price that existed before the news hit. When I ask traders if they would be willing to sell the EURUSD at the price it was trading at before news hit that caused a 30 pip spike, they say no. But they expect that banks will make those prices available. In other words, they aren’t willing to accept the consequences of a “market.” Trading on economic news in the Forex world is the most dangerous type of trading that one can do. Having said that, let’s consider what the various platforms offer to protect the trader.

Traditional deal desk platforms offer very little in this regard. The trader is either buying or selling or doing nothing. Orders are largely market and stop (market) orders. However, STP and ECN platforms (which are both NDD platforms, and EFX handles BOTH of these types of orders) execute any marketable orders instantaneously. That means if you are a buyer at the market and there is a seller at a price and no one has bought from him/her ahead of you, you are filled at that price. It is a true market. There is nothing that says that you deserved to get filled 20 pips back because that would have made you money.

The Forex market has come a long way in the last two years. Traders should look for platforms that offer the following:

1) Fraud protection in the form of Fidelity bonds.
2) Segregation of client money.
3) True executions.
4) Lots of liquidity.
5) A good variety of order types, which professional traders should use to control their risk. No one should EVER place a market order when they can limit themselves to fills 5 or 10 pips above the market.

On a true STP/ECN Forex platform, no trader that understands executions should ever have issues with getting extremely bad fills (slippage). Everything should be in-line.

I have spent a lot of time watching thousands of people trade the Forex markets. Forex is a very exciting market with massive liquidity. With platforms like EFX GROUP / MBTF, which offer true STP and ECN technology, it should be a true “trader’s market,” as long as that doesn’t suggest to traders that they are entitled to fills that don’t exist in fast markets or that reckless use of market orders should always be rewarded.

When the exchange rate between the Euro and the US Dollar moves $0.01 in a day, that’s 100 pips. This is a microscopic move that is only remotely tradable because of the leverage used in the Forex markets. I think a lot of people have expectations that go well beyond reason when it comes to the Forex markets. I think that things are moving closer to a centralized market place with good regulation about the limits to which a seller or buyer can price themselves away from the market but still fill a retail client. I think within a year or two, platforms like EFX GROUP / MBTF will have completely altered the landscape of Forex just like ISLD and ARCA did in the US stock market back in 1995-7. In the meantime, stick to the platform that safeguards your money, gives you the most options, and provides you with direct, unhindered access to the liquidity that is out there. Make sure that your funds are secure from fraud and protected from co-mingling with your platform. Make sure that your funds are held on-shore, not off-shore.

With all of that, it’s just about your trading skills.

 

[efx_justin]

Thanks for clarifying.

I might end up biting the bullet and opening a standard account in a month or two, I'll hold out for AUD though.

Update on non-USD accounts:

I was given this post from our VP in regard to the issue of foreign currency deposits.

“The process of accepting foreign deposits took a turn that was unexpected in December. We made all of the arrangements easily with our primary bank to accept foreign deposits, which required that an additional deposit be held with them. To expedite the process, we were allowing wired funds only, no foreign checks, as part of the risk of foreign deposits is that other countries allow funds to clear for trading the minute that the check arrives, and that can obviously put us at risk if the funds don’t ultimately clear. So we were ready to go.

From a programming perspective, it is actually quite simple to allow Navigator to become based in another currency. That part is quite easy, and the trading would function properly.

We ran into a different issue. At the end of the day, you have PnL and commissions that have to be paid to us. Let’s say that your account is GBP-based. While the system can obviously convert the commission rate at the time of the transaction to equate to your standard account commissions (let’s call it $5 per $100,000 US, which is the basic commission for retail customers), we don’t actually receive that in USD until we convert. It is not feasible to convert on a constant basis throughout the day, and yet, the exchange rate will fluctuate by the point of settlement. That means that between the time that the trade is run and the time that we would choose to convert the currency back and forth, it might not be $5 per $100,000 (could be higher, could be lower, but it becomes a variable). At the same time, PnL has to end up in customer accounts based on transactions that occurred at the bank level through us in USD. Again, based on the change in the exchange rate, this puts MB at substantial potential risk and leaves a lot of uncertainty. Obviously, when anything becomes variable in business, even if it could fall into your favor potentially on any given day, it has to be analyzed differently.

Since coming to this realization, we are having various discussions with parties to see what we can do, and we will make an ultimate decision once we have explored all options thoroughly and believe that we have the best solution, most importantly for our global customer base. Obviously, we will then let the public know. I will not give an ETA on this process. We pride ourselves on doing what we say that we can do, and this one definitely caught us off-guard just as we thought we were ready to go. For that, we definitely apologize.

Chris”

That’s all I can give you guys on this one for now.

 

[nizar]

Thanks justin for your contributions, good stuff.

 

[efx_justin]

Thanks justin for your contributions, good stuff.

Thank you Nizar - you're welcome.