Citi announced in a press release earlier this week that us poor souls from the UK would have to wait no longer to be able to use the CitiFX Pro platform. According to Citi’s Manager of Margin Foreign Exchange for Europe and the Middle East, Sasha Serebrinsky:
The UK launch of CitiFX Pro offers UK-based clients all of the advantages of trading FX through a global leader, including excellent liquidity and access to its highly regarded research and market commentary. We offer experienced individuals and small institutions a flexible product with tight pricing, which could make a difference to our clients’ bottom line.
Here at the Trading Gurus we're into automated trading that completely ignores "the fundamentals" and doesn't make a whole lot of use of standard technical analysis either, so the research and market commentary isn't of much interest to us, however highly regarded it might be by others. Access to "excellent liquidity" most certainly is of interest though. The first catch is that before you can discover how big a difference all that lovely liquidity might make to your bottom line in practice you have to be able to stump up at least £7,500, and satisfy the FSA's definition of a "professional client" as required by the MiFID legislation. Assuming you can do that Citi will let you loose on one of their four available trading platforms. However if you're into automated trading as we are you need to be more than a mere "professional" if you want to use anything better than MetaTrader 4 as your API. If you want access to Citi's alternative FIX API you need to be "an institution".
If you're merely interested in manual trading however, then your £7.5 grand up front will get you access to the CitiFX Pro platform. That comes in 3 flavours – desktop, mobile and web. The technology is actually supplied to Citi by Saxo Bank, and so the web platform is very similar to the MSN Trader platform that launched at the end of last year. Here's a quick look at what the desktop client looks like:
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Last week the NASDAQ listed TradeStation Group announced that:
With the launch of [its] new TradeStation Forex business, TradeStation will have transformed its forex offering from a fully disclosed operation, where it introduces customers to a third-party forex dealer, to one where its new subsidiary, TradeStation Forex, Inc., an approved Retail Foreign Exchange Dealer (RFED) and member of the NFA, acts as principal and directs aggregated pricing to its customers.
The third-party forex dealer referred to in the announcement is currently GAIN Capital, and TradeStation will shortly be cutting out that middleman and dealing directly with a number of liquidity providers. Retail forex traders will be able to use the recently introduced TradeStation 9.0 platform to access that liquidity, and the announcement also stated that:
Our forex customers will now be able to trade forex with no platform access or forex data fees, no lot restrictions, 50:1 leverage for the popular currency pairs, and tighter spreads that include a reasonable mark-up.
so there will be no commissions to pay either. Of course it remains to be seen just how tight those spreads prove to be.
The same press release also announced that TradeStation had been invited to ring the NASDAQ opening bell last week. In his speech at that ceremony TradeStation Group's Chairman and CEO Salomon Sredni said that:
Within the next few weeks we're scheduled to release a major important restructuring of our forex business.
and that:
We think our new forex offering will be the best choice available to the forex retail market.
It also remains to be seen how long a period of time "a few weeks" turns out to be, and whether retail forex traders ultimately agree with TradeStation's own assessment. However the TradeStation platform has been providing traders with access to exchange traded stock, futures and options markets for 20 years now, so they do have considerable experience in such matters. Whilst the new version does show its age in some ways, TradeStation have managed to add object-oriented features to their EasyLanguage automated trading system development language, whilst maintaining backwards compatibility with a huge existing codebase far better than MetaQuotes have managed to achieve with their new MetaTrader 5 platform. Whilst MT5 is also supposed to be able to provide retail traders with access to other asset classes apart from forex, the platform is currently still undergoing apparently interminable beta testing so it's rather difficult to assess how this particular object-oriented war might pan out. It certainly looks as though TradeStation 9.0 will have a big head start, but it does have one significant disadvantage. Only one broker currently provides the TS9 platform, and that is TradeStation Securities Inc. I assume that as and when MT5 eventually emerges from testing it will be offered by rather more than just one or two brokers.
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It didn't take long for the next forex lawsuit to arrive, and from the same source too! Following on from their action against FXCM, the Business Trial Group of Morgan & Morgan, P.A. has announced another class action lawsuit, this time against FXDirectDealer, LLC (more commonly known simply as FXDD). According to the announcement the plaintiff this time around is Hugo Cruz, and once more the suit accuses:
FXDD of fraud by misrepresenting its trading platform as one that is free from dealer intervention or manipulation. Instead, Cruz alleges, FXDD uses a number of devices and tricks, including software applications, designed specifically to manipulate and interfere with customers’ trades.
Like the FXCM case, the suit alleges that FXDD uses specially designed software to manipulate trading and “loot” its customer accounts, and also that FXDD lures its customers by promoting a “demo account,” which was touted as providing customers with a true market trading experience. Instead, the suit alleges, the demo account does not reflect what FXDD does when the customer begins “live” trading.
