Nicholas Pratt
Nicholas Pratt

Retail FX ECNs - helping traders achieve more effective strategy implementation

Nicholas Pratt examines what benefits traders can get from dealing with brokers who take a hybrid approach to trade execution by offering both traditional Dealing Desk and and Non Dealing Desk facilities and he looks at what factors should determine whether a retail forex trader should transition to an ECN Broker and the issues that might influence their choice of platform provider.

There are two trading models in the retail space. One is the traditional market-making, dealing desk-based execution model where brokers act as the principal in the trades. For years this has been the dominant model in the retail space but is less the case now.  The market-making model gives the brokers control over the pricing they offer their retail clients in exchange for assuming the risk of the transaction. However, increasing volatility in the FX market and changes in regulation, such as the US Dodd Frank Act which limits the amount of proprietary trading banks can engage in, are making market-making less attractive to FX brokers. And there is also the fact that the alternative non-dealing desk, ECN model is becoming increasingly attractive at a time when investors are demanding more transparency and greater access to better pricing.  Hybrid approach Poland-based TMS Brokers is one of a number of FX brokers that have adopted a hybrid approach that offers both traditional dealing desk and...continued

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