The change in a broker's spread and roll is directly influenced on what their bank or liquidity provider is charging them.
Brokers make fractions of the spread and role you are charged. Basically, they have to increase spreads and rolls based on whatever they are being charged to fill and roll-over your trade or else they won't be making any money.
Exactly, hence market-driven (you can call it bank-driven, same thing). I also wouldn't assume that a broker works with only one bank (as you imply), if that's the case for yours, I would definitely recommend switching brokers!
Thank for you the Dealing Desks 101 overview, even though I never asked for it.
I guess you must be talking about the market rates and not FXCM's platform. Swap is still negative on long EUR and AUD positions on FXCM but my other broker still has positive swaps which have remained at the same level throughout the market turmoil of the past few days.
FXCM appreciates your concerns and would like to clarify a few of your questions.
This week we have large financial institutions fall due to what we believe was over exposure and taking on too much risk.
FXCM strives to limit unnecessary risk. FXCM operates under a No Dealing Desk Execution model. We provide you with streaming prices given to us directly from the banks and financial institutions. These are the prices you will see.
Brokers providing you with lower spreads may be tailoring the prices given to them by the banks and holding the risk on their end.
FXCM feels that it is in your best interest that we strive to limit our risk and will continue to provide you with the spreads and rollover rates we are receiving from the banks we work with.
In volatile market conditions like these that have caused multi-billion dollar entities to go under, we believe it would not require very many losses to wipe out a multi-million dollar entity. If they go bankrupt because of the risk they took on, you lose as well from having your funds frozen in bankruptcy litigation for years.
FXCM chose the no dealing desk execution model to avoid these conflicts and dilemmas with our clients.
We apologies for this inconvenience, but will continue to only stream you the prices and rollover that are given to us directly from banks and financial institutions
Thank you,
Jaclyn Sales
Public Relations Coordinator
FXCM / DailyFX.com
Financial Square
32 Old Slip, 10th Floor
New York, NY 10005
Dir (646) 432-2463
Tel (212) 897-7660
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i'm stay rawang, selangor... i'm very dissapointed with fxcm trading station now.. every times i complaint they keep blame the connection or reinstall the platform... i followed all the steps but the condition still same... asian session is the worst.. high spread sometimes 20 pips for gbp/usd.. ridiculous.. they keep gave the same answer... i'm looking the best forex broker to open new account.. which one is the best..
Yes, they are market-driven, and in the case of rolls, the underlying benchmark are interbank overnight interest rates. I have attached a chart of USD o/n Libor including last week. That is the interest rate a bank has to pay to borrow funds for one business day - exactly what happens when they do a FX-transaction(note its the offered rate, it doesnt mean you get this interest rate when lending). As you can see, the costs for borrowing USDs went over the roof the last few days, as much as 400 BPs in one day. The fact that IB still bases rolls on the fed-funds rate only means they are paying the difference out of their own pocket, which is nice, but it doesnt mean that others, who reflect the underlying market in their rates are ripping off their customers. If these marketconditions persist, they will without doubt adjust as well.
