Stocks Futures and Options

Issue: March, 2004

Shifting Online Forex Trading Into High Gear: Not Just for Institutions Any More
by: Elizabeth Thompson

Start, stop. Start, stop. Start, stop. That, in a nutshell, was how I drove my first stick shift car. After several days of nearly ruining my car’s transmission, I could release the clutch and press the gas pedal harmoniously. No more stalling. Soon I could weave that little VW in and out of traffic like a pro.

Often times, learning how to use anything that ultimately gives you more control may make you feel almost out of control at first. Such, too, is true with online systems.

According to Josh Levy, North American head of CMC Group plc, learning to drive a stick shift is a bit like learning to use CMC’s Marketmaker, an online forex trading platform (made available to U.S. traders only since July 2003, after seven years in successful operation across the pond). The first online forex trading platform kicked into gear in 1996 and subsequently won, among other awards, the Millennium Product Award from the U.K. government and the Euromoney award for best independent non-bank trading platform.

“What anyone who drives stick will tell you is that it’s kind of harrowing at first, and it’s not as easy as driving automatic,” says Levy, “but once you get comfortable with driving stick shift, most manual stick drivers will tell you that it offers you control, more power, more flexibility and just an overall better sense of a driving experience. Our customers have told us that our platform is the same.”

But will American forex traders find that Marketmaker offers an overall better sense of a forex trading experience than a more common, but more limited trading platform? If numbers are any indication, then the answer is yes. Since CMC opened its New York office last summer, the number of U.S. accounts has increased steadily each month, according to Levy.

CMC Forex opened for business in the U.S. as a registered futures commission merchant (putting them under CFTC oversight) at quite an opportune time, as interest in foreign exchange trading has grown significantly among retail traders in the last year. But heightened interest in forex trading probably is not the only reason their business has seen a boost. They have a lot of products as well as customizable features and flexible trading sizes through the Marketmaker platform.

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This includes more than 300 currency products, such as commonly traded currencies like the euro and yen, and even more exotic currencies – the South African rand and the Estonian kroon for starters. And while many forex dealers offer only spot, or cash currencies, CMC has currency forwards and swaps under the hood. Says Levy, “We can even trade a forward that would expire, or that would be set to the same value date as the currency futures traded in Chicago. For a lot of guys who are used to trading currency futures, that’s a tremendous advantage.”

Add to this advantage the fact that Marketmaker users can hedge in exact amounts rather than just approximations, in essence giving traders more control. Currency futures traders, for example, typically have to trade in standard sized lots. That’s just the way futures work, with standardization being the norm. With Marketmaker, on the other hand, users could trade, for example, $123,456 to a specified currency.

Before users begin navigating through forex with exact hedges, they can analyze the market using market information provided by the platform. Marketmaker offers users access to integrated charts, news, third-party commentary and research – all customizable – again giving users more control. For instance, users can change the size and location of charts and news; they can choose whether or not to view their open positions and profits and losses in real time. Also, because these windows are integrated, a user won’t have to close the trading window to view charts, news or market commentary. Sure, it may take a while for users to customize their screens, but once done, they can easily shift their focus from a trade to news, from news to charts, etc.

But is that more than the average trader needs? Perhaps, but it could also give the average Joe a leg up with the opportunity to use a platform suited for professional traders and skilled individual traders. Levy notes that because Marketmaker is so sophisticated, it has attracted institutional customers as well as individuals.

So how can it be suited to non-professionals as well? “Following the success of the Chicago futures exchanges, CMC recently took the decision to make available…E-mini-style products, so our minimum account size in line with the E-mini concept is just $500 now,” explains Levy.

He adds that because CMC is all-electronic and acts as a market maker, earning money from its own trades, CMC’s platform is free of commission fees and other user fees. Thus making it all the more accessible for virtually all groups of traders – or at least those who enjoy driving stick.

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