FX Intelligence gets on MB Trading webpage, signals new trend for US brokers

32 Comments on this post

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1. Paul Jeszenszky said:
   Lets keep in mind that many of the people displayed on FXIntel’s spreads list are not including their commissions… real transparency would require that the commissions be represented.

   All OANDA definitely supports what FXIntel is doing however and that is why we made sure we were listed.

   January 27th, 2011 at 11:35 am
2. Trevor said:
   MB has low spreads because they charge a commission. The others do not, its comparing apples and oranges.

   January 27th, 2011 at 11:40 am
3. Alfonso Esparza said:
   FXIntel is a great tool. Its biggest contribution is increasing spread awareness. Its been my experience that the more experienced the trader the more he cares about spread and execution and I applaud FXIntel for making information available for comparison.

   I would suggest than in the interest of fair comparison they would make a distinction between: “Spread only” Brokers and “Spread + Commission” Brokers.

   January 27th, 2011 at 11:50 am
4. Michael Greenberg said:
   Brian, can you clarify this issue when you read this?

   January 27th, 2011 at 12:49 pm
5. Steve James said:
   @Paul-

   It’s true that it doesn’t include their commissions, but this article just pulled the FX Intel component of MB Trading’s site out and showed it. If you look at the actual pages on their site, it is very clear, especially in the fourth tab, what their total costs are (and depending on your trading style, it could blow away all of the competition, including Oanda).

   Michael linked to the full set of pages on the site, make sure you check it out.

   January 27th, 2011 at 1:19 pm
6. Brian Johnson said:
   Michael,

   Thank you for the article mention & comments.

   To clarify the commission aspect, it’s an important issue that we’ve discussed with our partners and users for quite some time. Ultimately, we’re looking at ways to address the differences on our site, at least so users are aware there are extra costs involved with certain brokers.

   We’ve tested the addition of commissions directly into the displayed spreads, but that proved too problematic, given a multitude of varying factors. For instance, some commission-based brokers charge a variable rate based upon trader account size and/or volume traded. Thus, a one-size-fits-all approach would not be applicable.

   Alsfonso – thank you for the comment & suggestion. A simple distinction of the two types of cost models is both fair & logical, and likely the direction we’ll be heading in.

   January 27th, 2011 at 3:54 pm
7. Asaf said:
   Which begs the question of why does MBT has a lower profitability results than most of the broker they claim to have better spreads then.

   – Asaf.

   January 27th, 2011 at 5:06 pm
8. Trader said:
   Asaf: one possible reason could be different methods of calculating ‘profitable traders’.

   Hopefully the next quarterly data will be more comparative, given the recent NFA clarification …

   January 28th, 2011 at 8:04 am
9. Steve James said:
   Asaf-

   One thing I would consider…MB Trading allows people to fund with just $400, which not all brokers do. I bet that means that a lot of little players that really have no idea what they are doing (less than the rest of us) drop in $400 and “roll the dice.” I agree with Trader that the numbers will be more interesting after next quarter, and also this Pay for Limits item of theirs might have an impact over time, but I still feel that the reporting numbers don’t really paint a clear picture of anything.

   January 28th, 2011 at 11:27 am
10. Abigail said:
    Glad the industry is recognizing the efforts of brokerages focusing on transparency—some more than others. Interbank FX has been publishing our performance metrics for 18 months now, allowing customers to see inside our engine at any time. Our ultimate goal is to challenge traders to ask the same of other brokers they work with. (BTW, we do not charge a commission—our spreads and execution are low as a result of our proprietary multi-bank order routing system and technology infrastructure).

    January 28th, 2011 at 2:12 pm
11. Brian Swell said:
    I guess we can title that post…”How to ride someone else’s wave”

    Thanks for the clarification Abby!

    January 28th, 2011 at 4:12 pm
12. Paul Jeszenszky said:
    @Steve James

    Fair comment but many forex dealers allow much smaller initial deposits than $400 to start trading. I expect most of the bigger players are lower but off the top of my head, three examples:
    * FXCM Micro is $25
    * GFT is $50
    * OANDA is $1 (yes $1 is a tradable account because we offer no lots. People actually test out this is for real as well).

