Could someone explain me the difference between multi-dealer platform (hotspot, currenex, fxall) and retail aggregator (fxcm, oanda, gain, saxo)?
If I’ve understood correctly, currenex et al provides a platform/network to connect brokers to various liquidity providers (e.g. banks) and to aggregate these LPs into a single pool? I assume a broker wanting to use currenex would still need to sign contracts with all LPs he wants to deal with in addition to currenex, after which currenex handles the connectivity? Would the broker need a prime broker contract with a bank as well to deal with multiple LPs?
How would a retail aggregator compare with a multi-dealer platform? Are retail aggregators just market makers using an ECN such as currenex?
This is exactly the case, and actually in some instances these aggregators just fabricate an ECN environment for the end client (the retail trader) - whilst very much still operating as a market maker business model.
Direct access to to the likes of Currenex, as you also quite rightly said, is through a True ECN account - very different to a fabricated ECN environment.
A big problem that retail traders face today is that they assume [incorrectly, and by no real fault of their own] that a broker who states that they offer spreads from 0 pips, commission per trade on both sides and operates an ECN environment MUST be true ECN broker; the reality is that it’s very rarely is a multi-dealer platform, and most certainly is always a market maker [[I]or a wolf dressed as a sheep[/I]]
I suppose the biggest tell tell sign of a True ECN account would be a minimum deposit of at least $10,000 USD - If I was given the option to open an account with less than this amount I would be very very cautious.
True ECN accounts are where the big boys and girls go and play…