4. Which strategies are ideal to execute at a No Dealing Desk firm?

No Dealing Desk firms can pretty much take all strategies. The ones that differentiate FXCM over dealing desk firms are breakout and momentum strategies, mostly used by professional traders, as well as scalping strategies which are basically very short term high frequency range trading.

5. FXCM wants profitable clients. Why and how?

FXCM encourages profitable clients to sign up since we depend on size and frequency to make money and nothing else. Our assumption is that more profitable traders eventually trade bigger and more often. Many dealing desks have problems with profitable clients because many strategies that are profitable are impossible or not that easy to hedge as a dealer. As a rule, unregulated dealers in offshore jurisdictions will rarely tolerate any real streak of profitability and some have been known to be very creative in their attempts to restrain profitable clients. Regulated onshore brokers, as a general rule of thumb, do not engage in market manipulation and other things where the regulatory penalties would be severe. Nevertheless, trading desks do not have the customer's best interests at heart and will make sure the trading desks are protected and profitable from this deal.

6. What is the maximum trade size with FXCM?

There is no maximum trade size with FXCM. Specifically, FXCM platforms allow for order sizes up to 50 million per trade. Traders have the ability to trade incremental sizes (multiple orders of 50 million for the same pair). In addition, when calling into the trading desk, one can place an order of any size.

Traders should also note that FXCM has preset stop/limit functionality as well as one-click trading.

In contrast, dealing desk firms may employ a maximum trade size as scalpers and other traders create too much risk for the dealing desk broker to manage. Exceptions may be made to traders the dealing desk firm see as "not profitable" because, in these situations, the dealer is happy to take the other side of the trade.

7. Entry order restrictions - My broker does not allow me to place my stop within 5 pips, do you guys do this?

No. There are no restrictions when placing stops, limits, or entry orders on FXCM's No Dealing Desk platforms.

Restrictions on stops and limits occur with dealing desk brokers. This occurs because bank spreads are variable, while dealing desk broker spreads are normally fixed. Therefore, if a bank provides a 5 pip spread and the dealing desk broker is guaranteeing a 2 pip spread, the dealing desk broker will lose 3 pips on each trade. To mitigate this risk, restrictions on orders may be imposed. If the dealing desk broker chooses a restriction of 5 pips then they have mitigated their risk to 7 pips (5 pip restriction + 2 pip spread). Unless bank spreads widen past 7 pips, the dealing desk broker is protected. During news events and volatile markets, bank spreads can easily widen beyond this amount, which is why dealing desk brokers may heighten restrictions when the market is likely to move.

Alternatively, when trading on any of FXCM's No Dealing Desk platforms there are no restrictions on stop, limit, or entry orders. In fact, clients can place entry orders within the spread. This access is made possible due to the fact that FXCM's No Dealing Desk offering does not require FXCM to manage risk of client trades.

Please note that FXCM Trading Station allows for order sizes up to 50 million per trade. Traders have the ability to trade incremental sizes (multiple orders of 50 million for the same pair).

8. FXCM doesn't re-quote. Why?

FXCM does not re-quote its customers because it doesn't set the prices. If a price is available from one of the liquidity providers on our system then the order is filled. Our business model allows us to profit from all trading strategies and we tend to favor high frequency trading strategies that get customers re-quoted at other firms. While we cannot guarantee that we will fill you at the price you want, as the liquidity providers may have moved their prices, we genuinely try to fill you as best as we can since it is in our best interest to do so no matter what the ultimate outcome of the trading strategy may be.

9. Aren't banks market makers too?

Yes, they are. And, just like retail forex market makers, they hope to get into a trade at a better price in which they let you in. That said, there are distinct differences between executing trades at a retail forex market maker and executing trades through a pass through entity such as FXCM.

