Well, not exactly. There is a little difference in what you are saying and what it really is. Those are not the best bid and offer - those are the last transactions that took place as far as they have information on it throughout their network. Once you see that price changing - what does it mean? it means transaction took place and that was the last price. Lets take bloomberg, EBS, Reuters or any other network. By networks I mean: -automated order matching systems, ex.: EBS, Reuters and other systems for dealers; -systems for customers like multi-bank dealing systems FXall, Currenex, etc; -and lets not forget that there are single bank proprietary platforms of Deutsche Bank, CitiFX, UBS, etc and let us also not forget that except for that those banks also deal with other banks/institutions outside those networks. All those "quote/market providers", bloomberg, EBS, FXall and others - they all have a network that they work with; lets say 10-15 banks. All other smaller banks/institutions have to deal through one/some/all of those large "members". As far as I know there are 1000 main participant banks, but I am not sure about this figure. Yes, there are major banks that offer bid/ask prices at any time, but it doesn't mean that is the price that counts for the next trade you are about to enter (at least not exactly)... For example, lets take network "X" and suppose it works with 5 largest banks like UBS, DB, HSBS, JPMorgan and citi. Now, at any given time those 5 banks supply the network with prices. Usually in not too aggressive market those prices are almost identical and may differ only 1 pip tops and lets say usually those prices have sizes of offers; i.e UBS: EURUSD= 1.1845/46 / 10 mill. So, lets say you have same price from all those 5 banks, and each is offering 10 millions. In the end you have total of 50 mill in bid/ask. Now I come into the market though network X and I want to buy 100 million Euros vs USD. That is when there is not enough offer, and I will grab those 50 mill offer by 1.1845/46 (10 mill from each of the 5 banks - system should do it automatically for me if I enter 100 mill and hit buy), but next 50 mill will be filled by next offered prices. If all those banks will offer different prices each with 10 mill size, then price will bounce. For example, if after filling my 100 million order with 50 million that were out there the rest will be filled by: 10 mill UBS at 1.1847 10 mill citi 1848 10 mill hsbc /49 10 mill JP /50 and 10 mill DB /51 so, the price will move accordingly - others will see that price jumped from 1.1845/46 to 1.1850/51 in a sec. Maybe on the way there were some other buy orders pending, and it may trigger even higher prices; maybe there were sell orders or just sellers and the price will not move that much...but once you see the price changing on the ticker, it means transaction took place and that is the last price. Now since EBS/bloomberg/Reuters - are not the only networks that these banks work with, those other networks that work with these banks will get same quotes once the bank sold/bought and changed the price on any other network. If someone bought from the banks at the price that it was offering, and it raised the price by one tick, it will rise this offer at all other networks also that the bank works with. that's why the price is more or less always the same with diff brokers/banks. To sum up, daily exchange rates published by financial institutions, newspapers, central banks and providers such as bloomberg, Reuters and others are usually either based on an analysis of a high volume of foreign exchange trading during the previous day, or on procedures which occur every day at a certain time between central banks. In the first case the providers analyze, over a period of time, bid and ask currency prices provided in real time by suppliers such as Reuters, Bloomberg, Dow Jones Telerate, Knight-Ridder, Tullet & Tokyo, Bridge, etc. This raw data is validated with consideration to frequency, unusual peaks, possible errors, etc. The average of these filtered bid and ask prices over a certain period of time is called median price. Usually only the mid rate of the median price is provided. But lets leave the published rates that come after and go intraday: how come sometimes/usually there is no single price at any given time on this market? and it may be different by one 2 or (god forbid 5 ticks) at any second with different banks/brokers??? this is another question and there is an answer on this one (there is always an answer, its just that we don't always know where to find it or whom to ask ) - see in the end. Well, actually its available to any interbank participant and even some of the brokers provide this king of information. As I said, next to the offer, name of the bank that offers, there is also the size of the offer. There also may be a separate window with log of the transactions that took place. But you are correct, big part of the market transactions take place outside those electronic systems, and therefore only each and every bank itself can say what was the volume, but it cannot say what every other bank did outside the network. That's why Bank for International Settlements (see posts above) is making its survey once in 3 years based on central banks data. Central banks are collecting