ECN, order execution, aggregators, liquidity. - page 23
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It cannot!
It can, because in forex, most intermediaries are legally the second party to the transaction.
But the actual second party to the transaction is the ultimate liquidity provider, he cannot be an intermediary, he has nowhere to go except into space.
An interesting interpretation.
There are two parties to the transaction: the buyer and the seller. There are no other (third, fourth ....) parties. A transaction happens when the buyer finds the seller, or the seller finds the buyer, i.e. one party finds the other. That's it, the transaction is over. Further, the parties may perform any actions (buy/sell, withdraw somewhere), but these will be other operations irrelevant to the transaction. If there are intermediaries between the parties to the transaction, they are neither parties to the transaction, since they are neither buyers nor sellers. And if these intermediaries bought or sold, they become the second party to the transaction. Therefore, the second party to the transaction cannot be an intermediary.
Don't confuse us, Dimitri. :)
Let's use an example.
You buy eur in GKFX, GKFX redirects the order to LMAX, LMAX redirects it to Deutsche Bank.
Legally, the counterparty for you is GKFX, for GKFX LMAX, for LMAX Deutsche.
Who do you interpret as a party to the transaction and who is the intermediary?
Maybe. Two participants is the simplest case. Any number of legal entities can participate on each side. And they can re-establish at any time, sell their shares (under new terms), close a position. Additionally there is the same chain of brokers connected to each participant (or several participants). And in fact in the end - all these serving legal entities and participants of the second party of transaction can be closed on one large bank, though they work independently (each has own aims).
I am not sure, but it even seems possible that, at first glance, the absurd option of a bank concluding a transaction with itself (reason: different jurisdictions)
makes a deal with himself
Telling what I saw
P.S. Understatement at once for the overflow advisor
The second party is Deutsche Bank and the intermediaries GKFX and LMAX.
The second party to the transaction is the party that assumes all risks associated with the transaction. The intermediary does not risk anything.
Let me explain. I buy the euro, i.e. I take the risk of incurring losses if the euro does not go in my direction. The other party to my transaction must sell me the euro, i.e., it also assumes the risk of incurring losses if the euro goes against their sale. We (both parties) have diametrically opposed interests in the transaction. I expect that the EUR will rise, my opponent - that the EUR will fall. We take a risk. One side is sure to lose. The intermediary does not care where the euro goes and which of the parties to the transaction loses, the intermediary has already received its commission.
I hold to the position that the intermediary cannot be the second party to the transaction.
So, the question is how we determine the second party, if it cannot be seen with the naked eye.
Technologically, it is possible to consider all big banks (liquidity providers) as the second party of transaction, but legally it will be different, and sometimes it is impossible to find ends, which is used by dishonest companies that do not withdraw anything, but lie that they do. Although there are many circumstantial signs that can be used to determine this.
As far as I understand, there are brokerage companies that write in their agreement with the trader that they take their aggregate position to the bank. And the brokerage companies always cover the position opened by the user with their own funds (probably borrowed from the bank).
I think the situation is different in ECN accounts because opened orders should overlap with many other possible ones in the "stack", // here it may be an intermediary, and in their absence the counter-orders are covered by the BC (it is Forex).
Of course orders below a lot are not output anywhere (they are dispersed in the midst of positions, at most DC sees the total combination of orders and position = level2).
between a trader and a bank (liquidity provider) in most cases there are always intermediaries (dealing centres), if the market maker is not the bank itself,
and the bank has an agreement with a dealing centre for a mutually beneficial exchange, and the trader has an agreement only with an intermediary (DC=forex broker) or with a bank (forex broker and simultaneously a liquidity and credit provider).
Thus, I think to myself that in forex, depending on the terms of the contract, the intermediary may be the second party to the transaction.
Where is the larger spread in strong movements when statistics are released, in regular forex or ECN?
vspexp:
of course orders less than a lot do not go anywhere
Not naturally.
If we had not had to withdraw 0.01 (note: not even 0.1, and even less), we would not have gone to Integral and Carrenex, and would have gone to normal providers, the vast majority of which are ready to accept 0.1. And the fact that no one takes less than a lot anywhere has moss grown. You can withdraw easily, the question is that no one wants to withdraw. And many people write that they withdraw, but in fact they do not withdraw either a lot or 10 lots.