FX is coming home Everyone seems to know the score Do a trade and then punt some more, They just know They're so sure That NFA's gonna Throw it away Gonna blow it away But I know they can play Cos' I remember 33 FX retail brokers, Some punters got a reaming Some of them were jokers, Never stoppped me dreaming http://www.euromoneyfix.com/Article.aspx?ArticleID=2217083
excellent post. Yes. Fx dealers will all be shuttered by 2011. Just like the buckets of yore. They will be force to move offshore some degenerate gambler types will keep with the 3rd world style gambling houses but most will migrate to futures
Most will migrate to futures? Yer 'avvin' a 'kin larf, ain't yer? The self-proclaimed pomposity of the FX futures industry has amazed me for around 25-years. As if there are no sharks or charlatans in futures. Market is big enough for futures and OTC and in fact, the dependence of futures on OTC is far greater than the dependence of OTC on futures. If the big banks hadn't decided to stream to CM back around 2000, the FX futures industry would have died. The so-called new breed of market makers can only make markets when they know what the price is on EB/Reuters or bank portals.
Futures are a horrible comparison and alternative to the spot FX market. The major FX crosses are so illiquid in futures they might as well not even exist and the lot sizes and margin requirements are higher also. I realize that the CME is coming out with smaller lot sizes with their micro sized futures, but these have a ways to go yet and there are also no crosses, the last time that I checked. So futures are not a viable option for many in this industry.
Yes, I realize you can spread the futures or make synthetic crosses, another words. But this requires much more margin and has higher transaction costs. Obviously you would have to pay twice the margin with this set-up, when compared to spot crosses. Plus with the spot rates form a dealer, each trade is prepackaged and gives a pip cost, as opposed to figuring all this out for each trade involving a cross. Sure I could create my own formulas through a spread sheet for each synthetic cross, but this is way more cumbersome then just using a spot dealer. Not to mention charting the crosses is also easier through the spot market. So, there are several reasons why I would still prefer spot over futures any day of the week, with or with out a centralized exchange.
The futures industry have tried so many times to break into fx and have failed every single time. Why would a bank put up margin to trade when they can deal spot with no margin for a start? Not exactly effective use of capital. As for calulating forward points -please - the only thing you want to know is "mine" or "yours" not what some cock dated forward point is. I dare say that the two markets have different cultures as well. Speak to a futures trader and see how many take great store in volume - both lots traded at a certain price and also how many on the current bid or offer etc. In fx world volume its barely worth a mention (although if the spot cable dealer at JPM wants to send me a PM next time he has a juicy order on the go I will treat it with confidence) The recent CME/Reuters experiment failed as have every one before it - who can remember the "rolling spot" contract that was the next big thing? The liquidity and depth of market is shocking in fx futures and although it may happen eventually not in the foreseable future.
I seriously doubt that they would ever pass this I don't see enough support behind especially with the recent rising popularity of forex not only from newbie traders but also more experienced traders from other trading products What they're proposing isn't even as much as basic margin for stocks This has essentially no probability of passage imo