How do market makers work? - Page 2
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  1. #11
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    Apr 2007
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    I'm having a hard time understanding this whole "dealing desk" business. I'm used to centralised markets like stocks and such. Can these dealing desks manilpulate prices at your broker's platform, and make prices move in ways that diverge from those at other platforms?

  2. #12
    Join Date
    Jul 2007
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    Quote Originally Posted by kingen View Post
    I'm having a hard time understanding this whole "dealing desk" business.

    I'm used to centralised markets like stocks and such. Can these dealing desks manilpulate prices at your broker's platform, and make prices move in ways that diverge from those at other platforms?
    If you're wishing to trade currencies on a par with the experience you associate when trading stocks & indices etc, then just trade the currency futures @ the CME.

    When you're trading retail 'spot' - unless you're striking thru an ECN such as Hotspot, EFX etc or via a Prime Broker outlet, then you're punting via the deal desk of the broker who has your account.

    He has the potential to shade his prices & bias his book to take out near term stop levels sitting on his triggers. He can also refuse to honor his bid-ask quotes if he feels it suits him (by re-quoting you).

    He can do all this & more because he's not operating from a centralized exchange, unlike the Futures Exchange clearing house.

    He receives his prices (bid-ask numbers) from his supplier(s) & adds whatever he likes on top as his take, therefore inflating the price of the wholesale feed.

    Dependant on who his supplier(s) is/are, & their ongoing liquidity at varying points throughout the day, will reflect in the quality of service cascaded down to his customers...ie: you!

    Basically, he do can what the hell he likes, when he likes...as you're trading with him (the broker), not directly with the market.
    Last edited by Tess; 08-26-2007 at 07:56 AM.

  3. #13
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    Aug 2007
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    Market maker - Wikipedia, the free encyclopedia
    The wikipedia description of a foreign exchange broker gives it away slightly.

  4. #14
    Join Date
    Apr 2007
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    74
    Quote Originally Posted by Tess View Post
    If you're wishing to trade currencies on a par with the experience you associate when trading stocks & indices etc, then just trade the currency futures @ the CME.

    When you're trading retail 'spot' - unless you're striking thru an ECN such as Hotspot, EFX etc or via a Prime Broker outlet, then you're punting via the deal desk of the broker who has your account.

    He has the potential to shade his prices & bias his book to take out near term stop levels sitting on his triggers. He can also refuse to honor his bid-ask quotes if he feels it suits him (by re-quoting you).

    He can do all this & more because he's not operating from a centralized exchange, unlike the Futures Exchange clearing house.

    He receives his prices (bid-ask numbers) from his supplier(s) & adds whatever he likes on top as his take, therefore inflating the price of the wholesale feed.

    Dependant on who his supplier(s) is/are, & their ongoing liquidity at varying points throughout the day, will reflect in the quality of service cascaded down to his customers...ie: you!

    Basically, he do can what the hell he likes, when he likes...as you're trading with him (the broker), not directly with the market.
    Ok, that sounds fun... How will this affect you if you trade like once a day. Will they try to shake you down to your stops, or stuff like that?

    So, it is not in the interest of a DD broker that you trade profitably?

    Damn, this sucks. *frustrated*

  5. #15
    Quote Originally Posted by superdupe View Post
    Do they just create a buffered market between their own traders or are they part of the wider FX market and simply act as go-betweens?

    Do they look at who is long and who is short before accepting a trade?

    Do they hold prices until they are in profit themselves?

    I ask because I was in a trade and the price moved very nice in my direction on my chart but on my platform it only moved a couple of pips. My chart is provided by a different company from my broker and I was just wondering if this discrepancy was normal? Why would there be such a lag?
    Hi superdupe,

    I think you'll find this article useful, it explains in details how the forex market makers work.

    Article
    p.s don't mind the affiliate link there.

  6. #16
    tymen1 is offline Banned FX-Men Honorary Member
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    Mar 2007
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    Perth, Western Australia
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    Informative, Sir Forex.

    Straight to may favourites.

    Regards, Tymen Wortel, Perth, Western Australia.

  7. #17
    Join Date
    Aug 2007
    Location
    UK
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    1,466
    Prices are jogging along handsomely, everything looks nice & calm on the sea then all of a sudden...Bang! prices skip 10-15 pips (or more) on a suspected rogue spike. A whole stack of lovely bright stops & related orders are triggerd & a few angry folks begin meticulously leafing thru alternative data feeds to suss out this strange peculiarity.
    Thanks again Tess, I was always under the impression that this
    happened, but I always put it down to my paranoia, even though
    others have made the same sort of comments.

    I feel though until I am in a position to make a change to ECN?? etc.,
    with a larger bank roll, I will learn all I can here at the bottom then make the change.
    Last edited by daydreamer65; 08-27-2007 at 08:05 AM.

  8. #18
    Join Date
    Apr 2007
    Posts
    74
    OMG, this is so F#%@& irritating. I am sitting on the blueprints of what looks to be a very consistent and profitable EA, that Coder's Guru said he will code for me.

    Damn those dealing desk bastards.

    Is there any none-dealing-desk broker that offers "EA"'s or similar services? I've heard that MBT/EFX was trying to create a partnership with MQ, but the Metaquotes people rejected or somethink like that.

    I NEED a serious automated trading service.....

  9. #19
    Quote Originally Posted by tymen1 View Post
    Informative, Sir Forex.

    Straight to may favourites.

    Regards, Tymen Wortel, Perth, Western Australia.
    No problem,

    Glad I could help.

    regards,

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