Real A-Book Brokers
- Thread starter semsem86
- Start date
It's good that you recognize the marketing terms used by most retail brokers.. since they only apply very loosely in a technical sense to the broker's offering.
The hard reality is any broker offering MT4 simply can't provide an "ECN" in the sense of what you are looking for.. the archaic MT4 platform needs the broker to run a quote engine... and even with server side "add-ins" that let brokers emulate an BBO style book of quotes from their LPs, the experience you will have is not the same as actually trading on an electronic exchange with peers competing for prices (live auction market.)
The industry as it is comprised creates a few major limitations in striving for a proper ECN environment.... You have to keep in mind, spot FX is a decentralized and "made" market (as in market maker based.)Even with the shift from phone brokering (a-la the 70's-90's where most of the volume was turned in relationship based with a bank's currency desk directly,) to electronic trading as we see it today... it's still a "made" market where the LPs have direct deal terms with the vendors and brokers who contract with them. This is where we see things like "last look" on deals and other protections for the LP that would be incompatible with an ECN type environment.
So with this in mind, there are a few venues where we inch closer to an ECN in practical terms:
On the retail accessible end, LMAX runs their own order book and matching engine where brokers act as MM's quoting on the their exchange. Interactive brokers does the same... both allow you to interact with the order book and even hit other client's resting orders so it's as if you're trading on a public exchange. However, both are limited in scope to just the precipitants on their network... and both have MM/LPs who, with the more inflexible terms of their platform, might not quote as much liquidity/size when market conditions get dicey (think slippage..)
Another alternative is trading with a futures broker and using currency futures. The total cost of trading (comms + spread) is not as competitive as some retail FX brokers, and there's not many liquid and actively traded contracts.. but the CME does provide a competitive order book and ECN experience.
...
All that said.. "how I learned to stop worrying and love the made market"
Execution quality and trust is what's really important in the end. Since FX is a made market, I sopped caring if my broker is "true ecn" or not... I started to care only that I can get the price I see on the screen and not get slipped. Does the broker fill me at a fair price and are the trustable. Do they fix things when stuff goes wrong (tech can break, stuff can happen, it's only important that they broker does right by you and makes you whole.)
Like, your broker should be looked at like a business partner: If they are on your side, they will do things to keep you around and happy... they won't be giving you stupid high leverage so you bust out quickly, or encourage you to overtrade... they won't give you worse fills and slippage as you get consistently profitable... they are on your side and win as you win.
Even a broker who directly makes markets (think Oanda) can always hedge out your market exposure on their risk desk... so they are happy to have long term and profitable traders who turn big accounts. They make off the spread and volume... they are on your side since you are profitable to them while being profitable yourself.
Don't get caught up in marketing terms.. my skin crawls when I read "TrueECN" and I don't trust and never recommend the broker who coined that term... just focus on your 'business partner' and if they are trustable.
The hard reality is any broker offering MT4 simply can't provide an "ECN" in the sense of what you are looking for.. the archaic MT4 platform needs the broker to run a quote engine... and even with server side "add-ins" that let brokers emulate an BBO style book of quotes from their LPs, the experience you will have is not the same as actually trading on an electronic exchange with peers competing for prices (live auction market.)
The industry as it is comprised creates a few major limitations in striving for a proper ECN environment.... You have to keep in mind, spot FX is a decentralized and "made" market (as in market maker based.)Even with the shift from phone brokering (a-la the 70's-90's where most of the volume was turned in relationship based with a bank's currency desk directly,) to electronic trading as we see it today... it's still a "made" market where the LPs have direct deal terms with the vendors and brokers who contract with them. This is where we see things like "last look" on deals and other protections for the LP that would be incompatible with an ECN type environment.
So with this in mind, there are a few venues where we inch closer to an ECN in practical terms:
On the retail accessible end, LMAX runs their own order book and matching engine where brokers act as MM's quoting on the their exchange. Interactive brokers does the same... both allow you to interact with the order book and even hit other client's resting orders so it's as if you're trading on a public exchange. However, both are limited in scope to just the precipitants on their network... and both have MM/LPs who, with the more inflexible terms of their platform, might not quote as much liquidity/size when market conditions get dicey (think slippage..)
