Ooh, it looks like the competition is heating up between some forex brokers! Word through the grapevine is that FXCM Australia and DMM FX Australia are battling it out with ultra-low fixed spreads.
Less than a month after FXCM introduced a raw forex spread price model for its U.S. accounts, FXCM’s Australian branch announced that it would be offering a raw spread and commission model for its clients. According to the firm, it could allow traders to reduce transactions costs by as much as 50% compared to the traditional spread structure.
Under the new pricing model, the broker would display raw spreads received from various liquidity providers. Traders could opt to use the tightest bid-ask spread and pay a commission charge instead. FXCM claims that this commission-based structure would reduce the visible spread by over 2 pips on all major pairs.
New accounts opened under FXCM Australia would be able to take advantage of this new spread and commission structure while eligible existing live accounts were upgraded to include this feature last Friday. According to FXCM Managing Director Jessica Beckstead, the feedback on this raw spread model has been overwhelmingly positive.
Not wanting to get left behind, online forex and CFDs broker DMM FX Australia also announced its move to implement ultra-low fixed spreads for most of the currency pairs available on its platform. ‘’DMM FX clients will experience our lowest fixed spreads ever, from 0.5 pips, on all pairs, even our majors are fixed,” declared DMM FX CEO Koji Miura last week.
However, the firm disclosed that these “ultra-low fixed spreads” would be offered 99% of the time during normal trading hours, with the potential for widening spreads during volatile market conditions. As for FXCM, their online disclosure statement implies that the firm could still modify its commission structure or adjust spreads based on the company’s commercial decisions.
This goes to show that, while brokers are coming up with more competitive strategies to lower transaction costs for its clients in an effort to boost trading activity and gain new accounts, forex traders should remember that these offerings are still very much dependent on market conditions. Broker transparency remains as important as ever, as clients should be aware of any potential changes in the spread and commission structure. In other words, if you think a new offering is way too good to be true, better do your homework and read the fine print!
Moving forward, more forex brokers might decide to adopt this raw pricing model to keep up with the competition. Do you think this would be enough to boost trading volumes and volatility? Share your thoughts in our comments section!