Which FX provider for an Aussie?

[Stormin_Norman]

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)

 

[Stormin_Norman]

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/

 

[>Apocalypto<]

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!

 

[Kauri]

From my blog:


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/

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...)

 

[Stormin_Norman]

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.

* There's no dealing desk to mess with your trades

* We're not trading against you - we hedge all positions

FXTrade is a fully automated trading platform in which OANDA plays the role of market-maker. Our platform is not an auctioning system in which a trader must request a price from a pricing source and then make a buy/sell decision based on the quote offered. Nor is it a matching engine where a trade is executed only if both sides of the trade can be filled at the time of the buy/sell request.

Except for residual amounts, OANDA fully hedges our clients' positions. All the time. So there is no conflict of interest. We benefit most when our clients are profitable and we have nothing to gain when they are unprofitable.

 

[Stormin_Norman]

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

First I have to say that I have live accounts at Oanda and Alpari UK.

So I know the differences.

Oanda has a max. leverage of 50:1, Alpari has normally a leverage of 100:1. If you write an eMail to them, you get up to 500:1 if you need it.

Oanda has better spreads. 0.9 pips in EUR/USD where Alpari has 2.0. Oanda has usually instant fills for limit, stop and market orders. Alpari is a dealing desk broker. You will have some slippage of around 2 pips almost the time.

Oanda pays interest to your free margin where Alpari don't.

Oanda allows lesser position sizes (down to 1 unit which is 0.00001 lots, where Alpari only has micro lots: 1,000 units = 0.01 lots)

The only reason I'd prefer Alpari is because of Metatrader and using expert advisors (automated trading systems). If you don't use any automatization, you don't need them. You could use Metatrader as a chart tool and Oanda for the orders.

Spread widening happens both at Oanda (20 pips @ GBP/USD during news) and Alpari (20 pips @ GBP/USD as well).

There is one thing: As Alpari UK is an european broker they have insured funds up to 20k, where Oanda doesn't have something like this. But that's not that important as it sounds.

If you want to scalp, forget Alpari. If you want to use expert advisors you have to use Alpari.

I'd always prefer Oanda.

 

[tayser]

OANDA Electronic Market Maker = Deal Desk.

 

[tayser]

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



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

 

[>Apocalypto<]

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?

 

[Stormin_Norman]

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.

 

[Timmy]

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).

 

[Stormin_Norman]

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.

 

[>Apocalypto<]

>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.

 

[Stormin_Norman]

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.

The Stage

Broker complaints and debates have gone on since they have existed. But lately, this topic has been hotter than ever. Why? Because, things are changing. And, when you change things people get upset. Hey, my spreads never widened before or what the heck! I never got slipped like that! So, why is all of this happening now?

Retail trading strategies around news have been changing. The little guys are getting in on the data game. It is not hard to see the tremendous profit potential possible on many of these economic reports. Some retail traders are getting news services, some are joining data release signal clubs and a large number are just straddling their favorite pair before the release.

The market makers dilemma

So, how does this change anything and why would ECN style brokers be any better? Well, the answer lies in the market makers liquidity providers and their relationship with the global interbank market. This is not so easily defined because these relation ships can come in many forms. But, this explanation will apply to most retail brokers.

As most of you know, retail brokers are the counter party to all of your transactions. When trading on the exchanges, Joe sells and another member Mary buys and the exchange broker merely gets a commission for facilitating the deal. At BigretailFX when Joe buys BigretailFX is selling and when Joe sells BigretailFX is buying. BigretailFX may take Joe’s position and cover it with their liquidity provider, they may put it into a pool and then take a position with their liquidity provider that equals their total position or they may just hold it in house knowing that Joe is probably going to lose anyway. In any case, there is a step or most often two between Joe and the community of banks, hedge funds or other brokers that would have the other end of Joe’s position in an ECN type environment.

These 1 or 2 steps are where the problems start for Joe’s market maker broker during high volatility trading such as economic releases. You see Joe’s broker may have promised him “fixed spreads”, “guaranteed fills”, and/or “zero slippage”. Or, they just may not have slipped him or widened his spreads in the past because it always worked out in their liquidity pools and they want to keep Joe happy.

Then, suddenly, the world changes. More and more of BigretailFX’s customers start trading the news. And, at the same time they are start having incredible success because the market reactions have been very predictable and they have been educated on strategy. Now BigretailFX is in trouble, their business model is not working and they are loosing money like crazy during economic releases. Why? It is those darn 1 or 2 steps between Joe and the greater market. The fact is, good old BigretailFX is selling Joe and hundreds of their clients Euros when no one else in the Forex community would. And, you guessed it, no one will sell them to BigretailFX so they can cover either.

So what does BigretailFX do? If you are a Forex trader, you know the answer oh so well. They widen their spreads, introduce slippage or just shut down during economic releases altogether.

Suspicion and the want for something better

When a trader clicks on buy or sell, he has an expectation of what he thinks will happen. When he ends up in a lesser position than he expected he thinks “What the ….? They screwed me!!!” We have each been there a time or twenty. This very experience starts the thought and from there on forward you are looking out for being “screwed”. So what now? You have decided that your broker is no good. You talk to your fellow traders and they say “I’m getting screwed too”. So, you all start searching. And everywhere you look it seems to be the same old thing. Why? Because everywhere you looked it was pretty much the same old business model.

Are ECNs our savior?

