I have a question? i trade forex on ecn platform i pay a commissions, thats how my broker say they make there money on commissions they have 11 liquidity providers i can buy with one bank and sell to another and vice versa. my broker collects the spreads. so who gets the spread?
The banks but i would not be surprised if the banks pay something back to the ecn company based on volume put through...
thats true my broker do get kickbacks, if the banks get the spreads do they split the spread if im buying with one bank and selling to another?
I am a representative of FXCM. If you are trading on a multi-bank platform, then no single bank can "get" the spreads, as you will buy from and sell to various banks over time. The prices you see quoted on the platform are simply the prices each bank is willing to fill you at for a given amount at a given time. The bank you trade with holds the risk of what happens if you buy a substantial amount of currency from it and that currency starts to fall in value. Banks constantly adjust the prices and the amounts of currency they will fill you for so that, over time, they can make money buy buying from traders at a lower price, and selling to you at a slightly higher price. Not all multi-bank platforms are alike by any means. The size of the firm who sets up the platform determines the quality of credit relationships that exist with banks, who are the ones providing the prices/size you see on the platform. Larger firms have better relationships with banks and therefore can access superior pricing which can be passed on to the end user. If you are looking for a professional platform, I would recommend that you also consider issues like which banks are feeding through prices to the platform, how much liquidity the platform tends to show at a given time (i.e. how much size is quoted on the platform), the size and consistency of the spreads on the platform, the anonymity available on the platform, and the like. FXCM's size has enabled it to offer what it feels is a superior multi-bank platform, through PropFX.