Should You Consider Using A Forex ECN Platform? - MB Trading

RETAIL e-FX CLIENT
in late 2007, when more clients started to demand a
real ECN execution delivered on the MT4.
Fastbrokers.com concluded that clean bridging seemed
to work only in theory. Zagara says: “It is a very tough
task to achieve in a live environment, mainly for the
nature of the MT4 infrastructure, where its core, in
my opinion, is mainly designed for a dealing desk
usage only. Furthermore, each ECN has is own trading
and order rules, different API specification and FIXcommunication
issues. Our tests reported problems
with split fills (which MT4 wasn’t able to handle), off
quotes caused by latency (trades were passed while the
price on the ECN had changed), which made possible
the use of a bridge in a hybrid model but it was not
possible to make it work in a true STP-only model.
“For that purpose we dismissed the MT4-ECN
project and switched to focus our custom software
to fill this gap,” explains Zagara. “I am sure now
things have changed; there are different and more
powerful bridges. However, in my opinion, I am still
very sceptical when I see a broker claiming is offering
an MT4 through an ECN. I would scrutinise both
the bridge and whether the ECN it connects to was
specifically designed or modified to handle MT4-like
platforms, to the extent that the benefits of a regular
ECN may have been compromised to accommodate
the needs of MT4,” he warns.
Ross Ditlove
“There are now a lot of brokers that claim to be FX ECNs
with MT4, but we review what they are claiming and know
that at best, they are simply routing orders out to one
destination and again failing the transparency test.”
Richards adds: “There have been many challenges
getting this marriage to work. As, in my opinion,
the MT4 software was never really meant to execute
through an ECN. Currenex, through its executable
streaming prices model, is another company making
headway in retail ECN trading. If a broker signs on
with Currenex they will have true STP-NDD accounts
available for their clients,” he claims.
ECN or not ECN?
On what factors may ultimately govern whether a trader
should consider using a forex ECN platform or not,
Zagara states that while some traders, when delivered a
true ECN product, enjoy the liquidity and volatility of
these feeds, they are sometimes quickly overwhelmed
not only by the commission charges, lower leverage,
and higher balance required, but especially with the less
user friendly trading platforms that allow you to trade
on it. Zagara comments: “That reason led us to develop
Pathfinder Trader, which includes trading on different
ECN’s but delivered on a front end with the most
advanced features, such as, powerful charting, auto
execution, back testing, pattern recognition, and any
other advanced functionality you would expect from a
modern trading platform.”
Vedikhin comments: “At Alpari (UK) we believe that
over 95% of forex retail trading will go through ECN’s
within the next five years, but there are some obstacles
in the way. The first is that ECN trading is often too
expensive for the majority of retail traders. Account
opening requirements are usually much steeper
compared to traditional FX trading, while leverage
is much lower. The other obstacle is complexity.
ECN’s often come across as too complicated and
‘institutional’ for retail traders. We believe that over
time ECN trading will become progressively simpler
as users become more informed and educated about
its potential. Cost of entry and complexity are both
obstacles that can be overcome.”
While Ditlove notes: “We would obviously argue
that not using a true ECN platform is at some point
detrimental to the trader, but there are still people who
view it differently. Our goal is to have a transparent
display system that prohibits games, and for some
people that have been around a while, the importance
of that is lost. Can they make the argument that with
a fixed spread, no-commission model it is easier to
know what you’re getting? Maybe. Is it cost effective
and better in the end? I would question whether that
is the case. Simply stated, transparency in a market
place brings efficiency and efficiency brings value.”
134 | april 2010 e-FOREX