Whilst many FX companies across all sectors have spent the last few months operating very conservatively at a time when low volumes plagued their results on an ongoing basis, retail FX giant FXCM has been firmly engaged in an extensive growth program, picking up high-value client bases from other prominent retail FX firms.
The company has long since been recognized as the largest retail FX company in the world, however the recent campaign of acquisitions has strengthened FXCM’s bow even further. Sheer size, however, is not enough in today’s highly competitive retail FX market, therefore FXCM has not rested on its laurels and has set forth its next policy to ensure its continued upward direction.
During the past weekend, the company implemented its new pricing model to existing trading accounts in the United States as the company moves further away from the dealing desk model. As of market opening on Sunday (October 5th), all accounts of existing US customers of the broker were shifted to the new model, which envisages a totally new way of determining the size of spreads and calculating overall transaction costs.
The essence of the new pricing model is lower spreads without a mark-up, and setting the commissions seperately from the spread.
The new model means “raw” spreads, which equates to spreads without the commission being included in them, thus by default producing much lower spreads. This means that the spread offered across FXCM’s entire range of assets is now determined solely by market liquidity. Of course, these spreads are still variable and can grow during certain events such as major news releases.
As announced previously, spreads on popular currency pairs have been axed by up to 50%. As an example, for the EUR/USD pair, the average spread drops from 2.5 pips to 0.2 pips. The average spread on AUD/USD falls to 0.4 pips, on GBP/USD – to 0.6, and on USDJPY it drops to 0.3 pips.
The pricing model allows greater transparency, with commission now separated from the spread. The commission size for majors including EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, EUR/JPY, and GBP/JPY is 4 US cents per 1,000 units per side. This means that for a round-turn trade of 1,000 units, the commission would be 8 cents. The remainder of currency pairs would also see small commissions: 6 cents per 1,000 units per side, which translates in 12 cents commission expenses for a round trip.
The dates of the implementation of the new pricing model in other regions are yet unknown, the single exception being Japan. In the start of September, FXCM enabled its clients in Japan who use the Trading Station platform to switch to the new “raw” spreads model. All users of TS in Japan will be officially moved to the new model on November 3, 2014.
To make the transition to the new pricing model easier for its clients, FXCM offers a special and very informative article on the matter on its DailyFX.com website. You can read it here