    @ Abigail

    OANDA has offered the level of transparency you are referring to since ~2001. Welcome to the club!

    January 28th, 2011 at 4:38 pm
13. Steve James said:
    @abigail-

    Do you really think the best plan in this day and age is to promote that you hide your fees in the spreads? Just curious.

    January 28th, 2011 at 5:14 pm
14. Asaf said:
    I have to say that these prices don’t really mean anything – at the end of the day since the FX broker acts as the exchange and the market maker it doesn’t matter what is the prices that you see but what are the prices you can execute on. This is also not fair to show the spreads only when MBT also charges commission per trade.

    For me the final and most clear and transparent indication is the ability of traders to profit from trading – MBT despite their marketing effort are not presented as a broker where traders would get fair opportunity to profit.

    As for the minimum account size – this is their problem – most of the brokers allow small accounts and they know these people would lose their money due to the high minimum trade size and the high leverage they’d be forced to use because of this (Except OANDA that has no minimum trade size)

    – Asaf.

    January 28th, 2011 at 5:20 pm
15. Raymond Harris said:
    “OANDA has offered the level of transparency you are referring to since ~2001. Welcome to the club!”

    Weird, cause I look at MB Trading and see my order on the market depth window when posted, I do that same with my Oanda account and don’t. So whats the definition of transparency?

    Further, I can trade $1 on MB Trading so again please elaborate?

    I love discussion and personal failure its how I learn. So please tell me where I am wrong and educate me.

    My apologies in advance.

    Ray

    January 29th, 2011 at 12:33 pm
16. Justin LeBlang said:
    @asaf

    I have to respectfully disagree with your entire statement. First of all, MBT is known as one of the brokers with the lowest minimum account size at $400. We have offered this for years when others were much higher. The idea that someone can open an account with $1 and trade at 50:1 and get anywhere is extremely misleading, and I won’t even comment further. To your other points, I have no idea what you are getting at. Our website pricing pages clearly identify our spreads versus other brokers and then address the scenarios where you get a rebate and the scenarios where you are charged a transaction fee. We went out of our way to show the net costs of trading with us under the three possible different scenarios. To be completely blunt, I would agree that if someone only uses Market orders both ways, we are basically “in line” with what some of the tighter fixed-spread brokers charge. However, if a trader uses a Limit order one way or both ways, I think it is clear that we are the better option, and I am 100% open to any conversation that you want to have to the contrary.

    January 30th, 2011 at 12:27 pm
17. Mike said:
    The numbers can change dramatically over time, it seems. Just looked at FXIntel right now and MB Trading is definitely higher than FXCM, still lower than OANDA, twice as high than InterbankFX, and just higher than Forex.com. So, I guess it makes sense to monitor them all over time. Note that I’m biased towards my own broker InterbankFX, when I say that their rates were low both at the time of this article and now.

    Also, what’s up with FXOpen and Dukascopy – their spread is insane (GPDUSD at 72.6 for example). Can that be right?

    Thanks for the tool!

    January 30th, 2011 at 12:27 pm
18. Greg Briton said:
    .2 spread on MB Trading EURUSD, guess its working!

    January 31st, 2011 at 1:17 am
19. Brian Johnson said:
    @Mike – that was simply the last tick we received from them at the 2200 GMT close on Friday.

    January 31st, 2011 at 2:02 am
20. Jim Hunt said:
    An interesting conversation!

    Insane spreads on a Sunday? Can you trade at those prices Mike, even if you wanted you?

    At the end of the day the metric that matters is how much your account has gone up (or down!). It’s not a trivial problem to infer how that is affected from the headline spreads, commissions, rebates etc.

    Cheers,

    Jim

    January 31st, 2011 at 4:28 am
21. Asaf said:
    @Justin,

    If you want to compare cost then compare the cost don’t just compare the spreads and let everyone else figure out that there is an additional transaction cost to the price – you have to be transparent about trading with you if you want to be perceived as honest and fair.

