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FXCM Introduces Dealing Desk Forex Trading to the UK Market

Back in August this year FXCM, a forex broker notorious for its excellent No Dealing Desk (NDD) execution, introduced Dealing Desk trading to its customers from Australia.  The experiment must have been successful and FXCM is now introducing the Dealing Desk trading to the British market as well. I suppose that when FXCM first launched Dealing Desk execution in Australia, it was testing the waters to see whether offering a choice between NDD and DD globally would make sense.
 
The reasoning behind this was simple: dealing desk execution allows for significantly lower spreads. Nonetheless, this was a surprising move on behalf of the broker: as FXCM claims itself, Dealing Desk execution places the traders and the broker in a conflict of interests. While NDD brokers serve as mediators between the customers and the liquidity providers, charging a small commission for that, Dealing Desk trading providers determine the quotes and spreads themselves, thus becoming market makers and profiting directly from the customers’ losses. Even though they are often able to offer lower spreads, their customers suffer from slippage or re-quotes on their orders and stop/limit restrictions so at the end of the day, it might not be worthy to trade with a Dealing Desk broker at all. 
 
It is still unclear whether DD execution will be launched in the rest of the world – for now, the broker’s international website states the following: “FXCM does not take a market position—eliminating a major conflict of interest”.
 

The differences between FXCM’s Dealing Desk and No Dealing Desk models

 
Whether you sign up for a DD or a NDD account, FXCM will be able to see your orders; the Dealing Desk trading model, however, will allow it to use the information if gets from the orders placed in order to manipulate the market; i.e. you will not be trading anonymously.  
 
Dealing Desk accounts also have a cap on the maximum account balance allowed – a trader who signs up for such execution cannot have more than $50,000 in their account (there is no such restriction for NDD accounts).  On the plus side, DD traders will be benefiting from significantly lower spreads: 
 
FXCM spreads comparison
 
 
The maximum trade size for No Dealing Desk execution accounts is quite higher than the one of Dealing Desk ones: 50 million for NDD versus 2 million for DD. 
 
Dealing Desk also doesn’t allow for partial fills – e.g. it is not possible to have your orders broken down to pieces and filled at multiple prices; instead, all orders are filled at a single price. 
 
The last major difference between the NDD and DD trading models concerns trading strategies: FXCM warns that it reserves its right for risk management – in other words if you open a Dealing Desk account, the broker will have the right to change your execution if you employ strategies like scalping, automated trading or news trading
 
All differences considered, it is not surprising that FXMC encourages its customers to go for NDD execution – the advantages of that model are obvious. However, if you are a trader who doesn’t scalp or trade news, Dealing Desk execution with its lower spreads might be quite suitable for you. 
 
 

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  FXCM Australia  FXCM UK  dealing desk execution  no dealing desk execution  forex trading  forex spreads 

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