I'd suggest you better find out a few things, like ... What does it mean when people say there isn't something like a central marketplace for FX ? What is the usual dealing size for interbank dealing ? start of with those two and we'll probably be a whole lot further in this discussion ...
I am trying to find out - here on ET. Any pointers for web links, books, etc. would be highly appreciated.
It's not that I don't want to help me, it's just your question is so out there I don't even know where to start. The title of the thread should be: making my own operating system - possible ? Also start to explain me why, if so, this can't be done. ... the answer to both questions is: yes it can be done, but I don't feel very much like going through all the details why this won't be possible in practice for 99% for the people out there. Let's just say, normal interbank dealing is done with trades worth millions of usd. You better have some serious money behind you to be considered a counterparty there. Even then you might encounter a few snags along the way. I am seriously trying to answer your question but it's hard where to start. Better start to read a bit on how markets in general work. It's easier for example to become a member of an exchange to trade futures for example.
I did explain, you don't have enough money to be taken seriously. That's it. I could spend another hour with this question but that's it. read this: http://www.amazon.com/Trading-Excha...d_bbs_1?ie=UTF8&s=books&qid=1234089978&sr=8-1
Thanks cvds16 - I didn't know that it was that complicated. I thought that since there's no central exchange, barrier of entry would be much lower. Oh well - IB sounds good.
This book seems like a great read - excellent reviews. Any other books you'd recommend to learn inner workings of other markets, exchanges, investment banks, commercial banks, etc?
I'm literally cracking up because my first career was in computer programming, so I really appreciated all the OS comments, but when I first started trading my first question was pretty much along the same lines --"hey, trading's great but how do I get in on this commission thing too." Fortunately for the original poster, I have irregular sleep patterns and it just happens to be that I'm bored out of my mind with absolutely nothing to do -- so I'll take a stab at quenching his thirst for knowledge... although I already know he's going to be disappointed with the first thing out of my mouth. For all the purists out there who might be reading this, keep in mind I'm a futures trader and I don't trade forex so my facts and/or nomenclature might be either a little off or not quite current. First of all, despite what you might have heard up to this point, its actually quite easy to do what you're looking to do. But the reason no one took you seriously was because they could tell you didn't know what you were talking about by the way you phrased your question. You said, "is it possible to become your own forex broker," when you should have asked if it was possible to become a forex dealer -- you want to deal to customers and you're hoping to get brokers to bring you business and "introduce" customers to you. The only thing you need to get started is to start a company and capitalize it with at least $10 million -- which is the new NFA minimum capital requirement. And you're going to have quite a bit of IT and programming costs, not including web presence, marketing, and any other operating costs you might have. I would say you'd probably want to have another million at least in operating and marketing costs, but you could probably get away with a few hundred thousand if you were willing to do it on a shoestring. If you don't already know the ins and the outs of the business you'll also need to hire people who have experience, who are willing to teach you as you go, but you'll have to find high quality individuals who won't also take advantage of you, and you'll need to most likely pay them at least a competitive salary. A chief economist is almost a must -- if you're going to trade your firm's proprietary capital, then he'll make sure to at least put the important information you should be considering in front of you so at least you can make informed decisions -- and if you're not going to trade firm capital, and just rely on commissions, then you can turn that same information into marketing material to try to create a sense of excitement and trading opportunities to induce your customers to trade more. And don't forget about the lawyers, accountants, and compliance officers... as well as licensing and registration costs. After that, the rest is actually quite easy. Just take most of that $10 million you used to capitalize your business, and open up multi-million dollar accounts at a few of the major banks around the world. It would be even better if you could have a local bank account, denominated in the base currency, in each of the countries whose currency you wanted to deal in. If you only wanted to offer the 4 majors, then you only need 4 bank accounts in 4 countries... but if you wanted to offer every currency pair out there, you might need in excess of 30 bank accounts in more than 30 different countries. This isn't a requirement of course, you could get away with just one bank account here in the U.S., but then you'll have to convert currency with the bank or trade with their dealing desk, and sometimes you can get better spreads simply by wire transferring money back and forth between accounts. Its an added bonus if all of your bank accounts were also multi-currency accounts, so that you could wire transfer money back and forth between them, and have the bank count them as assets, without having to actually convert the currency -- that way you can convert when economic conditions are most advantageous. Of course, the more money you have at each bank, the better deals you'll be able to work with them on both the currency dealing side, the currency conversions, and the wire transfers (the wire transfers quite often being a rather large expense). This is where it will mostly hinge on your connections and/or how good of a dealmaker you are and how good you are at talking a good game. At the end of the day, after you've opened up all your accounts and worked all your deals, you'll have a spread that will represent what it will cost you every time you convert currency back and forth -- or if you're dealing with the dealing desk they'll just give you a spread, which may or may not be better than what it costs you to move currency between accounts. Since you haven't done much volume, most likely the spread you get still won't be as good as what you would have gotten from IB or any of the other bucket shops, so most likely you're still going to be fighting an uphill battle because until you do volume, its going to be hard to get your spread worked down, which means you're not going to be able to mark it up too much... because remember, unless you mark up your spread there isn't any way you can make money -- unless you have good traders and you can make money on your proprietary trading. Sometimes you'll be able to get better spreads in various pairs from other wholesale currency dealers than you'll get from your own banks, so you'll also have to be constantly developing a network of suppliers and relationships with other dealers who are in the same position as you are, just to be able to continue offering competitive spreads. Of course it really really helps if you can get licensed and registered as a bank in the countries whose currencies you do the most dealing in, that way when you want to stock up on a certain currency you can just bid on it in the open market when the local banking authority holds its regular auctions. Then you'll really be able to start getting spreads that are somewhat close to being inline with the cash data you see on your charts as its reported by EBS and the others. After that, you're ready to open up the front doors and go find people who want to convert currency back and forth with you -- or as we call it -- trading. All you gotta do is convince them that they're better off trading with you than any place else -- which of course means you better be able to offer them something that nobody else can offer them. And you need to get enough business to cover all your overhead. If you think about it, its actually not that hard. All you really need is somewhere between $12 - $15 million... although a couple hundred million would be ideal.
you don't want to become a forex dealer. you want to become a forex broker, so that you don't lose money when you have people winning. All you do is take commissions, and then you trade the currency futures yourself through your own forex broker, and half the commissions go back into your own pockets and the other half into the exchanges pockets, right? don't worry, you only need one bank account, denominated in USD. Since that's the base currency of the currency futures that you can trade through your firm.