Then one day a new player shows up with promises of a better deal. We have all heard the new sales pitch. “Spreads as low as 1 pip”,“No dealing desk”, “We never take positions against you”, “Straight through processing” and even “True interbank access”. Wow, woohoo this is just what we were waiting for! We quickly open a demo account and see the spreads. Man oh man, we are impressed! “Look at that! One pip on the pound!” But as we begin to try it out suddenly it is not exactly what we had assumed it would be.

continued next post...

 

[Stormin_Norman]

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.

The first thing you find out when you open your ECN style account it that there is still slippage. But why? If there is no dealing desk to cheat us, why is there slippage? The reality is, in a true ECN environment,
slippage is a misnomer. Nobody is slipping you. Your ECN style broker is merely providing you what you asked for. You ask for a market order to go long on the euro and that’s what you got. The problem is many of us had no clue what a real market place is about. We thought we could buy the euro at the price on the screen like a tomato with a price tag. Why do we think this? Because, BigretailFX and his competitors trained us to think this way. Retail brokers have spoon fed retail traders simplicity. Some wanted to make it as easy as possible for traders. Others used this trader ignorance of the real market and market prices to steal some additional profits. In a sense, they set themselves up for all of the dissatisfaction and suspicion to come.

You see in real interbank networks, a market order is just that, a request for a euro at the market price. And the market price is not static. It is moving all of the time. Sometimes it is moving very fast. In those conditions, you may request a euro at 1.2750 but in the time it takes for you to push the button, route the order and match a buyer the price could be 1.2752 or in a really volatile market as during economic releases, the next seller might not be available until 1.2780. How many stupid people do you think are out there that want to sell a euro after the Federal Reserve just released a U. S. dollar negative statement? This is the reality of the real market. Sometimes there just isn’t a buyer at the price you want. Because we have been lied to, and some of us flat out cheated in the past, we immediately go into combat mode. “I can’t believe it! These guys are just as bad as the lousy market making broker I just got rid of!”. Well, no, probably not. They are just giving us what we asked for. Unfortunately for us, we didn’t really know what we were asking for.

After a few days with your new ECN style platform you observe your first economic report. And the good news is that you don’t get the ridiculous 20,30 or even 50 pip fixed spread that popped up prior to the data on your BigretailFX platform. But the spreads do widen a few pips and the spread starts dancing like crazy, especially on the pound. The spreads widen, narrow and even invert in a frenzy. And for a few seconds before the release it just looks scary. Banks are pulling order and last minute speculators are taking positions. It looks dangerous because it is. Welcome to the cold cruel world of the real interbank networks. There are no guaranteed stop losses here. Just buyers and sellers and whatever the market will bear.

Commissions are the next consideration. Unlike BigretailFX, the brokers profit is not hidden in the difference between your price and the brokers liquidity providers price. The Bid and Ask you see on the screen is representative of the prices offered in your ECN’s network. So in order for your ECN style broker to profit, they charge you a transaction fee or commission. While the commissions can vary, most retail ECN style brokers commissions average the equivalent of 1 to 2 pips per round turn depending on the currency pair. Just a little math will tell you that in order for your ECN style brokers spreads to be better that your old retail market maker, your ECN style broker must be showing a spread of 1or 2 pips or less. And this may or may not be the case when it is time for you to take a position. So are ECN style broker net spreads really better than your old market maker broker? Sometimes yes, sometimes no.

So why all the praise for the ECNs?

In a word, transparency. Or at least the promise of transparency. While some are initially attracted by the spreads, the big draw for ECNs is to see the real market. If we can see the real market, then no one can lie to us or cheat us. And for many, we just want a fair shake. But the thing that must be said here is that, we may have revealed, your old broker may not have been so bad after all. More specifically, your old broker may not have been out to cheat you. BigretailFX is just built on a business model put them in a position that inspires distrust. Throw in the fact that there have been notable amounts of skullduggery by retail brokers over the years and you have a Forex market begging for transparency. Are ECNs style brokers truly transparent? Not really. Unless you have central clearing where everyone, including the retail trader, has access to the feeds then it is not truly transparent. But they are a good step in the right direction.

Run straight to your nearest ECN? Not so fast.

As we discovered, your old market maker broker may not be obsolete just yet. In fact, many of them have features that are an advantage or just down right prudent for new or small account traders. Some market maker brokers guarantee no negative balances. Which means you can never lose more money than you have in your account. This is a huge plus and a very smart safety feature. Also, you won’t find any ECN style brokers that guarantee stop losses. These features alone can make them the only choice for many. Many market maker brokers also have leverage up to 400 to 1. This may be attractive to some and makes those stop loss and no negative balance guarantees all the more important. Let’s face it, if you need 400 to 1 you had better have no negative balance protection! Last but not least is the advantage of fixed spreads. If you trade at odd times like early in the Asian market timeslot, fixed spreads can be better than the interbank, especially on the pound.

So, is the grass greener with ECN style brokers?

The answer is up to you. We now have a much better idea of each broker’s structure and advantages. In general, I will state that experienced, active Forex traders will probably be happier with and ECN style broker. While a new trader, in need of simplicity and financial safety will likely be better off with a quality market making broker that has these safety features. After all I have learned, for now, I will have one of each.

-The FxOpportunist-

 

[Trembling Hand]

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

 

[Stormin_Norman]

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.

 

[StockyGuy]

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)?

 

[traydor]

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

 

[tayser]

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)?

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.