Dealing Desk Option Arrives To FXCM US
After announcing in August that it would reinstate Dealing Desk accounts alongside its existing No Dealing Desk offering, FXCM stated
After announcing in August that it would reinstate Dealing Desk accounts alongside its existing No Dealing Desk offering, FXCM stated that the new program would allow them to offer tighter spreads for clients. Although the broker had mentioned in August that the NDD offering was the default service, FXCM websites have wasted no time to begin highlighting the features of the new Dealing Desk accounts by promoting their lower spreads.
The changes first hit FXCMs Australian website FXCM.COM.AU and then a little later the FSA regulated FXCM.CO.UK entity. Notable though was the lack of the dealing desk offering appearing in the NFA licensed FXCM.COM website. However that has currently changed with the US entity now currently promoting its Low Spread dealing desk accounts.
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In Forex Magnates’ recently published 3rd Quarter Report, we wrote about the differences of a Market Making vs ECN model and the pros and cons of each business plan for brokers. The article also touched on why regulation or size of a company may be an important factor in the decision process. In FXCMs case, being a public company has brought on a new set of parties to please; shareholders. As such, in the same way that Facebook’s moves have been more influenced by bottom line results, the same forces are affecting FXCM. To counter, FXCM continues to pursue its “Full Transparency” mantra. So far this plan appears to be working as there has been very little if any uproar from forex chat rooms and broker review sites about the changes taking place in FXCM.
Interesting that they did this after making such a big deal about NDD. I wonder how it’s going to play.
FXCM’s entire marketing and sales pitch was to bash dealing desk brokers. Which is why many uneducated traders moved their accounts over there. I wonder what FXCM is telling them now…
@ David – very simply “spreads are lower” – and if anyone complains, they still have the NDD option. They’ll most likely go for the angle of “we offer whatever you want, so that’s the best for clients”
@David & @BrokerMarketing: While FXCM still does recommend NDD as the best execution method for our traders, CEO Drew Niv mentioned in the last quarterly earnings press release that the new offering will target small retail customers, an area we have not been traditionally strong in where the agency model has less of an impact. For the smaller retail traders that focus on spreads, we set out to find a solution and believe this will be the optimal solution which we can offer in a very transparent and fair environment. The price feed on the DD option is the same… Read more »
Is it possible for the DD to have nano lots or smaller? (100 units of base currency)
Similar to how IBFX and other brokers have mini/micro accounts where the trader can trade smaller units. I think this is important for traders who the maximum account balance should have the option to trade smaller lot sizes to take advantage of position sizing.
Heck, Oanda goes down to 1 unit of base currency, although not on mt4. If they did, it would be interesting to see how the order flows then.
@Jon: the smallest forex lot size with FXCM is 1k micro lot regardless of the execution type chosen.
I think you should offer 100 units of base currency, at least for your dealing desk model. Why not take advantage of the ability to offer smaller lot sizes?
@Jon – need to take into consideration how the platform was created. If it wasn’t set up to allow for 100 unit trades then changing it to allow it can be a mess. Oanda is different since they rolled it out that way from the beginning. If you want a great example – professional equity platforms trade in 100 share minimums (less than that you have these odd-lot rules that apply for the pros). But, with berkshire hathaway trading in the tens of thousands of dollar, you could buy 10 shares at a time. But, some platforms automatically would create… Read more »
Ron,
It’s as easy as moving the decimal over. IBFX Au, InstaForex, XeMarkets, and other mt4 brokers have done this successfully. You can have different type of accounts to handle the 0.01 minimum lot sizes imposed by mt4/mt5 or whatever platform you are using. The broker is making the market, so its a matter of how their backoffice software handles it.