• Competition - With a No Dealing Desk system, FXCM takes prices from over a dozen top tier banks worldwide, as well as a couple non-bank providers. These firms compete to win your business. For instance, let's use the following example to see how this benefits you, the trader:
  • Market Maker A offers 1.4960 by 1.4962
  • Market Maker B offers 1.4559 by 1.4961
  • Market Maker C offers 1.4959 by 1.4962
    • FXCM would offer 1.4960 by 1.4961 plus our fixed mark up (highest sell price matched with the lowest buy price) "buy low/sell high."
  The above example highlights the importance of competition. If one market maker attempts to move the market for their interest, they will lose out on winning trades as 11 other providers will be more competitive. Note how Market Maker C offers a buy price 7 pips above what FXCM offers to their client. This provider will not win out as others are far more competitive.
• Anonymity - Another key difference when trading through FXCM's No Dealing Desk model is that all orders reside on FXCM servers and are sent to market makers as market orders only. One again, let's use an example. Let's say you buy the market at 1.4550 with a stop at 1.4530 and a limit at 1.4600. With FXCM, your stop and limit reside on our server. At no time do banks see where these orders sit. If the market moves down through your stop, FXCM's system sends your order to the market maker as a market order and execution takes place at the next available price.
  
  In contrast, a dealing desk sees your orders. In the above example, a dealer knows your stop is at 1.4530 and knows that your limit is at 1.4600. In specific cases the dealer will profit when you are stopped out and, since they control the market, they control if and when the market moves through your stop level.
• Scale - Another advantage banks have is scale. They deal with a lot of retail shops like FXCM, as well as thousands of other institutions. This gives them access to so much order flow that it's easier for them to offset trades internally. In addition, speculators are just a portion of the customers most banks have. Corporate customers, investment funds in other asset classes dealing in cross border securities, as well as other daily business transactions make up huge swaths of currency trading where the end users sometimes are price sensitive but never directionally sensitive as he/she isn't speculating in the forex market. These transaction flows provide banks great advantages and, as a result, they are better market makers as they further enable buyers and sellers to meet at the same time internally.

10. Can banks see my orders?

No, banks cannot see your orders. Market makers on the FXCM system don't get to see who the customer is. In fact, to the market maker, all customer orders look as if they come from one customer—FXCM. All orders, stops, and limits sit on the FXCM side and only when triggered are they sent as market orders to the banks (this also includes margin calls) that ensures that banks can't position their feeds to trigger upcoming orders unnecessarily.

See Anonymity

11. My broker claims to offer No Dealing Desk execution, but I doubt that. How can I tell?

A broker offering No Dealing Desk execution will not have order restrictions, will not re-quote trades, and will not restrict trading strategies. The role of a No Dealing Desk broker is to act as a true middle man that offers access to the market and who collects a transaction fee for doing so.

Transparency is also a way to determine if a broker is using a No Dealing Desk model. FXCM's Active Trader platform not only shows up to ten tiers of prices, but also displays how much liquidity is available at each price. This level of transparency can only be employed by a No Dealing Desk broker since a dealing desk broker will take trades regardless of market pricing or liquidity if they feel that they are on the correct side of the market.

12. Why does my order hang?

Hanging orders are the result of trades being sent to a liquidity provider who has not acknowledged the status of the trade. Keep in mind that FXCM passes all trades to the liquidity provider who made the given price. Thus, confirmation from the liquidity provider is needed to complete the order. If a technical glitch that affects the confirmation of the trade occurs, the order may hang until confirmation is received. In extreme situations confirmation may not come, at which point orders may be reset or rejected.

While rare, if you notice an order hanging for an extended period of time, please call our client service desk at
1-888-503-6739.

13. The chart clearly traded through my limit, but the trade did not execute, why does this happen?

It is possible for the market to trade through a limit without your limit order being executed. This occurs when there is not enough liquidity in the market to fill all orders at the price points displayed on a chart. Generally speaking, this is more likely to occur during news announcements when liquidity can dry up.

Imagine that over 20M sell limit orders are sitting on FXCM platforms at the price of 1.3350, while the market is at 1.3320. A news announcement comes out that spikes the market from 1.3320 to 1.3355 within a few milliseconds. You watch this occur on the chart and subsequently watch the market drop back below your limit within seconds. The tick chart clearly traded through your limit, so why were you not filled?

Generally, a spike like this occurs as one liquidity provider makes an aggressive bid to the market. Due to the risk involved, the liquidity provider will normally send limited liquidity, say for instance 1M. If 20M worth of orders are sitting in the market, then only 1M can be filled as the price spike had only 1M attached to it. Because a No Dealing Desk offering simply passes through what is available, the remaining 19M worth of orders are simply reset.

Note, generally speaking, price spikes on tick charts reflect limited liquidity amounts.