I can't help but wonder if these forex class action suits are like London buses? You wait ages for one, then three come along in quick succession.
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The OANDA version of MetaTrader 4 has been in beta testing for a while now. It sounds as though that testing is now finished, because today OANDA have announced that it is now possible to use MetaTrader 4 on a live fxTrade account. I can't find an online version of the press release, so here it is in full:
NEW YORK—February 15, 2011—OANDA Corporation, provider of innovative online forex trading and currency data services, now offers its competitive advantages to traders who use MetaTrader 4 (MT4). When they set up an OANDA trading account or demo account, MT4 traders can continue to use their favorite MT4 tools and benefit from OANDA’s tight spreads, quality fxTrade execution, and transparent business model.
MetaTrader is an electronic trading platform with automated trading capabilities; OANDA has licensed this software to be used with market-leading OANDA Spreads®. The OANDA fxTrade platform bridges directly to MetaTrader using custom technology, which helps keep costs low for traders because there are no third-party fees to link the fxTrade trading engine with the MT4 user interface. OANDA will not use the controversial MT4 Virtual Dealer plug-in, which has been criticized for enabling dealers to bet against clients—a practice that goes against OANDA’s policies of transparency and fairness.
“OANDA has licensed MetaTrader software to offer traders more choice,” said Michael Stumm, CEO of OANDA Corporation. “Many of our clients who use automated trading strategies have asked us to support this popular trading platform, and I’m pleased to say we’re now able to offer them the best of both worlds.”
Notice a couple of points that OANDA are making. They explicitly state that their implementation does not use the MetaTrader 4 Virtual Dealer plug-in that got GAIN and Ikon into trouble with the NFA last year. They also mention that they developed the MT4/fxTrade bridge themselves, so unlike many of their competitors they have no need to pay a portion of their spread to third-party bridge software suppliers.
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In a press release issued earlier today The Business Trial Group of Morgan & Morgan, P.A. announced that it had filed a class action lawsuit today against Forex Capital Markets, LLC (FXCM) alleging fraud and racketeering. My thanks to Michael Greenberg over at ForexMagnates for bringing this interesting piece of news to my attention.
Morgan and Morgan say that FXCM are "the nation's largest Forex dealer", but they don't say how they came to that conclusion. There are lots of ways of doing that calculation, but personally I'd prefer to settle for "one of the largest US retail forex dealers" instead. Be that as it may, Morgan and Morgan are acting on behalf of:
William H. Sanders, of Muscogee, Oklahoma, and all other similarly situated FXCM customers
and are:
Accusing FXCM of fraud by misrepresenting itself as a trading platform that is free from dealer intervention or manipulation. Instead, Sanders alleges, FXCM uses a number of devices and tricks, including software applications, designed specifically to interfere with customers' trades.
Recently the NFA fined GAIN Capital and Ikon for their use (and alleged abuse) of the infamous MetaTrader 4 Virtual Dealer plugin, so quite possibly Morgan and Morgan are going to pursue a similar angle in this case? The press release certainly alleges :
That FXCM engaged in a pattern of racketeering activity by collaborating with its software developers and programmers to develop a "diabolical" software application that provides FXCM with a myriad of tools and system commands with which to interfere with customers' trades, including routing trades to "slow" servers and sending false "error" messages when customers attempt to close out profitable trades.
What with one thing and another I can't help thinking that this won't be the last lawsuit directed at US forex brokers both large and small during 2011.
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Yesterday I spoke at some length with MB Trading's Chris Mercer. Chris is in charge of various aspects of their business, including their MetaTrader 4 project. We started off by discussing MB Trading's recently announced "Get Paid for Limit Orders" initiative, then went on to talk about the intricacies of electronic communication networks. Finally I asked Chris about where the MetaTrader platform fits into all of this, both now and in the future.
The first thing to clear up was obviously exactly which orders now receive MBT's $1.95 per 100,000 credit, and how that affects the bottom line for both MB Trading and their retail customers. Chris assured me that every "non-marketable" limit order receives the credit, whether it's been resting on MBT's order book for a few milliseconds or a few weeks. Basically that means that any limit order used to exit at a profit, or to enter following a retracement, will receive the credit. However a conventional stop-limit order will not, since the limit part of the order usually is beyond the stop price in either direction (short or long), thus generating a marketable order after the stop price has been hit. Secondly that $1.95 really is a credit. If your limit order adds liquidity to MBT's forex ECN you don't end up paying a "reduced commission" of $1 net, after taking the new credit off the standard fee. You really do get paid that $1.95 in full.
