Director of Business Relations
において
ILQ
Robert is an associated person and director of business relations for ILQ. ILQ is an NFA and ASIC registered Forex liquidity provider that specializes in building custom white label solutions for broker dealers, introducing brokers, educators, EA system vendors, and affiliates. The MAM and PAMM software it provides is a favorite among CTA and signal providers. He has over 8 years of experience in the foreign exchange markets with both buy side and sell side firms, He has setup multiple prime brokerage relationships with direct API and off the shelf liquidity aggregation. Prior to his career in forex he sold corporate real estate.
Robert Bescoe
Execution... there has been some clever marketing resulting in a general misunderstanding of execution acronyms and how that impacts your trading activity.
a. ECN (Electronic Communication Network)- This is a system of aggregation used to identify fair market value and execute trading requests. Depending on the sophistication of the system it may be used for hedging activity with large banks, brokers or allow for netting of trader activity in the network.
b. MM (Market Maker)- the Broker is the counterparty, highly regulated, well capitalized with sophisticated risk management tools and strategies designed to reduce risk of loss. It uses its balance sheet to allow traders to net off of one another thereby reducing latency and hedging costs.
c. STP (Straight Through Processing)- the Broker is the counterparty but offsets the trade to its ECN for final execution, and the bid/ask spread is marked-up to cover associated trading hedging costs and broker profits.
d. DMA (Direct Market Access)- the Broker is the counterparty but offsets the trade to its ECN for final execution, a commission is added to the traders account to cover associated hedging costs and broker profits.
e. B/S (Bucket Shop)- the Broker is the counterparty, loosely or unregulated, under-capitalized and risking its clients’ funds.
STP and DMA are both Agency or Middleman models. The netting is Bid to Bid and Ask to Ask. By nature they have longer latency periods and negative slippage for the trader. The execution requests, make a minimum of 4 hops; (1) Trader to Broker, (2) Broker to LP, (3) LP back to Broker, (4) Broker back to Trader. If the LP rejects the request, steps 2 and 3 are repeated until filled, this will likely result in slippage against the trader. The execution relationship that a broker has with a Liquidity Provider (LP) is known as FOK (Fill Or Kill) which means; fill at the requested price or reject the request. When the LP receives the trade request, it holds it for a period of time, usually less than 100 milliseconds, during that time, the LP checks the requested price against what it considers to be fair market value (FMV); if the requested price is equal to or in the LP's advantage over the FMV it will fill the request; however, if the requested price is at a disadvantage for the LP, compared to the FMV the LP will reject the request. This means the trader will always be filled at or worse, than the future FMV. This model reduces the risk of loss for the Broker but increases the overall trading costs, the broker is paying the LP's spread, any associated technology and Prime Brokerage fees.
Market Maker is a principal model. The netting is typically Bid to Ask and Ask to Bid. The execution requests make two hops. (1) Trader to Broker, (2) Broker back to Trader. The broker may insert a delay in its execution, the delay may be harmless or harmful, the reasons can vary from the desire to match the latency created by its STP environment, to match buyers and sellers together, to evaluate its overall risk impact, to compare against FMV or for a-symmetrical slippage practices. It faces potential risk of loss if the book is not properly balanced. It reduces the overall trading costs by netting one traders Bid against another traders Ask and thereby reducing associated hedging fees.
a. ECN (Electronic Communication Network)- This is a system of aggregation used to identify fair market value and execute trading requests. Depending on the sophistication of the system it may be used for hedging activity with large banks, brokers or allow for netting of trader activity in the network.
b. MM (Market Maker)- the Broker is the counterparty, highly regulated, well capitalized with sophisticated risk management tools and strategies designed to reduce risk of loss. It uses its balance sheet to allow traders to net off of one another thereby reducing latency and hedging costs.
c. STP (Straight Through Processing)- the Broker is the counterparty but offsets the trade to its ECN for final execution, and the bid/ask spread is marked-up to cover associated trading hedging costs and broker profits.
d. DMA (Direct Market Access)- the Broker is the counterparty but offsets the trade to its ECN for final execution, a commission is added to the traders account to cover associated hedging costs and broker profits.
e. B/S (Bucket Shop)- the Broker is the counterparty, loosely or unregulated, under-capitalized and risking its clients’ funds.
STP and DMA are both Agency or Middleman models. The netting is Bid to Bid and Ask to Ask. By nature they have longer latency periods and negative slippage for the trader. The execution requests, make a minimum of 4 hops; (1) Trader to Broker, (2) Broker to LP, (3) LP back to Broker, (4) Broker back to Trader. If the LP rejects the request, steps 2 and 3 are repeated until filled, this will likely result in slippage against the trader. The execution relationship that a broker has with a Liquidity Provider (LP) is known as FOK (Fill Or Kill) which means; fill at the requested price or reject the request. When the LP receives the trade request, it holds it for a period of time, usually less than 100 milliseconds, during that time, the LP checks the requested price against what it considers to be fair market value (FMV); if the requested price is equal to or in the LP's advantage over the FMV it will fill the request; however, if the requested price is at a disadvantage for the LP, compared to the FMV the LP will reject the request. This means the trader will always be filled at or worse, than the future FMV. This model reduces the risk of loss for the Broker but increases the overall trading costs, the broker is paying the LP's spread, any associated technology and Prime Brokerage fees.
Market Maker is a principal model. The netting is typically Bid to Ask and Ask to Bid. The execution requests make two hops. (1) Trader to Broker, (2) Broker back to Trader. The broker may insert a delay in its execution, the delay may be harmless or harmful, the reasons can vary from the desire to match the latency created by its STP environment, to match buyers and sellers together, to evaluate its overall risk impact, to compare against FMV or for a-symmetrical slippage practices. It faces potential risk of loss if the book is not properly balanced. It reduces the overall trading costs by netting one traders Bid against another traders Ask and thereby reducing associated hedging fees.