Structure and composition of FOREX market participants - page 10
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And my broker is probably tensed - looking for a catch )))) Well, nothing, we will wait.
Maybe this will enlighten you, also found on the internet.
WHO IS A QUOTATION PROVIDER?
One of the most important questions for the novice trader is where does the VC get its quotes from. In the stock market, it is always clear that there is a single financial institution that forms the price of securities or other commodities with itself. The Forex market does not have a specific location; there are tens of thousands of financial institutions providing possibilities for trading on this market. In traders' environment such organizations are called brokers. It is worth knowing that all real operations with currencies take place through banks, while the Forex market is usually called the international interbank market. When you buy currency through a broker, you cannot ask for its physical delivery; you can only sell it within that broker. The price of the currency you buy changes almost every second, but there is always a difference between the price you buy and the price you sell. So where does this difference come from and how does the broker form the price? The answer is simple, because the liquidity providers are banks and it is the banks that provide the dealing desk with the price at which they are willing to buy the currency. Further, the quotes may be influenced by data from other information systems, competing companies, and external counterparty partners for hedging positions.
It comes to the fact that the broker can use the features of the software to manipulate the current prices. This practice is more common in so-called "kitchens" which have nothing to do with cis or stp brokers. The kitchens manipulating the market quotes in most cases do not have licenses from regulatory organizations and attract attention only from beginning traders. Generally, due to the high liquidity of the forex market all quotations at different brokers in most cases differ by 1-2 pips maximum. Such difference taking into account existing spread makes arbitrage tactics of deals impossible. Arbitrage trade is a trader's strategy based on the difference in quotations at different brokers. You can find a lot of arbitrage Expert Advisors on the Internet, but the possibility of earning by using these robots is very doubtful. Now we are going to study the main aspects of the price formation at the interbank currency market (Forex).
Why is there a difference between the price at which a currency pair is bought and sold?
Having investigated the matter the broker applies some filters to the traders before they send the quotes which makes them profit. One such filter is the spread, which is the difference between the buy and sell price. Conscientious brokers earn only on this difference, but most DCs also earn from lost deposits of attracted clients. Spread differs at different brokers and depends not only on the speed of receiving and processing of quotes but also on the broker's desire to earn. Some brokerage companies set a fixed spread for traders from the very beginning, which shows the kitchen method of work.
Solid brokers providing the possibility to trade on the ECN accounts always have floating spreads and depend on the level of volatility. The ECN (electronic communication network) system includes several leading liquidity providers and is used by many international brokers with a good regulation. Quotes for ECN accounts at different brokers are always the same, but spreads can increase significantly during the release of important news. The lowest commission per trade is on the currency pairs with high liquidity. First of all, it is the currency pair Euro and 5 other major currency pairs where the US dollar appears.
Sooner or later any beginning trader wonders how to minimize the spread. This is where rebate services that refund a part of the spread paid to the broker can help. Besides, if you have a considerable amount of capital, you can ask the broker for special terms of cooperation. It should be understood that the Forex market is not a charity organization, and there are many intermediaries between the trader and such major financial institutions as Deutsche Bank or J.P. Morgan. It is the mentioned biggest banks, which are the initial link in the formation of quotations. All other financial institutions are just an intermediate link, getting data from these financial institutions.
How to understand the phrase: Quotes on ECN accounts at different brokers are always the same. but spreads here may significantly increase during the release of important news. ?
If the quotes are the same, then the spread is the same. It does not work otherwise. The appetite of brokers with the same quotes may differ only in the commission.
Got a reply from my broker. All my questions were answered except for the quote providers. They said that this is a competitive advantage of the company and this information is not disclosed. What does it mean, let's think about it? Yes, the question was as clear as this - the client's control of broker quotes in the terminal for closed positions with losses. They also said that they can check broker quotes on the Myfxbook website, but they do not say who the quotes providers are.
But they do not say who are the suppliers of quotes. What are the advantages as compared to IC Markets for example? - You see, their quotes are delivered to 70 banks via aggregators - Currenex and Integral, and they named them without hesitation, not fearing for any competitive advantages...
Or should I have asked about the aggregator? Because the provider is a participant of trade ... and the names of banks won't tell me anything in principle, because they themselves use the information system of quote aggregators, I think.
My previous broker, on the second clarification request - refused to disclose the quotation provider. I made a request to the Central Bank. We are waiting for a reply.
I will be sure to post the request and response here.
Help, you need a sensible book about the structure of the market FOREX, describing the main functions of the market, the composition of its members, the rules of entry / accreditation of each participant and the legislation governing their work in the market FOREX - I will be very grateful.
