Breaking: FXCM Australia Introduces Raw Spread Forex Pricing Model
by
George Tchetvertakov
The new raw spread and commission model introduced by FXCM aims to reduce retail trading costs by more than 50%. The switch underlines just how compressed FX pricing has become in a fiercely competitive market.
FXCM, one of the world’s largest retail brokers, has announced that its Australian branch, FXCM AU will be introducing a proprietary FX pricing model which will allow the broker's range of platforms to display raw spreads being received from Liquidity providers. The reduced spread structure is compensated by a separate commission charge paid on each trade. The move to a commission-based structure reflects an industry trend where clients prefer to see raw spreads and pay commissions separately.
FXCM claims that “trading costs could be reduced up to 50% when compared to previous typical spreads”. When looking at specific currency pairs, the new pricing model introduced by FXCM claims to reduce the visible spread by over 2 pips on all major pairs.
For AUD/USD, FXCM’s typical retail spread is currently 2.5 pips, but under the new pricing structure, that spread falls to 0.4 pips with the client being asked to pay $3 per 100,000 traded. Spreads on EUR/USD will now be reduced from 2.5 to 0.2 and USD/JPY falls from 2.3 to 0.3, although $4 commission fees apply for every $100,000 traded.
Of note is the fact that FXCM AU charges clients on a 'per side' basis. This means clients must pay $3, $4 or $6 (depending on the currency pair) per side, with clients consequently paying $6, $8 or $12 total commission per 100,000 or $60, $80 or $120 per million.
FXCM Managing Director, Jessica Beckstead said: “We’ve received overwhelmingly positive feedback on our new pricing model in regions we’ve already rolled this out” and explains FXCM’s move as a response to the positive feedback received in other territories. As recently as late September, Forex Magnates reported that FXCM had introduced raw spreads and would operate under an 'agency' model in the United States.
In a press-release, FXCM announced that “Starting today new clients signing up for a live or demo FXCM AU account will see raw spreads from one of our 14 Liquidity Providers”. The broker added that “eligible live clients will be upgraded automatically after the close of trading on Friday, 24 October”.
In addition, FXCM UK has initiated a new retail FX pricing model as well. FXCM UK platforms will be yielding client-trading costs up to 50% relative to previously offered spreads for the top 14 currency pairs. The new pricing is also slated to become eligible on Friday, 24 October.
In Context
The new pricing model should be put in context when contrasted with FXCM's 'compensation' policy.
On its website FXCM states: "When executing customer trades, FXCM can be compensated in several ways, which include, but are not limited to: charging fixed lot-based commissions at the open and close of a trade, adding a markup to the spreads it receives from its liquidity providers for certain account types, and adding a markup to rollover. Under the Dealing Desk execution model, FXCM may act as a dealer and receive additional compensation from trading".
The statement effectively means that the raw spreads being provided by FXCM could be amended accordingly depending on the firm's commercial decisions, hence clients would be paying a mark-up (spread) and a commission to follow. The question of broker discretion dependant on market conditions still stands - so although FXCM are introducing a new pricing model, the same market intricacies apply.
FXCM, one of the world’s largest retail brokers, has announced that its Australian branch, FXCM AU will be introducing a proprietary FX pricing model which will allow the broker's range of platforms to display raw spreads being received from Liquidity providers. The reduced spread structure is compensated by a separate commission charge paid on each trade. The move to a commission-based structure reflects an industry trend where clients prefer to see raw spreads and pay commissions separately.
FXCM claims that “trading costs could be reduced up to 50% when compared to previous typical spreads”. When looking at specific currency pairs, the new pricing model introduced by FXCM claims to reduce the visible spread by over 2 pips on all major pairs.
For AUD/USD, FXCM’s typical retail spread is currently 2.5 pips, but under the new pricing structure, that spread falls to 0.4 pips with the client being asked to pay $3 per 100,000 traded. Spreads on EUR/USD will now be reduced from 2.5 to 0.2 and USD/JPY falls from 2.3 to 0.3, although $4 commission fees apply for every $100,000 traded.
Of note is the fact that FXCM AU charges clients on a 'per side' basis. This means clients must pay $3, $4 or $6 (depending on the currency pair) per side, with clients consequently paying $6, $8 or $12 total commission per 100,000 or $60, $80 or $120 per million.
FXCM Managing Director, Jessica Beckstead said: “We’ve received overwhelmingly positive feedback on our new pricing model in regions we’ve already rolled this out” and explains FXCM’s move as a response to the positive feedback received in other territories. As recently as late September, Forex Magnates reported that FXCM had introduced raw spreads and would operate under an 'agency' model in the United States.
In a press-release, FXCM announced that “Starting today new clients signing up for a live or demo FXCM AU account will see raw spreads from one of our 14 Liquidity Providers”. The broker added that “eligible live clients will be upgraded automatically after the close of trading on Friday, 24 October”.
In addition, FXCM UK has initiated a new retail FX pricing model as well. FXCM UK platforms will be yielding client-trading costs up to 50% relative to previously offered spreads for the top 14 currency pairs. The new pricing is also slated to become eligible on Friday, 24 October.
In Context
The new pricing model should be put in context when contrasted with FXCM's 'compensation' policy.
On its website FXCM states: "When executing customer trades, FXCM can be compensated in several ways, which include, but are not limited to: charging fixed lot-based commissions at the open and close of a trade, adding a markup to the spreads it receives from its liquidity providers for certain account types, and adding a markup to rollover. Under the Dealing Desk execution model, FXCM may act as a dealer and receive additional compensation from trading".
The statement effectively means that the raw spreads being provided by FXCM could be amended accordingly depending on the firm's commercial decisions, hence clients would be paying a mark-up (spread) and a commission to follow. The question of broker discretion dependant on market conditions still stands - so although FXCM are introducing a new pricing model, the same market intricacies apply.
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Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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