    Paying people for limit and stop is still unclear to me. If I understood correctly you are showing the exact price that a trader placed the limit order and you are rebating him part of the transaction that you are charging – if this is the case than you are making it very easy for market makers that make market for you to hunt the retail traders and it cost you nothing – this sounds like a brilliant program for you and for your market makers I have to say.

    – Asaf.

    January 31st, 2011 at 11:07 am
22. Justin LeBlang said:
    @asaf:

    I have to start this once again by asking…Have you even looked at our pricing pages? There are four tabs, please read through them at http://www.mbtrading.com/pricing.aspx. Not sure how we can be any more transparent than to tell you when we charge and how much, tell you when we pay you and how much, let you see our spreads in real time on all of the pairs we offer, let you compare those spreads to other brokers, and then give you specific examples (last tab of the four) about what the total cost of trading with us is. Seems pretty transparent to me, and also, I think the math is pretty clear.

    As for paying people for limit orders, your question seems to miss the point. How is that encouraging (i.e. paying) our customers to tighten our spreads so that the rest of our client base that needs to enter and exit at the market has better pricing helps the market makers? You’d rather have the spreads wider and wait for the market makers to come to you? Now, if the market makers want orders to get routed to them from our customers, they have to tighten their pricing up more as well to compete. If our customers become our bid and ask all of the time, for example, then the market makers and banks that provide liquidity would become irrelevant as they would never get an order routed to them because they aren’t the best price. Please explain to me and everyone how this is a bad situation for you or any other customer?

    January 31st, 2011 at 12:03 pm
23. Art Paganovich said:
    @mike – What symbol were you looking at when you came up with that?

    @raymond – Too funny. The idea that Oanda is transparent is a joke. They still don’t post Limit orders, as you pointed out, and I doubt that they will reply. Guess they think the fact that you can send them $1 is more important than truth in markets.

    @asaf – I couldn’t figure out why someone would think that MB Trading’s model (if it does what it says) would be a bad thing. Their site is the most comprehensive and transparent (as is their platform) about costs and pricing of any broker. They give you real examples of net costs and they display your Limit orders to the market so the MM’s can’t dominate. Then I clicked on your name and it took me to a Currensee page that lists you as working for them and it all started to make sense. I assume you guys get paid as an IB with all of these brokers. MB’s model, if it works, basically squeezes out your ability to make money. I think it is important that everyone understand that.

    @justin – Isn’t there some risk to you guys here if more than 50% of your executed trades end up being between customer limit orders and your banks instead of against your customer market orders? I think that’s the concern that I would have, because outside of that, everyone that I’m talking to thinks you guys finally took what you have and put the nail in the coffin of everyone else.

    -Art

    January 31st, 2011 at 12:32 pm
24. Asaf said:
    Justin,

    You are charging $2.9 on a $100,000 traded which is, if my math is right, $5.8 round trip which is 0.58 of pip. It is misleading to mix your spreads with all the others when you are the only one that charges extra for the trades even if you give that information in another window – if you want to be transparent you should have one tab called “cost of trading” and compare your cost to the others where your include spread + fee and for the other broker it’s just fee.

    Second – spreads don’t mean a thing if you can’t execute on them – so showing the lower spreads is nice but doesn’t not include any information for someone to decide if you are an expensive broker or not.

    As for paying for the limit orders – you have to do some more homework in the area or how financial exchanges work – they all have market makers and the more liquidity your traders bring the more profitable the market makers would be because they can act much faster than the retail investor and there is nothing in this world which they would like more than to know where your traders place stops and limits.

    This is why I said that at the end of the day you are being judged by the ability of retail traders to make money trading with you and so far the profitability figures are not that attractive.

    – Asaf.

    January 31st, 2011 at 1:23 pm
25. Mike said:
    @Jim – definitely not – haha. I was just looking and couldn’t believe what I was seeing. But, as Brian Johnson mentioned, it was just the last feed received at day end that skewed it.

    Reviewing the feed more today, I can see that while I’ve been very happy with my broker, their spreads are unnecessarily high. I’ve begun the process of reviewing ATC and MB Trading. I asked ATC for their swap rates, as well, since I hold trades open for quite awhile sometimes – and those are way better than Interbank, as well. May be switching in the next couple of months…

    Thanks for the info all!

