Rumour that what you see is not what you get?

Discussion in 'Forex' started by icebergorder, Apr 18, 2006.

  1. Hearing rumours that on one of the big platforms they are taking a cut on the rates without telling the banks?

    Unlike some where they tell you its free of commission but rate is spread..they apparently charge a fee but still spread the rates and dont tell you they are doing it....

    does it really matter if people are dumb enough to trade on their rates in the first place? ...
  2. RedDuke


    Most (all that I know off) forex market maker shade prices. Some doing to a very small degree, so it is Ok to trade with them.
  3. Thats true but I think the market obligation is to actually advise your clients your are doings so...i.e most retail platforms will print up front ...3 pips spreads no commission and then they tell you in the small print that they are taking a cut on the this case I hear they are not telling the clients they are spreading the rates...
  4. RedDuke


    I "love" hearing this no commission bs. In fact forex is one of the most expensive products to trade. Most of futures have 1 tick spread today and you pay rt commission, which can be negotiated if you do volume. With forex, some of the brokers charge you 5 pip spread on majors like sterling and swissie, which means that you are 5 ticks in red to begin with. Thankfully the spreads are coming down and some platforms offer 1.5 on eur, but sterling still has 3 pips spread, and these costs add up. On top of it you have a non regulated environment, but there are some forex MMs who at least not manipulating the prices a lot and do not spike up/down individual clients.

    My next favorite myth is liquidity 1.5 trillion and so on. This liquidity does exist, but it only exists in intra bank market, which is not accessible to retail traders. What happens in reality MM matches buys and sells within the house and then hedges itself if needed in order not to be exposed to market risks.

    It took me over a year to realize all inner workings of forex market. My original endeavor in forex was due to the fact that I have 9-5 job and wanted to trade during night to learn the markets and accumulate grub stake for full time trading. Then I realized that the same can be achieved with futures (currency and others), they are cheaper and regulated. I primarily trade DAX right now.
  5. I'll never understand why anybody trades cash FX unless your last name is Soros, Jones, etc... There is a transparent, fair FX market at the CME that is inline with cash tick for tick. Is it so you can tell your friends you trade cash FX?
  6. Chood


    Agree. Good comment.

  7. jm73


    Would you switch to spot if it becomes regulated as future?

    I think many future traders would due to more liquidity.
  8. RedDuke


    My point exactly. It is the same movements as forex, but with all benefits of CME regulation, and it is cheaper.

    If there is ever going to be a central currency exchange than I am sure that a lot of people will trade there, but it means that all banks world wide will be exchanging currencies in one giant place. I do not think it will happen in near future. That is why I try to explain the benefits of CME currency futures if one only want to stick to currencies. But you’ll be surprised how many people are too stubborn to realize it and do not even want to listen.
  9. jm73


    But isn't it hard to trade big size with future due to the lack of liquidity?

    Is trading 50 lots in future possuble without partial fill?
  10. RedDuke



    CME 6E tick value is $12.5, so 50 lots is $625 per tick. This is equivalent to appox. 62 standard forex lots. I personally do not know anyone who trades such large size in forex, and very curious about execution on large size forex trades. Based on what I read, it should be Ok, and I asked many times if someone trades over 30 standard lots constantly, but got no replies. I received an answer from Michael Stumm (one of oanda owners), that 10K or 10 MIL will be treated the same, but the question remains will it be?

    Would you feel comfortable to trade at $600 per tick, knowing that there is no central exchange and that you are at the mercy of your market maker, who can produce a spike and take you out (you'll be surprised but some MM even put it in their agreement that they can quote different prices to different clients at the same time)? I definitely would not.

    #10     Apr 21, 2006