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21/03/2011: Fxcm :: Explains Their No Dealing Desk Forex Execution Model Vs. Competitors Dealing Desk

FXCM Inc., (NYSE:FXCM) launches the FXCM Forex Execution Center. With numerous requests for transparency in the forex market, the FXCM Execution Center will be a central hub on the FXCM websites that will provide forex traders with detailed information regarding forex execution practices. FXCM will continue to update this area over the coming months with insightful information and analysis.

The first step is to explain the different forex execution models. Unlike most other forex brokers, who act as market-makers, FXCM operates on an agency execution model.

FXCM takes the best bid and ask prices streamed to them from multiple large financial institutions, adds a markup (commission) on top of those prices, and shows them to clients. FXCM makes an identical amount of money in the form of pip markups (which are really commissions) regardless of whether the customer makes or loses money on a trade. As a result, FXCM earns consistent and transparent revenue per trade.

This is significantly different from brokers who operate a dealing desk execution model, where the revenue per trade is not as transparent. There are common practices, many times unknown to customers, which allow dealing desk firms to make more than just the mark-up attached to the prices streamed from large financial institutions. These practices include, but are not limited to, re-quoting customer trades, taking the opposing side of customers trades, and even preventing customers from trading or managing their positions during news events.

Many experienced forex traders may find the concept difficult to grasp. And it is especially hard for those new to the forex industry.

No Dealing Desk (FXCM): Learn How FXCM Executes Forex Trades
http://www.fxcm.com/fxcm-forex-execution.jsp

Dealing Desks (most of the other guys) learn about the potential conflict of interest between dealing desks and traders
http://www.fxcm.com/fxcm-forex-execution.jsp



 
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