    January 31st, 2011 at 5:03 pm
26. Steve James said:
    @asaf-

    As a retail trader with about 15 years of trading experience in stocks, options, futures, and forex, I would have to respectfully say that you don’t appear to know what you are talking about. In order for any true market to function properly with the least waste given to the MMs, you need everyone’s limit orders displayed for all to hit as that is what provides the liquidity. When they are not displayed, it means that there is a desk or MM benefiting from the chance to get a better price before it fills the order. A limit order by definition is a price to buy or sell if the market pulls BACK, so in other words, if I want to buy the EURUSD lower than it is or sell it higher than it is. The best way for that to happen, and it doesn’t help the MMs at all (it actually hurts them) is for my order to be displayed to everyone in the market so that the first person that thinks that my price is the best available hits me and not some MM at a worse price who then fills me and keeps the change. What you DON’T want is for your stop orders to be displayed to the banks, and MB’s system doesn’t do that, nor does any true ECN Forex broker. What you are saying is incorrect almost across the board.

    January 31st, 2011 at 5:47 pm
27. Justin LeBlang said:
    @asaf:

    Yes, that is what we are charging. Please again look at the fourth tab of our Pricing page that clearly states that if you place a trade with “Market and Market” orders both ways, you add that fee to our spread to get your total cost, and that is the apples to apples comparison against a deal desk. Likewise, if you use a “Market and Limit” roundtrip (Market one way, Limit the other), your net costs are substantially lower. And finally, if you use a “Limit and Limit” (Limits both ways so you get paid both ways), your net costs are extremely low.

    So now your argument falls back to “what if someone can’t get executed.” And that is of course true. People spent years wishing they could get away from the requoting and bad fills of deal desks, and yet many people still have issues with getting fills. It takes a lot of time doing live testing with a broker to decide how good their executions are. Many desk brokers will give you the exact fills that you want for a couple of months and then hope that you deposit more money, then suddenly start requoting you and slipping you once you do. I would say that you should get a feel for how good a broker’s execution is in a Live environment for about 6 months to make that determination, but it certainly is not a topic that is specific to us. So how do you try to say on one hand that we shouldn’t be comparing our spreads and trading costs and then suddenly say that spreads don’t matter if someone can’t get filled. There are plenty of brokers that quote a 2.2 pip spread on a pair and don’t fill people very well at those prices. So I 100% agree, people should test executions. And by the way, our executions that occur customer to customer are faster, which means that as more and more customers display their limit orders on our system, the chances of getting executed get better, not worse, because everything is handled in house without having to send an order out to a bank destination.

    January 31st, 2011 at 7:35 pm
28. Asaf said:
    Steve,

    It sounds like you know more about MBT then they care to advertise so I am not sure if there is any hidden agenda here.

    The way markets usually work is that there is an exchange which anonymously aggregate liquidity from all market participants and market makers which make their money on the spread. In FX there is no exchange and every broker acts as it’s own exchange and most also act as the market maker. Regardless if the broker is the MM or not he does not have to comply to a fair exchange rule and usually enable his market makers second look and other benefits like preferred execution. Saying that a broker is an ECN is meaningless in FX because there is no exchange so there is no where for the ECN to connect to.

    It’s Naive to think that a broker can properly operate without market makers – there isn’t enough liquidity at any single FX broker to support an efficient exchange and I have to tell you that some of the brokers are having liquidity issues even when connecting to a much larger liquidity pool and marker makers.

    Exposing limits and stops enables high frequency market makers to take advantage of the fact they know where the liquidity is and act on it before anyone else does. If a market maker knows that someone is waiting to sell 20 lots of EURUSD at 1.3000 and someone else is waiting to buy 20 lots at 1.30020 he would quickly fill both traders and make the difference without even taking any risk.

    There is a pretty basic rule in business – if you are paying for something it means that this something is worth to you at least the amount you are willing to pay. So when MBT is paying for limits you have to ask yourself what’s in it for them.

    – Asaf.

