Category Archives: Forex

The interbank market is the Top Tier of The Forex Market

ECNs (sometimes called Alternative Trading Systems, ATS) are regulated by the SEC essentially as brokers Dealer (BDs), which puts them in a different category from exchanges • ECN Broker Tend to handle over the counter (OTC) retail securities •  ECNs started as basically websites for traders created by young computer geeks, but increasingly functioned more as exchanges •  New SEC rules January 1997 made ECNs important by granting them access to Nasdaq National Market system •
Archipelago founded 1996 in anticipation of new rules •  Instinet: for professionals. Until 1999, it was the biggest ECN.
•  Island: for individuals, became the biggest ECN. In 1999 it did 4.9% of all Nasdaq trading volume.
The Forex Market can be divided into 3 markets. The relationship between the parties in each market is as followed:

The interbank market:
The head of the Forex market is the interbank market. At this market, banks trade with each other by contracts amongst themselves. The main objective is for banks to hold the necessary liquidity to provide for the clients. The exchange rate in this market is considered the optimal as there are no spreads. Contrary to common knowledge, the interbank market is not a centralized exchange, meaning there is no official quote linking the parties. the quote is displayed through the Inter-bank communication links such as one provided by Reuters and EBS.

The intrabank market: consists of only two parties, the banks, and clients. The bank exchanges its own currency with its clients to provide them liquidity. For example, a business in Hong Kong will trade HKD for USD with the bank to have sufficient currency to pay for one of its associations in the USA. the banks earn revenues through transaction fees. Another source of revenue is the spread, in which banks marks up the exchange rate when they sell the currency to their clients.

the clients have no choice but to accept the quote by the bank or choose another bank altogether.

This is the third tier of the Forex market, where the retail traders participate and exchange currency with each other. In this tier, the different brokers act as the liquidity providers for the retail traders. These brokers are in turn provided liquidity by the banks in the interbank market through an agreement with a single bank. Some brokers, however, have more than one liquidity providers, allowing them to have access to a more competitive spread. However, by no mean should we expect the price to be precisely what exists in the Interbank market, as collecting spread is the main source of income for the brokers.
Read more about ECN brokers in pdextrading

CEX.io launches Bitcoin Margin Trading

6FMDGoM1JHCEX.IO currently offers margin trading with 1:2 and 1:3 leverages on BTC/USD and ETH/BTC pairs. More options will be added in future.
Advantages of Margin Trading on CEX.IO
There is no need to open any extra accounts to trade with leverage.
CEX.IO offers Several leverages available for traders to open positions with 1:2 or 1:3 leverage
Rollover fee is charged only for the efficient time period, while the position is still opened.

Goldman Sachs: The market is too anxious over the weak dollar

Robin Brooks and Michael Cahill, economists at Goldman Sachs wrote that they believe that the current market for a weaker dollar is too anxious about the weak US dollar for the following reasons

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First, Figure 1 shows since 2014, dollar-weighted index against major currencies trend. Red arrows indicate the European Central Bank and the Bank of Japan easing measures in terms of driving the dollar role, the pink arrow indicates the limited role played by the Fed’s policy shift (end of 2014, the Fed abandon forward guidance, the dollar being a little boost). In short, the current dollar weakness is not affected by the Fed’s influence, but the Bank of Japan and European Central Bank policy change results. Of course, the dollar rallies or be reversed in 2014, but the European Central Bank and the Bank of Japan need to reduce irritation. We expect these two would run counter to the central bank. As the Fed is prepared to take easing, the dollar may be pared gains in 2014. However, we expect the Fed will run counter to, the Bank is expected to cut the current economy to the end of 2019 the Federal Reserve will raise interest rates by 300 basis points.

Goldman Sachs: the ECB will cut interest rates again within 12 months

euro-dollar Draghi Reviews detonated euro reversal, in took less than 90 minutes to reverse the decline of 1.6% of the total stimulus measures caused by the ECB, the highest intraday volatility of the biggest since last November.

However, Goldman comments on Draghi’s steps does not seem to buy it. Goldman Sachs believes that Draghi is not caused by the euro rally is reasonable, it will be difficult to avoid the ECB to cut interest rates again.

Financial Network station MarketWatch reported, chief currency strategist at Goldman Sachs analysts Robin Brooks and his team said in a report reiterated the euro in the next 12 months is likely to be reduced to 95 cents. In fact, after many analysts hold this view has recently changed his views.

Goldman Sachs team, “said the ECB will eventually tend to doves, as was the case since June 2014 – The European Central Bank may eventually cut interest rates again.” June 2014 was the first time the ECB deposit rate declined below zero.

On Thursday, the European Central Bank cut deposit and lending rates, to expand the amount of monthly asset purchases, and start a new round of TLTRO (long-term refinancing) operation, more than economists expected. ECB decided to incorporate corporate bonds within the quantitative easing program, and provide a new round of bank loans attractive, the market surprise.

Further easing by the ECB boosted European stocks rebound at first, the euro fell sharply and hit 1.0822 dollars low. However,It did not last long, Draghi seems to inadvertently mentioned at the end of the ECB meeting, there is no need for further interest rate cuts expected, and said that “the future focus will turn to negative interest rates of other non-traditional tools, such as QE”. Subsequent reversal of market, the euro against the dollar rebounded quickly, less than 90 minutes to reverse the decline of 1.6 per cent of all ECB stimulus caused and stand on the intraday high of $ 1.11218, intraday volatility highest since last November maximum.

Goldman Sachs analyst said, “but also because of the euro implies a high Draghi cut interest rates further barriers, the market will once described as ‘the ECB’s bullet was over’.”

Some analysts pointed out that negative interest rates undermined the banking industry profit level, Draghi appears to have a press conference on Thursday to admit this. Targeted new round TLTRO operation and expansion of the asset purchase program, is considered to some extent offset the impact of negative interest rates brought about. Thus, some market participants interpret this as the end of the ECB’s rate cut cycle, pushing the euro higher.

However, Goldman Sachs believes that the possibility of the European Central Bank cut interest rates further excluded premature. “We believe that the ECB’s policy will have to face the limitations of sovereign bond purchases, to relax monetary conditions sufficiently to achieve the inflation target.”

They added, “We maintain the euro in a year will be reduced to 95 cents point of view, but do not think the risk-reward attractive in the short term.”

Source biz888.biz