The next obvious question to ask was what the effect of paying all these credits might have on MB Trading's own bottom line. Chris told me they expected to receive "a smaller slice of a much bigger pie.” When I then asked about quantifying the size of those slices Chris told me that MBT expected the percentage of retail limit orders to increase as people take advantage of the new incentive. That covered the "smaller slice,” but what about the "bigger pie?” Chris assured me that the publicity surrounding "getting paid by a forex broker" had led to a lot of interest from retail traders, and that even after less than a week there was already a significant increase in "customer to customer executions" on MB Trading's ECN.
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Following their recent IPOs US brokers GAIN Capital and FXCM now seem to be engaged in a battle for the hearts and minds of retail forex traders instead of investors in their respective businesses. In a press release today FXCM announced a new section on their website which they call the FXCM Forex Execution Center. I can't help but wonder if that announcement is in any way related to the new Pricing and Execution section on GAIN's Forex.com website and their Trade Execution Scorecard, which was announced in a press release yesterday.
FXCM's offering explains what they call "The Truth About Forex Trading". This consists of a couple of cartoons explaining the differences between FXCM's "No Dealing Desk" execution model, and "Most of the Other Guys" execution model, which apparently involves a "Dealing Desk". There are also a number of other videos outlining a variety of scenarios in which FXCM's customers might be able to benefit from price improvement on their orders. On the other hand Forex.com are obviously one of the "other guys" FXCM have in mind, since they proudly proclaim:
The benefit of trading with FOREX.com versus a so called ‘no dealing desk’ broker is that we take full responsibility for providing you with consistent liquidity, low spreads, and quality execution on every trade. We don’t outsource that responsibility to third parties, which can result in longer execution times, erratic spreads, and slippage.
whereas FXCM maintain that:
Unlike most other forex brokers, who act as market-makers, FXCM operates on an agency execution model. 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.
Sounds as though the two companies don't quite see eye to eye on what exactly constitutes "the truth about forex trading", doesn't it?
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We've previously pondered how the CFTC might go about enforcing the new forex trading regulations that came into force last October, and now we know one of the tactics they are going to employ. Yesterday the CFTC issued a press release announcing that:
It simultaneously filed 13 enforcement actions in Federal District Courts in Chicago, the District of Columbia, Kansas City and New York, alleging that 14 entities are illegally soliciting members of the public to engage in foreign currency (forex) transactions and that they are operating without being registered with the CFTC.
That list includes 12 RFEDs, the most prominent of which is FXOpen, plus two introducing brokers, all of which the CFTC alleges:
Solicited or accepted orders from US investors to enter into forex transactions in violation of the [Commodity Exchange] Act.
The complaints themselves are all against entities that allow US residents to open accounts, and that also have US offices and/or phone numbers, or US hosted websites and/or trading servers. Apart from requesting that the courts stop the assorted defendants from soliciting US forex traders without being registered, the CFTC also "seeks civil monetary penalties". I'm no lawyer, but it sounds to me as though the CFTC are asking for up to $140,000 per day since last October, plus costs, plus further relief!
It will be very interesting to see how all these cases progress, particularly the ones against entities located outside the US, in jurisdictions such as Canada, the British Virgin Islands, Mauritius and Panama!
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Yesterday we took our first look at the beta version of OANDA MetaTrader 4, and did a little bit of experimental trading. Today we're going to go behind the scenes and take a look at what OANDA's fxTrade platform makes of those same trades, as well as highlighting some important differences between the two platforms.
First of all here's what my OANDA MT4 demo sub-account looks like this morning, viewed from the MetaTrader perspective. Whether you're currrently familiar with either fxTrade or MetaTrader 4 there are some weird things going on in this screenshot:
An OANDA GBP/USD weekly chart, on MT4, with interest!
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In an announcement on their FXMessage forum forex broker OANDA revealed yesterday that:
You will soon be able to access OANDA’s tight spreads from MT4’s popular graphing, automation, customization, and community-based features.
Here at the Trading Gurus we've been beta testing OANDA's MetaTrader 4 implementation for a while, since amongst other things this announcement opens up the prospect of automated forex trading at OANDA without having to pay their current API fees. Here's our brief overview of what you can look forward to if you're a MetaTrader 4 user wondering if OANDA's "tight spreads" are worth looking at in more detail, or if you're currently an fxTrade user wondering what the recent MetaTrader fuss is all about.
To experience OANDA's demo MetaTrader 4 you'll need to start with an fxTrade practice account, then add an MT4 sub-account. Having done that you can then access that sub-account using both the fxTrade Java platform and the MetaTrader 4 Windows client terminal. We'll start with the MetaTrader 4 view of things. Here's what placing a market order looks like:
Placing a market order using OANDA MetaTrader 4
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