Retail forex platform
Encyclopedia
Retail foreign exchange trading is a small segment of the large foreign exchange market
. In 2007 it had been speculated that volume from retail foreign exchange trading represents 5 percent of the whole foreign exchange market which amounts to $50–100 billion in daily trading turnover. The retail foreign exchange market has been growing. In general retail customers are able to trade spot currencies
. Due to the increasing tendency in the past years of the gradual shift from traditional intrabank 'paper' trading to the more advanced and accurate electronic trading
, there has been spur in software development in this field. This change provided different types of trading platforms
and tools intended for the use by bank
s, portfolio manager
s, retail brokers and retail traders.
One of the most important tools required to perform a foreign exchange transaction is the trading platform providing retail traders and brokers with accurate currency quotes.
, GFT, CMC Markets
, Saxo Bank
(then known as Midas) and a handful of others. Most except CMC, Saxo & Matchbook FX were based on the ACT foreign exchange trading technology and GUI
. These platforms were good enough at the time but required constant investments in research and development
and this development cost too much. This was the first wave.
The second wave was in the early 2000s: several software companies entered the retail foreign exchange trading market by launching their own versions of trading platforms, like Apbg Group, Ctn Systems and MetaTrader 4
from MetaQuotes Software
. Typically these versions were cumbersome for both front-end users (retail traders) and back-end users (retail brokers) due to the misunderstanding of the developers about the foreign exchange market and also because of the insufficient programming tools/languages at the time.
Simultaneously most of the retail brokers kept using and developing their own systems as they waited for better platforms which were yet to be developed.
It is only in the last couple of years that the advanced trading platforms started to emerge. Platforms like Multicharts
and cTrader put much stronger emphasis on the user interface (GUI) making it more accessible to the retail traders while making trading on it very simple and intuitive. Platforms started to focus on social networking as a way to attract new users, after the emergence of Facebook, Twitter and other social media networks. Social trading
has been growing intensely in the last years, especially after platforms like Currensee
, Zecco.com
, eToro
or FXStat
appeared.
Moreover, a very strong emphasis was put on the back-end which allowed the retail brokers better control over their operations, better reporting and accurate system and ways to manage marketing campaigns.
Gradually this wave is replacing the previous second wave with a major shift now to the friendlier and more intuitive systems of the third wave which according to Aite Group are necessary in order to maintain growth.
and CitiFX Pro
are some of the banks that were offering this service. However Deutsche Bank
shut down its DBFX service in 2011.
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
. In 2007 it had been speculated that volume from retail foreign exchange trading represents 5 percent of the whole foreign exchange market which amounts to $50–100 billion in daily trading turnover. The retail foreign exchange market has been growing. In general retail customers are able to trade spot currencies
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...
. Due to the increasing tendency in the past years of the gradual shift from traditional intrabank 'paper' trading to the more advanced and accurate electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...
, there has been spur in software development in this field. This change provided different types of trading platforms
Electronic trading platform
In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes products such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a...
and tools intended for the use by bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s, portfolio manager
Portfolio manager
A portfolio manager is either a person who makes investment decisions using money other people have placed under his or her control or a person who manages a financial institution's asset and liability portfolios....
s, retail brokers and retail traders.
One of the most important tools required to perform a foreign exchange transaction is the trading platform providing retail traders and brokers with accurate currency quotes.
History and new developments
Since 1996, when retail foreign exchange trading was first introduced, several brokers who lacked the sufficient tools developed their own trading platforms tailored specifically to their needs. The 1st retail FX brokers were MG Forex, The Matchbook FX ECNMatchbook FX
Matchbook FX was an internet-based Electronic communication network for trading currency online in the FX or Foreign exchange market.-History:...
, GFT, CMC Markets
CMC Markets
CMC Markets is a UK based financial derivatives dealer. The company offers online trading in spread betting, Contract for difference and Foreign Exchange across world markets...
, Saxo Bank
Saxo Bank
Saxo Bank is an online Danish investment bank. It was founded as a brokerage firm in 1992, under the name Midas Fondsmæglerselskab, by Lars Seier Christensen, Kim Fournais and Marc Hauschildt. The name was changed to Saxo when the company obtained a banking license in 2001. Saxo offers trading...
