[I]Forex Magnates[/I] reports that:
• FXCM’s purchase of FXDD’s U.S. retail client base is a done deal,
• FXDD’s purchase of Boston Technologies (developer of MetaTrader) is very likely.
[I]Forex Magnates[/I] also reports recent substantial contractions in FX trading volumes (futures and/or spot) at:
• Chicago Mercantile Exchange (CME Group)
Wow! FXCM is consuming a big fish. if it continues we may have only one broker in the US…lol. BTW, I hope FXDD retail operations can offer FXCM major clues on how to further improve its own retail business model.
We’re always looking to improve. Do you have a specific suggestion?
Thanks Jason for inquiring.
As I understand, FXCM provides one of the most versatile products in the market and I am also impressed by the variety it offers to its retail clients. However, I must say that the only and probably the foremost concern of retail traders is regarding volatility of spreads on FXCM platform. Talking from the perspective of US clients, I am always told that the number one reason to switch from FXCM is spreads.
Spreads Fluctuation on FXCM & Retail Trader
In this regard, I strongly feel that because of fluctuation in spreads, most retail traders start to believe in stop-hunting etc. Its a common misconception about FXCM on review websites, which mostly originates from spread fluctuation instead of speed of order execution and percentage of execution etc. Therefore, it is very unfortunate that FXCM sometimes get penalized, gets low ratings, from retail traders who are sometimes limited in their understanding of the back-end operations.
FXCM and FXDD
As retail traders mostly trade short-term or scalp, this means they are bound to get hit when spread widens resulting in their assumption that FXCM did something wrong (such as stop hunt etc). In comparison, I found FXDD (FXDirectDealer, LLC) spread to be more consistent. I am not going to start yet another debate on liquidity and problems dealing with US regulations as you know better than me. However, I would really like to see FXCM improve their spreads (make it consistent like FXDD) to regain the reputation they truly deserve.
Improvement
For example, FXCM introduced the STP model, which is also reassuring in a marketing sense. I also know that FXCM has the technology to implement powerful products (synonymous with retail) such as its collaboration with FastMatch etc. Look, if FXDD can provide ECN like solutions on its Powertrader and Vikingtrader, then FXCM can offer even better technology without relying on third parties such as CUrrenex.
Overall, I may sound like dumb but most retail traders worry about spreads because of their trading styles and consistent spread fluctuations (instead of tight spreads) making them assume that there is something fishy on part of the broker, Hence the “Unjustified” low ratings for a broker that tries to do its best.
Thank you for sharing your thoughts, Umaf
FXCM’s spreads reflect the prices we receive from 10+ liquidity providers which include several of the largest banks in the world. Fluctuations in these spreads such as widening during news events are a reflection of the market conditions.
If another broker’s spreads don’t accurately reflect these changing market conditions, it could be a sign their dealing desk is taking the market risk of offsetting client orders at prices that aren’t available in the wider market. The risk that comes from such an approach could explain why several dealing desk brokers have had to close their operations in the US. Such brokers may even try to manage their risk by re-quoting orders placed by their clients. There are no re-quotes with FXCM.
Spreads are important, but they are just one factor out of many to consider when choosing a broker along with quality of trade execution, 24-hour customer support, trading platforms offered, charting, educational resources and safety of funds.
It’s no secret that the brokerage industry has been in the midst of a price war for the past couple of years. That combined with lower trading volumes over the past couple of years have caused many brokers to struggle. There was even a broker in Europe that went bankrupt in 2012 after trying to entice clients with 0 pip spreads. That year also saw the failure of a US broker that had previously touted their razor thin spreads. Just recently an Australian broker went bankrupt as well.
If recent events have taught us anything, it’s that the financial stability of the broker you choose can have huge implications. Unfortunately, the vast majority of forex brokers are privately held companies, so it’s hard to know the state of their finances. Are they profitable, or are they barely staying afloat? How can you know whether they are safe place to keep your money?
All traders need to ask their brokers the following questions regarding their financial stability.
[ol]
[li][B]What are your revenues?
[/li][li]How profitable is your firm?
[/li][li]Do you have a top-tier third party accounting firm auditing your financials?[/B]
[/li][/ol]
In this context, FXCM’s longevity and continued growth is validation from our clients of the value they see in our pricing which is both competitive and sustainable. As of the latest financial data, traders have entrusted FXCM with $1.191 billion in client funds.
Thank You Jason,
Offsetting client positions taking additional risk is definitely a food for thought for many of us who like to explore the spread issue. Honestly, I almost forgot that this is also the reason for tight spreads. You’re also right about financial stability. Thanks for explaining. At least, I can start exploring this topic in greater detail.
More broker news from [I]Forex Magnates[/I] —
The NFA files charges against [B]FXDD,[/B] related to [U]retail[/U] forex transactions, [U]after[/U] FXDD’s exit from the retail forex business.
As [I]Forex Magnates[/I] describes the situation, “Staying truthful to the commitment to destroy the US retail foreign exchange market, the NFA is not skipping this last opportunity to slap a hefty fine on FXDD”.
Exclusive: NFA Issues a Complaint Against FXDD, Raising Allegations on Five Counts | Forex Magnates
The Chinese news media (most likely in cooperation with the Chinese government) accuses [B]IronFX[/B] of fraud and illegal operations in China.
FXCM Acquires Retail Trading Accounts from IBFX’s Australian and US Firms | Forex Magnates
[U]From the [I]Forex Magnates[/I] article[/U] —
“IBFX, an entity within the Monex Group, will sell its retail MT4 accounts under its US and Australian firm to FXCM. The migration is expected to take place by the end of September.”
“According to the official press notification, FXCM reported that it will be acquiring approximately $63 million in client equity and 13,000 accounts.”
“FXCM is yet to report its August operating metrics, however, using July figures as a benchmark, the inclusion of 13,000 accounts will take the total number of trading accounts to 214,794 (estimated).”