mparama
Private, 1st Class
- Messages
- 66
Fist at all sorry for my bed english...! (I'm Italien)
Its really disappointing to discover that in the "Forex World" its really difficulty for us, small retailer, and even for professional retail to pass an order directly to the market without any manipulation and intervention of third parties.
Let see the differences between brokers ( I think every trader knows it or at least should know):
- Market Makers - Dealing Desk)
- Hybrid Brokers - (Market Makers and ECN/STP)
- STP Brokers - No Dealing Desk (suppose to be !)
- ECN/STP Brokers - No Dealing Desk (suppose to be !)
MARKET MAKERS
as clearly stated they produce the market in an homemade way, it means that all the trade orders are realized inside their office and never reach the "real" market. They gain when you loose and there is an evident conflict of interest (almost the same if you are in Casino).
HYBRID BROKERS - (Market Makers and ECN/STP)
These brokers have "a-Book" and "b-Book"
It means that at their discretion divide the traders in 2 categories losers and winners.
The loser traders orders are passed to the "b-book" (Market Makers - dealing desk).
The winner traders orders are passed directly to the real markets (ECN/STP - no dealing desk).
The trader has no chance to intervene in this decision.
STP BROKERS - No Dealing Desk (STP = Straight Through Processing)
They pass the traders orders directly to the real markets (Bank, Liquid provider, other Primary brokers........)
The problem is that, even if we are in the "real market", the Liquid Provider or the Bank) have the chance of
the "last look" it means that they can excute the order or reject it or delay it (slippage) and therefore produce an intervention on the order.
So most of the time the broker is not responsible for the slippage as it is operated by the LP
ECN/STP BROKERS - No Dealing Desk (ECN = Electronic Communication Network)
When it operate as STP do the same as the above.
When it operate as ECN it connect you to the real market and to the global market in which are included all the retails (as us), brokers, Market Makers.......
How does it work:
When you make a market order it is passed to the ECN network and when your order encounter another opposite order from another retailer it is executed with almost 0 spread.
You produce a Buy order for EUR/USD if in the ECN network there is a Sell request for the same price and volume the order is executed..
The problem with ECN comes in the very volatility time, news time and when the price get steadily one direction long or short in these case most of the retailers make the same action and most request does'nt encounter an opposite, so our order is passed to the Liquid Provider that apply the "last look" which means
huge slippage, delay and high spread.
N.B.: Pay attention as some broker declair to be an ECN/STP but actually they have different office connected ECN/STP, some of these office are considered as liquid Provider and they produce their own market and in the end they are pure Market Makers
There are very few broker ECN/STP that guarantee a "NO last look" from they LP but they require a very high minumum deposit.
For us, pour traders, the life is really hard in the Forex ocean...!!!!
Any suggestions or correction for above would be really appreciate.
Its really disappointing to discover that in the "Forex World" its really difficulty for us, small retailer, and even for professional retail to pass an order directly to the market without any manipulation and intervention of third parties.
Let see the differences between brokers ( I think every trader knows it or at least should know):
- Market Makers - Dealing Desk)
- Hybrid Brokers - (Market Makers and ECN/STP)
- STP Brokers - No Dealing Desk (suppose to be !)
- ECN/STP Brokers - No Dealing Desk (suppose to be !)
MARKET MAKERS
as clearly stated they produce the market in an homemade way, it means that all the trade orders are realized inside their office and never reach the "real" market. They gain when you loose and there is an evident conflict of interest (almost the same if you are in Casino).
HYBRID BROKERS - (Market Makers and ECN/STP)
These brokers have "a-Book" and "b-Book"
It means that at their discretion divide the traders in 2 categories losers and winners.
The loser traders orders are passed to the "b-book" (Market Makers - dealing desk).
The winner traders orders are passed directly to the real markets (ECN/STP - no dealing desk).
The trader has no chance to intervene in this decision.
STP BROKERS - No Dealing Desk (STP = Straight Through Processing)
They pass the traders orders directly to the real markets (Bank, Liquid provider, other Primary brokers........)
The problem is that, even if we are in the "real market", the Liquid Provider or the Bank) have the chance of
the "last look" it means that they can excute the order or reject it or delay it (slippage) and therefore produce an intervention on the order.
So most of the time the broker is not responsible for the slippage as it is operated by the LP
ECN/STP BROKERS - No Dealing Desk (ECN = Electronic Communication Network)
When it operate as STP do the same as the above.
When it operate as ECN it connect you to the real market and to the global market in which are included all the retails (as us), brokers, Market Makers.......
How does it work:
When you make a market order it is passed to the ECN network and when your order encounter another opposite order from another retailer it is executed with almost 0 spread.
You produce a Buy order for EUR/USD if in the ECN network there is a Sell request for the same price and volume the order is executed..
The problem with ECN comes in the very volatility time, news time and when the price get steadily one direction long or short in these case most of the retailers make the same action and most request does'nt encounter an opposite, so our order is passed to the Liquid Provider that apply the "last look" which means
huge slippage, delay and high spread.
N.B.: Pay attention as some broker declair to be an ECN/STP but actually they have different office connected ECN/STP, some of these office are considered as liquid Provider and they produce their own market and in the end they are pure Market Makers
There are very few broker ECN/STP that guarantee a "NO last look" from they LP but they require a very high minumum deposit.
For us, pour traders, the life is really hard in the Forex ocean...!!!!
Any suggestions or correction for above would be really appreciate.