    February 1st, 2011 at 12:03 am
29. Jim Hunt said:
    The conversation gets even more interesting!

    @Mike – I’m not sure if you got my main point, which is how can you be sure (even when the markets are open!) that you can deal at the prices quoted on your brokers platform, or with the spreads quoted by FXIntel. In the real world I think you’ll find it’s actually pretty difficult.

    @Asaf – According to Steve “MB’s system doesn’t [display your stops]“. As Justin said “you should get a feel for how good a broker’s execution is in a Live environment for about 6 months”. Why don’t you go away and try that, then come back in 6 months time and let us know what you’ve discovered?

    As for what’s in it for MBT, and their customers? Justin also said “Our executions that occur customer to customer are faster, which means that as more and more customers display their limit orders on our system, the chances of getting executed get better, not worse, because everything is handled in house without having to send an order out to a bank destination.” Why don’t you address that point? Do you think banks are the ideal people to take the other side of your trades?

    Do you by any chance ever ask yourself what’s in retail forex for the banks?

    Jim

    February 1st, 2011 at 9:03 am
30. Steve James said:
    @asaf – As I have said on this thread already, I’ll be interested to see if the MB system works as billed. If it appears that they are playing games, then it’s just another broker playing games. I currently have accounts with 5 FX brokers with my money spread about evenly across them all. However, if MB works as they say, which is something that I have been expecting one of the better FX brokers to do for some time, I will be most of my funds to them. Jury is still out since it just started Sunday. I will make sure it works with my trades, but I expect it to take a few months before enough people are taking advantage of it to tighten spreads so it will not be something that I’ll know by tomorrow. Having said that, your understanding of markets remains fairly limited. ECNs in the stock market (ARCA, ISLD, etc.) back in the 1996-1999 era were “off exchange” and didn’t have most of the liquidity. That was the whole point, to create a system away from the market makers for traders to trade directly with each other’s orders and not deal with the games of the MMs. Of the two big ones, one of them did it by lowering cost of execution to very small numbers, and the other did it by PAYING FOR LIMIT ORDER LIQUIDITY to participants while CHARGING A LARGER FEE to those that took liquidity through market orders. Last time I looked, the idea was so poor that both of them got bought by the NYSE and NASDAQ for over a billion dollars because they ended up doing more volume than the exchanges. That’s the real market at work. You cannot in any manner suggest that what MB is doing is any different except that they are doing it in FX. You need to play some catch up and get a grasp around it quickly. As someone pointed out, it looks like based on where you work, your motivations are a little at question here. It helps you to keep spreads wide so you can make your slice. I’m not promising that MB will be successful here. They need to be prepared from a technology perspective if this does work to handle the loads or the whole idea is a waste and then someone else will do it. But they have always been one of maybe three brokers that have both the technology in place and the history of doing the right thing in the markets for their customers to potentially give it a shot. In the end, understand one thing…FOREX will either end up on an exchange like futures or handled by two, maybe three, ECNs like ISLD and ARCA in the stock market.

    February 1st, 2011 at 10:33 am
31. Art Paganovich said:
    @Jim Hunt – I agree! Conversation gets more interesting!

    @Justin – Thanks for being available to answer questions. So far, I get what you guys are going for. Please don’t blow it.

    @asaf – You said “So when MBT is paying for limits you have to ask yourself what’s in it for them.” Isn’t the whole point that they are paying for tighter spreads that sit on their ECN for faster execution, which would mean more customers? Doesn’t seem like rocket science. I think Jim’s comment was more interesting: “Do you by any chance ever ask yourself what’s in retail forex for the banks?” Do you understand that as retail traders, the guys we really hate are the banks? Whichever broker makes us not have to deal with them is the one that we will want. Doesn’t matter who ends up making it happen. I’ll go there once it works. Sounds like maybe you won’t.

    February 1st, 2011 at 11:33 am
32. Asaf said:
    Steve,

    Time will tell if this was a good move from MBT – it sure is interesting approach and I wish they will be able to improve their profitability numbers and compete with the other brokers on business.

    – Asaf.

    February 2nd, 2011 at 1:54 pm