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I'm looking for a forex brokerage that allows me to:

  • add limit orders to the order book and

  • trade against other clients

    However, when I look at the looks of fxcm, alpari, robofx, ... it appears all that they do is:

1) take my order (only as a market order)

2) take the prime they get from their liquidity

3) add 1 pip on it on either direction

4) process my order

Ideally, I'd like to be able to place orders to trade against other clients on the same brokerage/ECN.

Is there any brokers that let me do this?

Thanks!

(I'm looking for the smallest brokerage that'll let me test some algorithms before I get eaten alive by the teams of Stats PhDs, CS PhDs, and FPGA-weilding PhDs).

Bonus points if it supports the FIX protocol.

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    $\begingroup$ No personal experience with it, but how about LMAX? $\endgroup$ – emsfeld Dec 5 '12 at 12:38
  • $\begingroup$ What do you mean by trade against other clients? The broker has to take the other side of your trade in forex, at least initially, until they can fill an opposing order. That's how I understand it. $\endgroup$ – grayQuant Feb 13 '13 at 4:10
  • $\begingroup$ @grayQuant They don't 'have' to, they could also match your order against those of other clients. $\endgroup$ – wildbunny Apr 1 at 8:46
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You did not give an indication of how much you intend to fund your "operations" with thus disregarding this, I can recommend the following from personal experience:

  • Interactive Brokers (Excellent fx executions/fills, zero to extremely manageable slippage, highly competitive spreads and commission structure for what you get, FIX protocol, ECN based business model. Minus: Snapshot data, no true tick based data. )

  • Lmax (one of the best APIs I have seen and interesting business model, ECN)

  • FXAll (superior executions and liquidity, tight spreads, manageable commission structures, FIX connectivity, ECN

  • DukasCopy (pretty well established Swiss broker, tight spreads, ok liquidity,FIX connectivity, ECN based business model)

Caveat: It all depends on how much size you intend to trade (not all brokers/ECNs offer equally superior liquidity), which pairs you want to trade (not everyone offers competitive emerging market currency executions), what exact connectivity you seek, and even more importantly what trade frequency you target (= whether you want to be co-located or not).

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  • $\begingroup$ I tested IB once and you can test their API without funding your account, it works with past data I think. You can test your custom algos and do almost the same as with a real account. At the time it was the best option I could find. $\endgroup$ – JordanBelf Dec 6 '12 at 1:51
  • $\begingroup$ @JordanBelf, not entirely correct, you can access a "test account" without funding any account, however, the data is unusable for any algo testing purposes. You can hardly do anything that comes close to a real account. Yes, you can submit orders and get fills but thats it, everything else is fictitious. However, once funding an account you can request a "paper trading account" which is based on your real-time market subscriptions and behaves a lot more like a real account, barring of course market internals such as queue priority, slippage, ... $\endgroup$ – Matthias Wolf Dec 6 '12 at 2:45
  • $\begingroup$ actually you are right, thinking about it I recall now that the beta test with real data was from a NT provider for a limited time. $\endgroup$ – JordanBelf Dec 7 '12 at 18:37
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I have recently been looking for the same type of broker. This link gives a list of brokers with the minimum deposit required and commission charged. It also gives a concise helpful descriptions of NDD, STP, ECN (right at the bottom).

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@Matt Wolf has some good information.

In regards to your comment of 'trading against other clients', you want to participate in a true ECN. Believe it or not, that might require expensive setup (minimum flow requirements, minimum order sizes, etc) especially if the flow is anonymous. HotspotFx might offer some insight. according to their own faq and also talking with brokers who actually connect to Hotspot, it is not very useful if you are not going to trade avg 100k minimum sizes (1.00 lot on mt4). You can customize feeds to get avg 1-10Mil top of book, but it would cost you. If you are looking to 'test' then you need to start with a quality retail broker who can give you PoP access.

I think your search of the avg retail fx broker revealed brokers who internalize nearly 100% of their flow, with no intention of actually making a market legitimately (the proverbial 'bucketshop') The OTC retail forex community does indeed have numerous conflicts of interest for the beginner trader. It's kind of like asking the casino how to blackjack is played. They can only provide the most basic rules. If they were to go in depth into how the cards were shuffled, why they serve you 'free' alcoholic beverages, etc. you could use that to develop an informed strategy (play to win against the house). Since the majority of casino games operate on a 'you lose, I win' profit model, the best way to manage the conflict of interest is to avoid playing at such venues.

A [bucket shop] retail forex broker has a similar 'broker profits = client loses' business model. So they have every incentive to give you information that makes you trade against yourself; your 'losses' become their 'profit', your profits = broker losses; and in some cases they will just cancel your trades and send you on your way. The correct way to make the market is to emulate market prices from Prime Broker/PoP add to spread or charge commission, match orders internally, and then send net exposure off to a wholesaler. In some rare cases, a retail broker will have a 100% agency model in place, and can prove so with proper post-trade reporting and a willingness to elaborate on specifics of the technology and practices they use to actually broker your order flow. To compare to a casino running a 100% agency model, it would be like a tournament or cash game where casino earns a rake for each game played. They don't worry about the edge of the players as they are playing against themselves; they only need to provide the venue, dealer, etc for the event and take a commission for doing so.

To be fair, most retail brokers do not attract enough volume to operate profitably enough with pure agency model, or to completely offset (match) all orders in-house. Especially with increasing regulatory costs. Don't count on them telling you this though; they go through great lengths to mask their true business model and in some cases outright lie to their clients that they do not run a b-book, are STP/ECN/NDD, etc. They can easily create an offshore or hidden entity to STP their flow to or have deal with LP to receive rebate of losses. FXCM is the most high profile example of this (google fxcm trades against clients; FinanceFeeds article).

  • For USA residents, Interactive Brokers was the last hope for cheap, direct market access; FXCM had active trader acct (raw spreads), but you read what happened. Gain Capital (forex.com) and Oanda is all that is left [huge sigh]. You could ask for a 'raw spreads' account if you meet certain minimum deposits or volume, but can you be sure they are not 'trading against you'?
  • Non US residents still have LMAX, Global Prime Au, FxPIG, and a few others to pick from (I keep a private list). Most public lists end up spammy or blatantly advertise numerous bucket shops anyway because advertising dollars trump honest information (yet another conflict of interest). Pretty much you have Metatrader 4 or FIX API + your own platform, but honestly a good broker could customize your mt4 feed so you can avoid having to dabble with FIX messaging protocols which can actually vary from broker to broker.

Once you get an honest broker sorted, then you focus on actual trading and algo development which is what should be consuming the majority of your time.

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If you are looking for an ecn broker you can find a relevant list by clicking here

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It all depends what you are looking for. IC Markets you can use Paypal. Hugosway you get high leverage and more crypto options. FX Choice a lot of people use Oanda are well known and respected.

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