(then known as Midas) and a handful of others. Most except CMC, Saxo & Matchbook FX were based on the ACT foreign exchange trading technology and GUI
Graphical user interface
In computing, a graphical user interface is a type of user interface that allows users to interact with electronic devices with images rather than text commands. GUIs can be used in computers, hand-held devices such as MP3 players, portable media players or gaming devices, household appliances and...
. These platforms were good enough at the time but required constant investments in research and development
Research and development
The phrase research and development , according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of...
and this development cost too much. This was the first wave.
The second wave was in the early 2000s: several software companies entered the retail foreign exchange trading market by launching their own versions of trading platforms, like Apbg Group, Ctn Systems and MetaTrader 4
MetaTrader 4
MetaTrader 4, better known as MT4, is an electronic trading platform widely used by online retail foreign exchange speculative traders. It was developed by MetaQuotes Software and released in 2005. The software is licensed to foreign exchange brokers who provide the software to their clients. ...
from MetaQuotes Software
MetaQuotes Software
MetaQuotes Software Corp is a software company that produces online trading platform MetaTrader 4 more commonly known as MT4. It specializing in the development of software for financial markets and is registered in Cyprus but founded and primarily based in Russia. Its main product MT4 is used by...
. Typically these versions were cumbersome for both front-end users (retail traders) and back-end users (retail brokers) due to the misunderstanding of the developers about the foreign exchange market and also because of the insufficient programming tools/languages at the time.
Simultaneously most of the retail brokers kept using and developing their own systems as they waited for better platforms which were yet to be developed.
It is only in the last couple of years that the advanced trading platforms started to emerge. Platforms like Multicharts
Multicharts
-Introduction :MultiCharts is a Windows-based application which is designed, sold and distributed by MultiCharts, LLC. The company is based in Columbus, Ohio, in the United States. MultiCharts is technical analysis software for analyzing the financial markets and trading. It uses a proprietary...
and cTrader put much stronger emphasis on the user interface (GUI) making it more accessible to the retail traders while making trading on it very simple and intuitive. Platforms started to focus on social networking as a way to attract new users, after the emergence of Facebook, Twitter and other social media networks. Social trading
Social trading
Social trading is the process through which online financial investors rely mostly on user generated financial content gathered from various Web 2.0 applications as the major information source for making financial trading decisions.. Social trading introduces a new way of analyzing financial data...
has been growing intensely in the last years, especially after platforms like Currensee
Currensee
Currensee is a financial services company based in Boston to serve as a social network for foreign exchange traders...
, Zecco.com
Zecco.com
Zecco.com is an online investing company with operations in San Francisco, California and Pasadena, California. Investors on Zecco.com have access to Zecco Trading, its stock, option, mutual fund and bond trading platform. Investors also have access to Zecco Forex, which provides spot foreign...
, eToro
EToro
eToro is a financial trading company based in Cyprus. It provides personal online financial services in forex, commodities and stock indices through its own electronic trading platform....
or FXStat
FxStat Group
FxStat or FxStat Group is a financial services company created in April 2010 and focusing on the foreign exchange market. FxStat's forex platform initially provided social networking and financial analysis features...
appeared.
Moreover, a very strong emphasis was put on the back-end which allowed the retail brokers better control over their operations, better reporting and accurate system and ways to manage marketing campaigns.
Gradually this wave is replacing the previous second wave with a major shift now to the friendlier and more intuitive systems of the third wave which according to Aite Group are necessary in order to maintain growth.
Peer to Peer Trading Systems
In the South Pacific, "peer-to-peer" foreign exchange services, supported by local government agencies, are emerging in an attempt to reduce transaction costs to heavily remittance-dependent nations, such as Tonga and Samoa.Banks
In 2006 a few banks have started offering foreign exchange trading services to individual traders and money managers. DBFXDBFX
dbFX was Deutsche Bank’s online margin forex trading platform for individuals which was shut down on 13 May 2011. The client list was bought by Gain Capital and existing clients were directed to Gain's retail service forex.com upon closure of the business....
and CitiFX Pro
CitiFX Pro
CitiFX Pro is Citigroup's online foreign exchange market trading platform for active individual and small institutional clients including commodity trading advisors, broker-dealers, money managers, and hedge funds...
are some of the banks that were offering this service. However Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
shut down its DBFX service in 2011.