I’m aware CMC Markers CFD is a Market Maker…except I am confused because the website states
“Automated execution with no dealer intervention”
Are Market Makers using a different technology for Robots? I thought Market Makers are Dealing desk?
Their use of “…no dealer intervention” means that they stream prices directly from their liquidity providers (LPs) and not just simply using the prices to “inform” them of what price to quote you.
They’re implying that their trade execution process is entirely automated so they neither have control over the selection of the best available price from their liquidity pool nor do they manually intervene to alter prices that are streamed to their trading platform.
They are still a market maker because even though they didn’t manually create a quote for you, they are still your direct counterparty and take the opposite of your trade (assuming your order can’t be matched by another client’s order).
This doesn’t necessarily mean they’re “trading against you”. They could hedge your trade (along with others) depending on their risk controls.
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Hi @ForexGump, do you mean that they are still a market maker because they direct the clients’ orders to their LP which is the real market maker?
I didnt know that a Broker could be a Market maker and not to have a Dealing desk at the same time.
@ForexGump Thank you for the info. I will do my proper researches.
The term “market maker” simply means that they always offer both a bid and an offer price. In this way they are making a market in whatever instruments they deal in.
There are various ways in which they can determine the level of their own bid/offers based on the underlying pricing they are receiving from their LPs.
They are a market maker because they are the ones providing liquidity to you.
They are always ready to quote you a buy and sell price upon request. As a market maker, they provide immediacy (no need to search for a counterparty).
For retail FX traders, there is no such thing as your orders being “directed to an LP(s)”.
Your trading platform is always your principal, meaning they are your counterparty. Your orders are always executed with your trading platform. (Notice how I saw “trading platform” and not “forex broker” because they are not brokers…they are dealers.)
Retail traders are unable to access the interbank market because they do not have credit connections that are needed to trade directly with the LPs.
Some retail forex trading platforms use an algorithmic trading system(s), a computer program that makes markets to their customers and competes with their third-party LPs. Which is totally fine as long as pricing is similar to prevailing market rates AND your orders are executed at these prices quickly and with no (or positive) slippage.
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Hmm, that sounds interesting. But why would they do that when they already stream prices from the LPs and route orders to them? Is it because they could make some additional earnings? With positive or without any slippage this is highly unlikely. Or they count on the generated commissions?
CFD stands for contracts for difference. No need for a dealer, the trading platform is the dealer and the traders are the executors.