Another alternative is trading with a futures broker and using currency futures. The total cost of trading (comms + spread) is not as competitive as some retail FX brokers, and there's not many liquid and actively traded contracts.. but the CME does provide a competitive order book and ECN experience.
...
All that said.. "how I learned to stop worrying and love the made market"
Execution quality and trust is what's really important in the end. Since FX is a made market, I sopped caring if my broker is "true ecn" or not... I started to care only that I can get the price I see on the screen and not get slipped. Does the broker fill me at a fair price and are the trustable. Do they fix things when stuff goes wrong (tech can break, stuff can happen, it's only important that they broker does right by you and makes you whole.)
Like, your broker should be looked at like a business partner: If they are on your side, they will do things to keep you around and happy... they won't be giving you stupid high leverage so you bust out quickly, or encourage you to overtrade... they won't give you worse fills and slippage as you get consistently profitable... they are on your side and win as you win.
Even a broker who directly makes markets (think Oanda) can always hedge out your market exposure on their risk desk... so they are happy to have long term and profitable traders who turn big accounts. They make off the spread and volume... they are on your side since you are profitable to them while being profitable yourself.
Don't get caught up in marketing terms.. my skin crawls when I read "TrueECN" and I don't trust and never recommend the broker who coined that term... just focus on your 'business partner' and if they are trustable.
Thank you for your time to reply with these much details
You got my point very well, the broker who can be in your side and happy when you grow your account because it means more profit they make by commissions, this is my main point that makes me trust a broker, all of them do it as market makers and trade against you, your loss will be their profit, they will be happy by your loss
Am looking for a broker who will be happ when I grow my account balance
Yes you mention big amazing broker names, I honestly activated my account with one of the very big names in FOREX
and they offer account called DMA, direct market access, and claimed that they only make profits from commissions
I contacted them over chat and after some questions, I asked one question "when I lose my money who make profit from this loss?" and the answer that this loss will be profit of the broker, and same time I was contacting my account manager by email she said that they are only making profits from commissions and they dont make profits from my losses, here is the point, even very big name that is licensed in USA, Canada, UK, Australia, Japan and Singapore, and you still get confusing answers that makes you not comfortable
At the time I had good money to make a professional thing for me, I was thinking to not open with a broker, I decided I will get siftware license and get direct liquidity and market access from SAXO or Swissquote and setup my own trading house, I know it is expensive but at that time I just wanted to make sure I will get paid the profits I will make from my big account it was around $200K
But after a big loss I have to trade with a retail broker that makes me feel comfortable I will get paid my profits until I return again to my plan to create my own trading firm
To this point I cannot trust any broker as a real A-Book, yes maybe they can pay profits to some level, but if big account with big profits they will try to make you lose them with manipluting your account, increase commissions or spreads specially at new times and say "It is normal during news releases", and if you managed to make big profits am sure it will not be easy to withdraw
The only thing I trust now if I create my own trading firm with direct liquidity from a big bank that you hold your account with, even big banks sometimes manipulate cutomer accounts
www.financemagnates.com
So?
You got my point very well, the broker who can be in your side and happy when you grow your account because it means more profit they make by commissions, this is my main point that makes me trust a broker, all of them do it as market makers and trade against you, your loss will be their profit, they will be happy by your loss
Am looking for a broker who will be happ when I grow my account balance
Yes you mention big amazing broker names, I honestly activated my account with one of the very big names in FOREX
and they offer account called DMA, direct market access, and claimed that they only make profits from commissionsI contacted them over chat and after some questions, I asked one question "when I lose my money who make profit from this loss?" and the answer that this loss will be profit of the broker, and same time I was contacting my account manager by email she said that they are only making profits from commissions and they dont make profits from my losses, here is the point, even very big name that is licensed in USA, Canada, UK, Australia, Japan and Singapore, and you still get confusing answers that makes you not comfortable
At the time I had good money to make a professional thing for me, I was thinking to not open with a broker, I decided I will get siftware license and get direct liquidity and market access from SAXO or Swissquote and setup my own trading house, I know it is expensive but at that time I just wanted to make sure I will get paid the profits I will make from my big account it was around $200K
But after a big loss I have to trade with a retail broker that makes me feel comfortable I will get paid my profits until I return again to my plan to create my own trading firm
To this point I cannot trust any broker as a real A-Book, yes maybe they can pay profits to some level, but if big account with big profits they will try to make you lose them with manipluting your account, increase commissions or spreads specially at new times and say "It is normal during news releases", and if you managed to make big profits am sure it will not be easy to withdraw
The only thing I trust now if I create my own trading firm with direct liquidity from a big bank that you hold your account with, even big banks sometimes manipulate cutomer accounts
Deutsche Bank to Be Charged With Manipulating its Autobahn FX Platform | Finance Magnates
German lender Deutsche Bank is set to be charged by a group of lawyers in the U.K.
