FXCM Dealing Desk Accounts

Hi Folks,

I was looking into depositing a small amount for testing purposes with FXCM and of course you need to deposit a minimum of £5000 to have a No Dealing Desk account. Now 5k isn’t exactly what I’d call a small deposit to test some live strats so I was looking into the next account type down from this which requires £1000 deposit and does involve a Deal Desk.

Firstly, has anyone here created a dealing desk account with FXCM, if so how did you find it?

Secondly, I will now copy/paste word for word 2 paragraphs directly from the FXCM Dealing Desk home page which to me just sounds like, “Hey if you decide to make a dealing desk account we will just shaft you” lol.

FXCM Dealing Desk Description

[B][U]DEALING DESK FOREX EXECUTION MODEL

FXCM also offers forex execution via a Dealing Desk execution model. In this model, FXCM’s compensation may not be limited to our standard markup and our interests may be in direct conflict with yours. FXCM faces market risk as a result of entering into trades with you. FXCM may take steps to mitigate its risk arising from market making more effectively by, at our sole discretion and at any time and without previous consent, transferring your underlying account to our NDD execution offering. FXCM may also choose to transfer your account to our No Dealing Desk (NDD) offering should the equity balance in your account exceed the maximum 20,000 currency units in which the account is denominated. Account equity is defined as the balance of your account plus the floating P/L of your open positions.

Dealing Desk execution and trading is not conducted on an exchange. FXCM is acting as a counterparty in these transactions and, therefore, acts as the buyer when you sell and the seller when you buy. As a result, FXCM’s interests may be in conflict with yours. Unless otherwise specified in your written agreement or other written documents FXCM establishes the prices at which it offers to trade with you. The prices FXCM offers might not be the best prices available and FXCM may offer different prices to different clients. If FXCM elects not to cover its own trading exposure, then you should be aware that FXCM may make more money if the market goes against you. [/U][/B]

So yeh… doesn’t really go down very well for me lol.

Let me know if any of you have had previous experience trading with this type of account on FXCM.

Thanks,
Steven

Hi Steven,

With dealing desk execution (AKA market maker execution), your broker acts as the buyer when you sell and the seller when you buy. Therefore a dealing desk broker faces market risk as a result of entering into trades with you. A profit for you could mean a loss for your broker or vice versa. For this reason, some market makers may use dealer intervention practices such as requoting their clients or widening spreads excessively, but FXCM does not resort to such dealer intervention practices. That’s because while FXCM provides dealing desk execution to Mini accounts ($50 minimum opening balance), something which differentiates us from many other forex brokers with a dealing desk is that we also provide No Dealing Desk (NDD) execution to Standard accounts (5k minimum) and Active Trader accounts (25k minimum).

On the NDD model, FXCM offsets each client order one-for-one with the best prices from competing liquidity providers. That means, we don’t take the market risk on the side of client trades. Therefore, we don’t profit from client losses, or lose from client profits. Furthermore, competition between our liquidity providers ensures NDD prices are market-driven and fair:

It’s worth noting FXCM uses the same base price for dealing desk execution on Mini accounts (before adding the spread markup) as the base price we use for our NDD execution (before adding the commission). If you are trading on dealing desk execution and your trading style exposes us to more risk than we’re comfortable with, FXCM may, at our sole discretion and at any time, change your execution type to NDD. This is how FXCM can comfortably offer both execution options without having to resort to dealer intervention practices such as requotes. That’s a key reason you can have confidence trading with FXCM regardless of the account type you choose!

Hi Jason,

Thanks for the reply and for further explaining the process with FXCM, much appreciated.

So just to clarify, do the dealing desk accounts come with fixed spreads? and if the broker feels the move is risky he/she does not increase the spread they just pass along to the NDD model?

Regards,
Steven

Hi Steven,

As mentioned above, FXCM uses the same base price for dealing desk execution on Mini accounts (before adding the spread markup) as the base price we use for our NDD execution (before adding the commission).

That means the only difference between the Mini (DD) spreads and the Standard (NDD) spreads is the fixed pip markup that’s added to the Mini spread instead of commission. That’s because no commission is charged on Mini accounts, while Standard accounts pay a separate commission on top of the spread.

NDD spreads are variable, because they are based on the best bid and ask prices available from competing liquidity providers at any given time. Competition ensures NDD prices are market-driven and fair.

That’s why we also base our Mini account pricing on the same NDD feed and just add a fixed markup. Since the NDD spreads are variable, so are the DD spreads which are based on the NDD feed.

By contrast, if another broker promises you a fixed spread, they will have to manage their market risk in some other way, possibly by requoting your orders at times. There are no requotes with FXCM regardless of the account type you choose.

If you have additional questions about us, please feel free to reach out to me in the Broker Aid Station.

Hi guys, dont mean to hijack here, would it be correct to assume that the mini account is more aimed at new traders, therefore less profitable and presenting an opportunity to take the profitable side of the trade before sharing that opportunity with the market place?

And by the same theory if a trader becomes consistently profitable then you would switch his account to NDD to mitigate risk for fxcm?

Welcome to the forum, TheSpeculator2017, and great questions! :slight_smile:

You are right to consider the potential conflicts of interest which can exist with dealing desk (DD) execution, and it also important to note how FXCM innovated transparency in the forex market with competitive and market-driven No Dealing Desk (NDD) execution to address such concerns. The fact is we would love to provide NDD on all accounts, and actually did so in the past.

Even now that we offer both NDD and DD account types, the bulk of our revenue still comes from our highest volume traders on the NDD model. However, in running the numbers, we found that below the 5k balance threshold, it is hard for us to recoup in commissions the fixed costs that go into providing customer support for any account.

Therefore, the purpose of providing DD execution to Mini accounts is not to target new traders as much as it is to provide service to smaller accounts in the most cost effective way. It’s worth noting that many experienced traders start with a small balance to test our service before investing more money, and as mentioned in my previous post, FXCM uses the same base price for both execution models with the key difference being that NDD accounts pay a separate commission while DD accounts pay a fixed pip markup added to the NDD spread.

From a risk management standpoint, an another benefit of the DD model is how it allows us to offer traders (with a balance below the Mini account maximum of 20K) the option of using more leverage than the 100:1 cap we set for all NDD accounts (with exception of US accounts which are limited to 50:1 leverage by CFTC regulations).

Contrary to popular belief, the key reason we would switch an account from DD to NDD is not because a trader is profitable but rather for risk management purposes. While our DD model is equipped to handle many profitable strategies comfortably, some unprofitable traders present risk management challenges which are a better suited to our NDD model. For example, Mini accounts with a balance above 20K can be switched to NDD for risk management purposes even in cases where a trader is unprofitable.