Take a look here https://habrahabr.ru/post/202402/. It may be useful. Also http://rannev.ru/. These are not books, but still
Have a look here https://habrahabr.ru/post/202402/. Might come in handy. Also http://rannev.ru/. It's not a book, but still
Vladimir, thanks for the info, will take a look.
Received a reply from Currenex: regarding the broker's clients' control of the "marketability" of the quotes.
Hi - thank you very much.
Yes, we have historical market data of a product called the currenex cache system which we can only supply to institutional clients that we contract with - i.e. we cannot work with individual traders.
It would bepossible for you to obtain market data, If you have a contract with a broker - please let us know if you want to arrange a call to discuss or need further information?
Respectfully,
As I understand it is possible to send a request to this aggregator and provide an agreement with the broker, to make sure that such a quote that led to the position being closed at a loss was indeed in the aggregator's history. But it is the independent control that is of interest - I have asked for information whether there are any external sites where I can reliably know that this is the Currenex aggregator's quotation history. I'll see what the answer is.
I think that to work with requests from non-institutional clients aggregator technically is not ready - for this infrastructure to work with requests must be strong, because there are millions of us individual traders and if everyone will send them requests, they will just give up on it, as probably under no legal obligation to provide such information to persons who are not their customers, so it is an important independent resource - displaying the history of aggregator quotes. Then everything will be chiciboney when trading on ECN.
So, the reply from the regulator came back.
In order.
Part 1:Request for information from broker:
Hello,
1. Can I set and edit StopLoss and TakeProfit on ECN accounts using the MT5 terminal?
Can I set and edit StopLoss and TakeProfit for open or pending positions?
2. Where can I find a list of ECN Trading Quotes Providers with
Where can I find a list of my ECN suppliers?
3. How can a user of the ECN.MT5 platform (terminal) verify that
the Quote corresponds to the Provider's Quote and there is no
Is there any risk of re-quotes being switched by Alpari? What is the difference in the quotes in the ECN.MT5 terminal
the value of the spread is understandable.
This request is official. If there is no response I will be contacting the Central Bank of the Russian Federation regarding the same problem.
The same problem - to receive information about customer control over
of formation of quotes in the trading terminal.
Since you are an open company - please provide explanations. I am planning to
One day I will open an account and I want to make sure that nothing but market
I am planning to open an account one day and I want to make sure that nothing will affect my trading with Alpari except market (currency) risk.
Clarification from the broker:
Hello,Yes, you can edit StopLoss and TakeProfit levels for open and pending positions.
There is a number of liquidity providers, but we can't provide it, because this information is a competitive advantage of our company, so we can't disclose the list of liquidity providers.
You cannot make comparison on your own, because we cannot provide liquidity providers, but you have access to all quotations in Tick history in myAlpari, where information is stored for a fortnight and to the full tick history http://ticks.alpari.org/. You can also view our quotes on external resources that collect statistics on spreads and swaps and compare the figures with other brokers, an example of such a resource is
Request for information:
OK, and with no further mention of competitive advantage, who supplies the quotes to Alpari? Curernex, Integral or another integrator?
I want to find an alternative resource to Alpari which keeps the historical data of quotes of the aggregator-provider for checking the positions closed at a loss. We are creating a problem out of the blue, you understand that nobody cares what aggregators Alpari or VTB have - no better and no worse than other forex brokers of the same caliber. Please solve the problem in a business-like manner, that is, without "competitive advantages", consult your management and lawyers, I have time,Broker Clarification:
Hello,
I regret that we do not have a list of liquidity providers.
Part 2. Request to the regulator.
Part 3. The regulator's explanations.
Here is the end of the fairy tale and the one who understood it - well done ))))
So, the reply from the regulator has arrived.
Part 3. The regulator's explanations.
Here is the end of the fairy tale, and well done to those who understood it ))))
Thank you for posting the information - it turns out that there is a hole in the law - it is not specified who (bank, stock exchange or whatever) can be a liquidity provider.
Thanks for posting the information - it turns out that there is a hole in the law - it is not specified who (bank, exchange or whatever) can be a liquidity provider.
Yes, the legal entity Alpari Limited, which is not an aggregator, is declared a liquidity provider for Alpari-Forex Ltd. Apparently they couldn't refuse the regulator's request to specify a "liquidity provider". I do not really understand all this structure and, most importantly, it is not clear why they have to hide from the clients the information about the mechanism of obtaining quotes by the broker himself? But for me the approach of Australian broker seemed more adequate. Our broker does not look convincing, even though it is licensed.