FXCM’s New Lower Spreads

Published on 4 years, 4 months ago in forex brokers. 2 Comments

Jaclyn sends me an update on FXCM’s New Fractional Price Pip,

FXCM (www.fxcm.com) announced today they will now offer Fractional Pip Pricing. Clients can now see an additional digit in the price quotes.

Instead of quoting full pips, FXCM will now quote prices in tenths of pips. The digit representing a tenth of a pip appears to the right of the two large bold face digits:

FXCM New Fractional Pips

“The Benefit is clear,” Drew Niv CEO of the forex broker stated, “Fractional pip pricing should reduce bid/ask spreads on all the more popular currency pairs.”

FXCM’s policy is to provide clients with access to the very best spreads. FXCM introduced No Dealing Desk execution, and as one of the largest FDM’s*, FXCM has strong liquidity relationships with some of the world’s leading banks. We constantly press these banks to supply the most favorable prices to our clients.

As a result, the banks are now providing streaming six-digit prices to FXCM. While competition intensifies, Fractional Pip Pricing should reduce bid/ask spreads even further.

“FXCM is delighted to pass these more accurate, tighter prices to our clients” said Niv.

For full details on Fractional Pip Pricing view this video: http://forex.acrobat.com/p68453006/

2 Responses to “FXCM’s New Lower Spreads”

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  • Optional
    4 years, 4 months ago.

    Will there be times that this system produces higher spread prices too?

  • Tim
    4 years, 4 months ago.

    Hi, this is Tim Shea, the producer of the video about Fractional Pip pricing. I’d like to elaborate more on the benefits of fractional pips, and why I think that it is a great development in the FX market. As I mentioned in my video, since the introduction of fractional pips, we’ve seen generally lower spreads. The spreads I used in my video are real spreads coming from real prices.

    Fractional pips introduces more precise pricing. This puts more pressure on the banks that provide us liquidity to offer us better prices. The multiple banks on our NDD system (currently 6, and we are working to add more) each have different prices. The system fills orders with the bank that offers the best prices for the necessary liquidity. So, that means if a bank wants order flow from our NDD system, it must give us higher bid prices and/or lower ask prices than the other banks are at the time. With an average nominal trading volume of over $200 billion per month, there’s a lot of order flow that’s worth competing for.

    With fractional pips, the pricing becomes keener. There are many instances where several banks want to pick up some of our order flow. Without fractional pips, we had instances where 3 banks would quote a 3 pip spread, and that’s the lowest they are willing to go. They would want to cut their prices to pick up more business, but when a spread is 3 pips, going to 2 pips is cutting your price by 33%. That’s a lot! Many banks would be unwilling to do that. Now, with fractional pips, these banks can lower their spread by 5%, 10%, 20%, etc, in order to compete. So, in order to win the order flow, one bank might quote 2.8, while another quotes 2.5, and the third 2.9. Much of the time, the bank quoting 2.5 will get most or all of the orders, beating out the other 2 banks to get the business coming from the NDD system, while the bank with the highest price, 2.9, would get little or nothing of the order flow. This makes for more pressure on the banks to give better prices to the NDD system.

    The result is generally lower spreads for FXCM clients. This means their cost of trading is now lower, saving them money. We’ve gotten a positive response to fractional pips from our clients, as they enjoy saving money.

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