Level II pricing (full ECN market depth) - difference between brokers

13 Apr 2015, 16:44Level II pricing (full ECN market depth) - difference between brokers#1
cjdduarteposts: 38since: 16 Jan 2015

The market depth (Level 2) should not be the same among brokers?
Comparing FxPro and IcMarkets, the difference is great.


Robots do not cry!
02 Jan 2017, 08:45#2
nmaxcomposts: 6since: 23 May 2016

I'd be awesome to have a reply to this question

02 Jan 2017, 23:09#3
galafrinposts: 80since: 26 Jan 2013

Obviously the set of liquifity providers to a broker based in UK does not have to be the same for Australia. Remember FOREX is uncentralized market. Weren't they much alike inside a same country ,that would be more worrying. 

15 Mar 2017, 00:17RE:#4
isomorph.0posts: 15since: 03 Feb 2017

galafrin said:

Obviously the set of liquifity providers to a broker based in UK does not have to be the same for Australia. Remember FOREX is uncentralized market. Weren't they much alike inside a same country ,that would be more worrying. 

it's not just that. and decentralization has got nothing to do with liquidity provisioning. meaning de/centralization refers to how order execution operates, ie on a central limit order book or OTC (Over-the-Counter) on a bilateral basis. for example, you have huge firms who specialize in market making for the Futures market and the Futures market is a centralized market. and yet, there are liquidity providers for this market.

liquidity is also customized on a per client basis (and by 'client' here i mean the retail broker offering trading access to retail clients like you).  since there are only about 50, more or less, insitiutional LPs, almost every retail broker pretty much accesses the same liquidity pool through their PoP or PB in terms of where it comes from (BNP, Nomura, Citibank, XTXMarkets, State Street, etc...). the difference is how the liquidity is structured for the retail broker.  

also, to keep in mind, the capital requirement to get an account nowadays with a PM has gone way up so it is way more difficult for new and/or small to medium retail brokers to get access to quality liquidity because most well known PBs don't want them as clients.  so that leaves the PoPs who are not well capitalized and suddenly we have credit counterparty risk rear its ugly head again (meaning the risks of bankruptcy are higher and so the risks that the retail traders to lose all their money at brokers using such PoPs is higher--not a good situation, just look at what happen in January 2015).

 

therefore Level 2 should be different from broker to broker.

15 Mar 2017, 00:32RE:#5
isomorph.0posts: 15since: 03 Feb 2017

cjdduarte said:

The market depth (Level 2) should not be the same among brokers?
Comparing FxPro and IcMarkets, the difference is great.

liquidity is customized on a per client basis (and by 'client' here i mean the retail broker offering trading access to retail clients like you).  since there are only about 50, more or less, insitiutional LPs, almost every retail broker pretty much accesses the same liquidity pool through their PoP or PB in terms of where it comes from (BNP, Nomura, Citibank, XTXMarkets, State Street, etc...). the difference is how the liquidity is structured for the retail broker.  

also, to keep in mind, the capital requirement to get an account nowadays with a PM has gone way up so it is way more difficult for new and/or small to medium retail brokers to get access to quality liquidity because most well known PBs don't want them as clients.  so that leaves the PoPs who are not well capitalized and suddenly we have credit counterparty risk rear its ugly head again (meaning the risks of bankruptcy are higher and so the risks that the retail traders to lose all their money at brokers using such PoPs is higher--not a good situation, just look at what happen in January 2015).  and those brokers who can't access quality liquidity resort to margined liquidity recycling, which is worse.

therefore Level 2 should be different from broker to broker.

finally, i will say that as long as you trade small (< 10M notional that is 100 standard lots), it should not matter what the liquidity is on majors.  any good B-book broker can provide you with plenty of liquidity for you to execute against, even when this liquidity comes from the broker itself (that is, not the real market).  

the only question is:  If my broker is a market maker (in which case it is not really a broker, but a dealer, hence the dealing desk), does my dealer have good enough risk management procedures in place so that when you win a trade and they lose on that trade, they are not tempted to freeze the platform, requote you, delay your position closing, spike the price feed to trigger a margin call so that they can take your money when the trade goes against them?  

they will not be tempted if they have the right client risk management procedures in place because that allows them to hedge the trade on which they are losing money in such a way as to not lose money, or at the very least minimize that loss when the client is winning.  

now we understand that it is the idiots who have no clue about risk management that go after their customers, and of course the criminal minded, conmen, who never cared about offering a real brokerage service, but only a quick way to make millions so they could disappear overnight once their goal has been reached. (watch out for all the offshore based 'brokers' as offshore regulation gives  you, the client, no protection whatsoever).

that's why you need to find a proof re their client risk management process to be 100% sure they are honest.  but even then, and even after they tell you they do have a god process in place, things can always change 6 months later as old employees leave the company and new employees are hired. if the new staff has less ethics, they could start cheating all their clients systematically. they won't tell you about it.  and this could easily happen because of the legal documents you signed and which offer you no protection whatsoever against such an eventuality.  

and this is another reason why real professionals prefer to trade on exchange, or with a Prime Broker that has an established reputation.