Hey, you know what? I've wondered about that myself. They claim they are presenting the best bid and ask prices from their "liquidity pool," yet there is materially no difference between the NDD and the fixed-spread platforms in terms of spreads. I rarely see 2 pip spreads on EURUSD. Likewise, I rarely see anything less than 4 pip spreads on GBPUSD and others. I have even seen ads where they claim "spreads as low as 1 pip," but I have yet to see a 1 pip spread on any pair! The only possibilities I can think of are: (1) Either they add one or two pips on top of the best bid/ask from their "liquidity pool," or (2) Their liquidity pool is comprised of an outfit like Deutshe Bank, whose spreads are in fact not that competitive despite their deep pockets. So, in effect, the worst case scenario is that FXCM NDD customers may be getting prices from another dealing desk -- one at a major bank rather than at FXCM. Honestly, it is inexplicable that their NDD spreads are that wide. They give the impression the NDD is an ECN. Yet, look at all the other ECNs out there -- much more competitive in terms of transaction costs (even when they charge half a pip in fees each way), mui superior trading platforms with much greater order interface functionality, and generally very good execution. Think about it -- EURUSD round trip is 6 pips 95% of the time for FXCM Non-Dealing Desk. GBPUSD is 8 or 9 pips. GBPJPY is often 16 pips. There really is little difference between NDD and fixed-spread, other than with NDD you can place orders within the spread, but you are also prone to more frequent slippage than with other variable-spread platforms that I have used. With EFX, EURUSD round trip is 1 pip 90% of the time (yes, boys and girls, that a half pip each way), plus a 0.5 pip commish each way ($5 each 100K turn), for a total of 2 pips round trip. GBPUSD, USDCHF, USDJPY, and others are often at 1 or 2 pips round trip, with a similar commish (a bit more for non-USD denominated pairs). I won't even tell you what the difference in spreads for GBPJPY are. It's rediculous how much less in transaction costs I pay, and I give up nothing from either the front or back end of my trading. I'm mystified why an outfit as big as FXCM doesn't get it. But I'm even more mystified why smaller retail traders continue to keep their accounts at FXCM. Vote with your feet people!
good points. however, its not 6 pip round turn for eur/usd. one only pays the spread on entry..... correct?? surf
Interesting thread. Sometimes there is little difference between the unethical and the illegal and some sharp businessmen skirt the illegal, like in the case of their advertising. Early in the morning I trade some forex futures through IB, mainly the yen. Most of the time the spread is 2 pips and sometimes it is one and the commission is only $4.4. After what I have read I don't think I want to venture into FX. GC
One thing to note about FXCM -- I believe there's actually FXCM retail and FXCM Pro. FXCM Pro is an interesting offering because FXCM exposes the retail book integrated with the Currenex book to FXCM Pro customers. So if you really feel that there's a hidden dealing desk behind FXCM retail.... you can be that dealing desk by becoming an FXCM Pro customer!
There is a pro platform. I demo traded it for about a week...but the spreads still weren't as good as some of the other ECNs out there. This was more than three years ago, so I don't know if their platform and fee structure have changed at all. At that time, I didn't have enough money to open a Pro account. Now that I do, there is no reason for me to change. The great thing is, anyone can get a platform that is just as competitive as the FXCM Pro platform -- and with only a mini account. EFX also shows what they call "Level II," which is just another way of saying they expose their order flow to traders on the ECN. The usefulness of this in comparison to Level II information for a stock is marginal. There is NO depth or breadth of market in this information. Oanda has a specific page that shows long and short positions by currency pair as percentages in their order books, which is essentially the same thing. While some might think this is advantageous, I find the information of marginal value to me. I'd rather just read a COT report. One thing FXCM does right that very few brokers/dealers do is provide Thomson order flow commentary. That information is very helpful, especially for swing and position traders. The point is, FXCM is not offering anything new to customers that is not offered elsewhere at less cost to the trader. And for most retail traders the Pro platform is out of reach. Would I switch to this platform now? Hard to say. I would be a hard sell after my experiences with FXCM in the past. I personally don't think there is a hidden dealing desk anywhere -- in the sense of a retail broker shading prices and offering wider spreads. I just think it is a matter of FXCM's choice to not offer lower spreads. I do feel, however, that there are more competitive dealers out there with better liquidity pools, and better pricing, and of course better platforms. In the end, it's really up to each trader to decide which broker/dealer and platform they feel most comfortable with. For my money, I would go with a discount ECN-type. One thing I'm still looking for is a discount global account with futures, stocks and spot FX and commodities that is a a good alternative to IB. (For the record, I do not have an account with IB.) I would ideally like to be able to trade FX, commodities, futures, and stocks from the same platform and from the same account, without having to log out of one and into the other. If anyone knows where I can find a **good** one, let me know.
Quite right. I don't know what the hell I was thinking. Helloooo! McFly!??? Still, other dealers are anywhere from 25% to 50% cheaper to trade with, depending on the pair. That's pretty significant.