information from the comm. banks and that is the most accurate info we have; but we cannot talk about exact daily volumes every day and at any particular moment. We only have avg daily turnover. And so, its not that big of a problem, but I don't see how can it help. There is no such thing as volume indications or analysis for this market as far as I see it, because even if you trade on these platforms and see the volumes, you don't see what is happening on other networks and what deals are made in between the banks because usually they have their own networks and other ways to trade (phone) - see the link to the article - not banks but even most of the institutional traders still prefer phone to online trading, and as for banks...do the math: If volume of EBS - one of the leading (if not THE leading) electronic provider of FX trading () has only 100 billion turnover in spot foreign exchange transactions compared to roughly saying 400bill - 25% of the turnover, then the rest is coming from Reuters - I don't know exactly how much is Reuters, but I would guess its even more than EBS), also non-electronic transactions and smaller networks (like FXall - $10-15 bn/day, FXConnect - $15-20 bn/day, Currenex - 3-4 bn/day, there was also Atriax - died in 2002 I think). Most trading in the over $1 trillion a day currency markets is still conducted by single bank systems or electronic inter-bank dealing systems. Commercial banks have the largest proportion of total trading volume. About 3/4 of all foreign exchange trading is between banks (interbank or direct dealing transactions). If some bank or financial institution calls in and orders to buy 500 million EURUSD, it will for sure bounce the price and it will immediately reflect the offers of the banks in the electronic platforms...Of course, its just an example and banks don't necessarily call each other to make a transaction. The fx market has no centralized exchange (except for some exchange traded forex derivatives (options, futures)). There exists very little public market information. Historically, most forex trading was done using voice brokering on the telephone and using fax machines. Since the 1990s proprietary electronic dealer systems (Reuters dealing system, Electronic Bro king Services (EBS)) have captured about 85-90% of all interbank spot transactions. Traded sizes on these electronic markets are relatively small. Larger deals quite often are done directly between selected counter parties. and this is the answer (at least partially and as far as I understand) to "how come there may be different price at any given second". Since there are many networks and places where this transactions take place, price may be different. But still, it shouldn't be dramatically different. This usually happens on volatile market (the differences in prices); otherwise prices are almost always the same. And lets not forget, that not like retail brokers offering constant spread of 2,3,4 or 5 pips no matter what, there is no such thing on real interbank market - spread may become 10 pips on highly volatile market and price offerings may differ by even by same 10 ticks between different banks/buyers/sellers... so that is one of the benefits of retail brokers on this market. Guaranteed spread and instant executions. just my 2c. I may also be wrong, so will be glad to hear corrections regards, Rezo Sorry for the long writing ... just wanted to share as much as possible.
Well Trevor, I dont know. I cannot tell you about the arbs on the futures because I am not familiar with futures market enough, but I would say its not easy. But hey, thats what arbs do Cannot give you the answer on this one, sorry. Dont want to mislead you or anyone else. best, Rezo
I trade the futures and I think you're right: the larger bids and offers two and three tics from the best bid or offer have to be people (banks, hedge funds, or whoever) that are looking for arb opportunities. If you compare the futures charts with the cash you can see that the emotional spikes go further in the futures and this is when those arb players must make some coin.
hi robek. At the moment I am trading with Refco (same as FXCM). worked with a lot, inclusing the one you trade with - CBFX. They are as low as it gets I should say with their platform of ages ago and poorest customer support I have even seen. There are 3 people there though who I know and personally respect: Ryan, Elena and Olga. Ryan is a true professional and the girls are just nice to talk with I heard they are in kinda reforms and inproving lot of things...well, I hope they will,cause the have a lot to improve...
Thanks rezo, Some things about FXCM are good - the guaranteed stops especially. But the spread is too wide, can"t see why they don&t match oanda. BTW tharnet; good question about volume, are you looking to add forex to market delta?
I have been trading the euro fx futures from 1 am - 6 am NY time. I am planing on stopping because the volume is ANEMIC during these times and my trading style requires volume. THEREFORE even if the banks are doing arbing in the futures during this time , the reality is it doesnt really amount to much in total $$$( for an institution that is).
This is a new thread I started about forex volume on esignal. http://www.elitetrader.com/vb/showthread.php?threadid=32137