I published a review of DeltaStock’s new ECN/STP platform and raised a few issues. DeltaStock responded and asked to clarify a few things. Although I have a few reservations regarding some of its comments, specifically regarding MT4 ECNs and liquidity providers, I will publish it as is.
In response to your article we would like to provide certain clarifications to the comments you have raised.
1. You have failed to mention Interactive Brokers, which is also an ECN – no smaller than Ducascopy or MB Trading. The liquidity of Interactive Brokers is generated by at least 20 banks-liquidity providers. As a matter of fact, by the example of Interactive Brokers, our ECN module integrates other ECNs as liquidity providers. By tracing the orders with them, in practice you are part of their ECN as well, which guarantees a good market liquidity. You might have noticed that we have limited the liquidity provided by Interactive Brokers up to the second level of their orderbook. The reasons for that being – first, Interactive Brokers have maximum size limit per order and second, to allow more liquidity providers to compete in our orderbook.
2. Regardless of the fact that DBFX uses the platform of FXCM, the quotes and execution of the orders are different and that can be easily confirmed when a live trading account is used.
3. If our goal were to mislead our clients about the liquidity of our ECN, that could have been easily done. Simply, we wouldn’t have shown the names of our liquidity providers in the orderbook, using the excuse that conflict of interest would have arisen, and we would have claimed that the quotes had been generated from more than 30 banks, brokers, etc. (Our price feed for fixed-spread quotes is based on the liquidity provided by a number of banks, brokers and market makers), and in the end none of clients’ orders would have been traced to any liquidity provider except to us.
In addition, if we were to mislead our clients and keep all their orders with us, there would have been no need to require a minimum and maximum order size, as are the requirements of our liquidity providers. In our case we do have a specific trading limit with our liquidity providers, which we hope to increase in time.
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The fact that the names of our liquidity providers are shown next to their dealable prices and trade quantity indicates that we are providing a transparent ECN/STP.
4. We think that the main idea of the Forex ECN is to resemble stock exchange trading as much as possible. We are not aware how the orders are executed with the technology provided by Integral, but with us, clients’ limit orders are displayed in the orderbook under Deltastock’s name. Moreover they could be placed within the spread, which actually creates additional liquidity.That defines the true ECN environment in which we act also as a liquidity provider.
5. In relation to the above, the limit orders submitted by the clients in the orderbook are immediately visible to all. Thus traders can place trade orders among themselves. That could be easily checked with other MT4 Brokers, which claim they are ECNs – you just need to place orders using two different accounts.
6. We also provide MT4 to our clients, so currently they can use its user-friendly interface and trade by using a bridge interface. We may soon allow clients’ “MT4 orders” to be executed in the ECN. However we will not release MT4 as a stand alone platform and claim it is an ECN because of one simple reason – with a true ECN, it is always possible for an order to be partially executed if there is lack of enough liquidity. It is the same way as done on the stock exchange. The MT4 platform does not allow the partial execution of orders which makes it impossible to use it in its pure form: as an ECN trading software.
7. It is our policy to work with liquidity providers which are established and well known names in the industry. Unfortunately we can add a limited number of liquidity providers, because of technological reasons. We are using STP to route clients’ orders to our liquidity providers on our behalf. Hypothetically, if we were a clearing house or stock exchange we would have been able to add a large number of liquidity providers.
8. And lastly, Deltastock is the only company offering the opportunity to clients to trade at fixed and variable spreads from one account, in one platform.. Our clients can choose whether to trade by using simplified buy and sell orders or take advantage of trading via the ECN/STP module.
I hope the above information provides a clear view of the functionalities of Deltastock’s ECN/STP module. We also tried to point out the difference between our ECN and that of other brokers – which is important to understand before making a valid assessment of the service.