So?
Again.. "made market", decentralized..
Every single retail FX broker is going to disclose that they are your final counterparty on any trade for legal reasons. That doesn't mean they profit from your losses.. That's not the issue. Hell, the CME in Chicago, largest futures market by volume, is your counterparty on all futures trades... again, for legal reasons, clearing, and keeping the other side of your trade anonymous. So let's not paint all brokers as evil on this alone.
Sure, some could operate pure B-Book model and not hedge any client exposure... and I bet any broker offering stupid high leverage ("unlimited", "3000:1") is in this camp because they'll give the client everything they need to quickly blow their brains out...
But most will do a combination of things... profile a typical gambler / bad trader and not hedge them... profile a consistent trader and hedge them... or just net out all client exposure and the imbalance is hedged out either automatically or by humans working a risk / trade desk.
None of this matters... what matters is you work with a broker that has staying power in the industry, who deals to you at the price you see quoted and doesn't jerk you around with held orders and slippage, and one who treats customer service / tech issues seriously and does what they can to quickly fix issues or make you whole if it's their issue.
Who cares who fills your order... you only care about the speed and price of said fill. If the broker hedges out your risk to the greater market, they make money off your spreads and commissions... they still want you around to turn volume, you have a win win if you're a profitable and long running trader.
Every single retail FX broker is going to disclose that they are your final counterparty on any trade for legal reasons. That doesn't mean they profit from your losses.. That's not the issue. Hell, the CME in Chicago, largest futures market by volume, is your counterparty on all futures trades... again, for legal reasons, clearing, and keeping the other side of your trade anonymous. So let's not paint all brokers as evil on this alone.
Sure, some could operate pure B-Book model and not hedge any client exposure... and I bet any broker offering stupid high leverage ("unlimited", "3000:1") is in this camp because they'll give the client everything they need to quickly blow their brains out...
But most will do a combination of things... profile a typical gambler / bad trader and not hedge them... profile a consistent trader and hedge them... or just net out all client exposure and the imbalance is hedged out either automatically or by humans working a risk / trade desk.
None of this matters... what matters is you work with a broker that has staying power in the industry, who deals to you at the price you see quoted and doesn't jerk you around with held orders and slippage, and one who treats customer service / tech issues seriously and does what they can to quickly fix issues or make you whole if it's their issue.
Who cares who fills your order... you only care about the speed and price of said fill. If the broker hedges out your risk to the greater market, they make money off your spreads and commissions... they still want you around to turn volume, you have a win win if you're a profitable and long running trader.
I agree with you about speed, price and trchnical issues are very important
But you got the point, hedging the risk of a profitable trader, this is ehat I mean by A-Book
Yes I know about the risk profiling and hedging, but let me ask a question, when a customer is seen as profitable and broker want totransfer the risk, then who the one my risk will be transfered to? who the one will pay my profits?
Because the broker transfer my risk to anotherone because he dont want to or dont have the financial ability to pay my big profits for example, who will pay it then?
But you got the point, hedging the risk of a profitable trader, this is ehat I mean by A-Book
Yes I know about the risk profiling and hedging, but let me ask a question, when a customer is seen as profitable and broker want totransfer the risk, then who the one my risk will be transfered to? who the one will pay my profits?
Because the broker transfer my risk to anotherone because he dont want to or dont have the financial ability to pay my big profits for example, who will pay it then?