Soren, with all due respect: you seem to be a serious man, how can you post such a marketing gimmick as "direct market access in fx"with a "liquidity bridge"? What is "direct market access" in fx at all? Inside chat in Bloomberg terminals?

Hi Alex - this is a bit "insider topic", and you are excused.

Hello Soren. I do not have much experience in using this concept with modern algorithms. It was used in the early years of trading the ES as example.

Discretionary trades were placed across eight different brokers to get the needed liquidity.

Søren Lanng, I must agree somewhat with Alex. You have to be a bit more clear about what exactly is DMA. How would you connect to the LP bridge? How much would such a setup cost (initial + maintenance)? How do you handle partial fills, rejections, post trade settlement, etc?

Your photo diagram doesn't make a lot of sense. Even with a FIX api, you still need some sort of "front end" to pass instructions to the bridge. MT4 rose to popularity primarily because a) has custom algo capability + basic charting + order routing ability in 1, b) off-the-shelf setup, and c) massive 3rd party developer community.

Søren Lanng , I must agree somewhat with Alex Krishtop. You have to be a bit more clear about what exactly is DMA. How would you connect to the LP bridge? How much would such a setup cost (initial + maintenance)? How do you handle partial fills, rejections, post trade settlement, etc?

Your photo diagram doesn't make a lot of sense. Even with a FIX api, you still need some sort of "front end" to pass instructions to the bridge. MT4 rose to popularity primarily because a) has custom algo capability + basic charting + order routing ability in 1, b) off-the-shelf setup, and c) massive 3rd party developer community.

Using a different front end does not automatically make it DMA. If it is not going to a Tier 1 (Prime Broker) or Tier 2 (Prime of Prime) broker with some sort of post trade reporting (tracking), how can you be sure it is DMA?

FX DMA is an an idea long past due. Bypassing the middleman makes the markets more efficient and can reduce a number of the nefarious shenanigans imposed on many of the market participants. Politics, not engineering limitations, are the only obstacle.

Does anyone remember the crazy spreads in March of 2009? It wasn't because there were fewer participants at that time. It was due to liquidity provider chicanery on a broad scale in a volatile market. The proof is the ES spreads were tight as ever in the same volatile market. The difference is regulated vs unregulated markets.

I sometimes wonder what prevents LPs from doing the same all the time. Perhaps only a vast network of arbitragers of all kinds.

John, I'd rather say that it's the difference between an exchange-traded vs OTC market; both could be regulated, but the price structure will be different. Look at stocks for example.

Jon, in my humble opinion the exponential rise of MT4 was in the first place caused by explosion of bucketshops offering "trading accounts" with virtually no limit — and at the same time tight and seamless integration of this platform with a particular shop. In other words, the end used doesn't have to do ANY setup: he simply downloads and runs the software, and starts "trading". Things which you mention are of course also very important, especially the intuitive and user-friendly interface, but the starting point was what I mentioned above.

As I recall it was MT4 that had a control panel for liquidity providers which allows them many knobs and dials to manipulate spreads in deceptive ways to extract more money from retail investors. It is nothing at all like a simple order book found at regulated exchanges. One of the brokers I used to be with who began using/offering that platform had to perform a sizable programming effort to strip out that deceptive functionality just to get back to a straight orderbook when integrating that platform into their brokerage environment. If I dig through my files I may still have a copy of the manual explaining how each of the knobs and dials can be adjusted to increase the spreads. In essence the quotes become a floating envelope of changing prices which appear randomly chaotic to the retail trader. That manual may be available on the web.

Jon, your are right not all is told. But I think the picture and the text is quite clear, and show the principle of how to get closer to the market.

John, in brief — you're right. MT was originally developed for market makers (dealers), and has all the required functionality. I couldn't believe my eyes when I started noticing that now MT was offered as a front-end by, for example, certain aggregators.

Soren, could you please first explain where in your opinion that very market is, and then this discussion could possibly become more meaningful. We are all ears.

The dominant cause of wide spreads resulting in poor fills is market manipulation, not so much the long latencies. However, reconfiguring the execution model as per the diagram above would resolve both issues. There are two ways to force the market to yield better spreads. 1) Provide direct competition with an unmanipulated orderbook. 2) Get world banks and liquidity providers to agree to unified regulation. Either way is a daunting task. In the mean time it would be wise to focus on using longer term strategies with larger pip count moves which thus reduce the proportion of effects from poor fills.

John, please excuse me if I'm wrong, but it seems like you consider this market from a bit too retailsh point of view. In certain cases it's far more efficient to have an entity which is able to provide you with a single price for your order without the necessity of thinking about the structure of this deal. Unfortunately neither direct competition nor (and especially not!) unified regulations are able to improve the situation; in reality they make it only worse.

There is no such thing as a single price in the FX market today, prices are in most cases an aggregation from a count of LP providers. The difference among those who give you a price, if how many LP´s have been aggregated to make up the price, the ordering route, and how the order is filled, which John Devron wrote with more details.

This is one of the reasons why orders are filled with different latensies - the order is filled by different LP´s from order to order, each having their "finger print".

John Devron yes, MQ did have video and manual for the Virtual Dealer Plugin, but they aggressively removed it from YouTube. Fortunately for the sake of history, it was preserved on TPB: https://thepiratebay.org/torrent/6943545/ (video) and https://thepiratebay.org/torrent/7066441 (manual). It would be wise to seed these 2 files to preserve history.

For the DMA access that you seek, I strongly recommend a verifiable Prime of Prime or a broker who uses a PofP solely to STP their trades. Trying to go directly for a Prime Broker relationship would be cost prohibitive unless you have $10MM+ and/or x yards/month minimum volume.

Hi Jon, there are other reasons to provide a DMA than old Dealer Plugins stories - since LMAX and PrimeXM introduced their technologies for aggregation (dont know who came first), much has happened in the FX market. There are many brokers out there offering a true STP solution, but not many offering DMA.

We see a dramatic change in the FX industry these years, and it will continue to change. The barriers of; access to market, low spreads and commissions, speed of execution, access to professional front ends, liquidity - have been removed one by one - the barrier $10MM+ for a DMA has also been removed, by us.

Removing this barrier is not a decision you make, but require technologies and time of development to make it possible, and the features you mentioned in an earlier post.