FXCM (Forex Capital Markets) is a New York-based online retail FX broker. Founded in 1999, FXCM were one of the pioneers of retail FX trading. They have since expanded into non-US markets with offices in Hong Kong, London, Tokyo, Paris, Berlin, Sydney, Dubai, Milan, Santiago de Chile and Athens.
They offer online forex, CFD, equities, and commodities trading, as well as financial spread betting via their own online trading platforms, and also via third-party platforms such as the ubiquitous MetaTrader 4. In addition to the main FXCM brand, the firm also owns the FX news and research site www.dailyfx.com.
One of the main selling points of FXCM is that they offer Straight Through Processing (also known as Direct Market Access or DMA) via their ‘No Dealing Desk’ service rather than the dealing desk/market making model that is more common in the retail FX world. This means that traders can trade directly with liquidity providers, which means that they can choose from several quotes when buying or selling currencies. This results in more price transparency and tighter spreads. It also means that you can trade at the actual market values, rather than the virtual prices that are on offer at market making brokers.
With STP, there is no conflict of interest between the broker and the trader, as it is merely an intermediary. The main problem with dealing desk brokers is that all of their prices are effectively made up by the broker, and although they generally mirror the movements of the market, there is no direct correlation. This means that they could, in theory, alter their prices in real-time to increase their own profitability at the expense of their customers. While there is regulation in place to ensure that this does not happen, it is a little more reassuring if you can take this question out of the equation entirely. With Straight Through Processing, the price providers (banks) do not see your stops, limits, and entry orders, which reduces the potential for market manipulation, and the competition between the liquidity providers also serves to prevent any foul play.
While every forex broker claims to offer lower spreads, in FXCM’s case, they may have some basis for the claim. For example, the EUR/USD spread is usually 2.6 pips, and the GBP/USD spread is usually around the 3 pip mark. FXCM offer fractional pips, which reduces the size of their spreads further, but it is the increased competition inherent in their No Dealing Desk model that has the biggest impact on spread sizes, as spreads are one of the main battlegrounds between price providers.
FXCM was one of the first brokers to fully integrate the popular Metatrader 4 platform, which is principally used for algorithmic trading. Also, the fact that FXCM places no trading restrictions on traders makes them ideal for people who wish to use this platform. High frequency scalping trades can be made without restriction, and entry orders can be placed anywhere, even inside the spread. Trades can be made during breaking news, which facilitates news-based trading. Also, traders are entitled to receive positive rolls at all margin levels, and all rollover amounts are displayed in advance, in line with the firm’s commitment to greater transparency.
In addition to allowing traders to access a range of liquidity providers, FXCM also provide traders with a wealth of trading information for free, including news, technical analysis charts, market data, and a broad range of educational materials.