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FXCM Cuts Spreads Worldwide

FXCM, the world’s largest forex broker, is launching Dealing Desk execution for its customers in the US. With this dealing desk trading becomes available to all of the broker’s customers across the globe with the exception of FXCM Canada, which is a white-label partnership with Friedberg Direct. 
 
Up until now the choice between Dealing Desk and NDD trading was only available to clients of FXCM Australia and FXCM UK
 
FXCM’s redesigned US website now welcomes traders with better and easier navigation, and the promise of lower spreads – and lower they are, indeed, for those who opt in for Dealing Desk accounts. 
 

Why Dealing Desk?

 
If you are wondering why would a trader go for Dealing Desk execution, the answer is quite obvious: tighter spreads. While No Dealing Desk (NDD) brokers are merely mediators between the traders and the liquidity providers, market makers are the ones determining the quotes – and this is why they are able to offer lower spreads on some of the most popular currency pairs. 
 
However, you should keep in mind that whenever you are trading with a market maker, you get yourself in a conflict of interest: the broker can see your orders and use the data from them to manipulate the market. Along with this, whenever you win, the broker loses and most providers handle this by widening the spreads, delaying execution, or re-quoting orders. 
 
FXCM’s website promises that they are not that kind of broker and I am inclined to believe them – after all, you don’t get to be the biggest broker on the market by cheating your customers. 
 

Dealing Desk vs. No Dealing Desk

 
There are a few important differences between the two execution models at FXCM: 
 
- Maximum account balance allowed: no cap for NDD vs. $50,000 max for Dealing Desk accounts.
- Trade size limit: $50 million for NDD and $2 million for Dealing Desk. 
- Partial fills: NDD orders can be split and filled at different prices; Dealing Desk orders are filler at a single price. 
- Trading strategies: scalping, trading the news and using Expert Advisors is allowed for both account types, however with Dealing Desk execution FXCM reserves the right to interfere and manage its risk by changing the execution type.
- Spreads: as I mentioned, NDD spreads are a big wider. Here is a comparison for some of the most traded currency pairs:
 
 

Is anybody buying Dealing Desk execution? 

 
Unfortunately we have no data about the number of the broker's traders who opt in for Dealing Desk accounts. I can see how FXCM's lower spreads could be attractive for those who don’t scalp or trade the news – especially with the promise of no re-quotes.  
 
Apparently, it makes sense for the broker to offer both execution types – they first introduced the choice to the relatively smaller Australian market, then expanded to the UK and only after that started offering it to the clients of the US site. 
 
I trust it that the FXCM knows what it’s doing – after all, its retail trading volume has increased by 18% this September compared to August 2012 to hit $304 billion. The institutional volumes suffer a slight decrease (8%) but this was expected given the impact of the low market volatility due to banks trading less. 
 

About FXCM Inc.

 
FXCM Inc. (NYSE: FXCM) is a global online provider of foreign exchange (forex) trading and related services to retail and institutional customers world-wide.
 
At the heart of FXCM's client offering is No Dealing Desk forex trading. Clients benefit from FXCM's large network of forex liquidity providers enabling FXCM to offer competitive spreads on major currency pairs. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. FXCM's U.K. subsidiary, Forex Capital Markets Limited, also offers CFD products with no re-quote trading and allows clients to trade oil, gold, silver and stock indices along with forex on one platform. In addition, FXCM offers educational courses on forex trading and provides free news and market research through DailyFX.com.

 

TAGS: FXCM US  FXCM Australia  FXCM UK  dealing desk execution  no dealing desk execution  forex trading  forex spreads  retail trading volume  market volatility 

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