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How to Choose a FOREX Provider
Middle East Money Summit
Dubai
October 2008
Betsy Waters
dbFX Global Director
Deutsche Bank
What is FOREX ?

FOREX or FX or Foreign Exchange trading is buying one
currency and selling another currency with the intention of
making a financial gain or return
How can you invest in Forex
Indirect Investing in Forex
Direct Investing in Forex

Local equities in companies
with international business

Non Local Bank Accounts

Non local equities

Exchange Traded Funds (ETF)

Bonds

FX online margin Trading
Self Directed Traders
Managed Accounts
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How Big is the FX Market
The Global FX Market has over 3 Trillion USD in volume daily
FX is a
growing
asset
class
3500
3000
2500
2000
1500
Total Turnover
1000
500
0
1989
1992
1995
1998
2001
2004
2007
Source: Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, 2007
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FX Compared to Other Markets
US Equity
Market
US Bond
Market
Global
FOREX
Market
24 / 5.5
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The Three Most Popular Trading Strategies in FX
CARRY
MOMENTUM
VALUATION
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How to decide who to trade with
What are the steps to take to choose an Forex provider
We will develop a step by step guide
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Questions to ask yourself
 How
much are you investing ?
 What
is your trading style ?
 What
level of risk or leverage are you comfortable
with ?
 What
are the different regulatory environments and
how does that effect you ?
 A look
at the terms regarding how the Forex provider
manage their currency risk
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What is your trading style ?
Questions
Considerations
How much are you investing ?
What % of your investable assets
How much are you depositing?
Interest paid on balances
Credit rating of your counterparty
How do you make your trading
decisions ?
Fundamental: What is the research offering, Macro ?
Technical : Charting capabilities
Can you trade from charts
Can you track open positions from the charts
What is the time frame of your trades ?
Minutes, Hours, Days, Months
Do you open trades from the trade
platform or by leaving orders?
Order Functionality
Do you link orders to open trades ?
Order Functionality of orders linked to positions
How comfortable are you with risk ?
Leverage desired
www.babypip.com Tools – Forex Broker Guide
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Leverage and what it means to you

Forex Brokers routinely offer leverage as high as 200 to 1.

Define your risk tolerance

Use leverage to match your risk tolerance

Currently the Forex market can move 1% in one day
How much leverage are you comfortable with ?
Value of
account
Leverage
1,000,000 1 to 1
1,000,000 10 to 1
1,000,000 100 to 1
% Value of
$ Value of
$ Value of
account with 1% poistion with 1% account with 1%
Position size
market move
market move
market move
1,000,000
1%
990,000
990,000
10,000,000
10%
9,900,000
900,000
100,000,000
100%
99,000,000
0
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Regulatory Environments

Not all Forex Providers are regulated

Not all regulators have the same rules
Web site
NFA – National Futures
Association
http://www.nfa.futures.org
UK
FSA - Financial Services
Authority
http://www.fsa.gov.uk/
Europe
MIFID guideline
Listed on FSA site
USA
www.cftc.gov
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UK Regulatory Environment
FSA – Financial Services Authority

Conduct of Business Rules (COB)

MiFID – New COB rules
– dbFX
– is a Non deliverable, daily cash settled,
–
– Contract for Difference (CFD)
CFD is a regulated investment so MiFID applies to dbFX.
MiFID: Markets In Financial Instruments Directive

Financial Promotions

Classification

Appropriateness and Suitability Test

Best Execution

Complaints Handling

Inducements
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Treating Clients Fairly (TCF)
 TCF
is an initiative from the FSA which aims to deliver six improved
outcomes for retail consumers.
–
Corporate Culture
–
Identified Consumer Group
–
Clear Information
–
Advise is Suitable
–
Products that Perform
–
Unreasonable post –sale barriers
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US Regulatory Environment
CFTC - Commodity Futures Trading Commission (a US Government Regulator)
NFA - National Futures Association (a Self-Regulatory Organization)

Registration
–

SRO Status
–

Firms conducting Off-Exchange FX can register as "Futures Commission
Merchants" ("FCMs") since 2001
NFA designates FCMs engaged in OTC FX as "Forex Dealer Members"
Capital Requirements –
–
FDMs currently required to have US $5M, going to $20M

Brokers/Trading Advisers

Safety of Client Funds

Required Disclosures
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Dealing with a Forex Provider
 Terms
you may encounter:
–
Broker: no dealing desk
–
Broker: dealing desk
–
Bank
Let’s take the mystery out of these terms
and look at what they really mean
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What does “no dealing desk” mean
Bank Liquidity
Provider
Forex Broker
Trader
Price from Bank A
Price from Bank B
1. Determines best price
2. Adds Markup to Price
3. Send Price to client
Decides
to make a
trade
Price from Bank C
Accepts the Trade
Trade Accept Message
Price Display
1. Finds the best price
2. Request a Trade
Trade Accept Message
Request a Trade
1. Trade is booked
2. Collateral account
debit or credited
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What does “dealing desk” mean
Bank Liquidity
Provider
Forex Provider
Trader
Price from Bank A
Price from Bank B
1. Determines best price
2. Adds Markup to Price
3. Send Price to client
Decides
to make a
trade
Price from Bank C
Dealing Desk will
1. Accepts the client trade
2. Decided to offset the
trade or not with a bank
3. Offset trades with banks
Trade Accept Message
Accepts the Trade
Price Display
Request a Trade
1. Trade is booked
2. Collateral account
debit or credited
Request a Trade from
a bank
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What does dealing with a Bank mean
Bank
Price from Bank
Trader
Price Display
Decides
to make a
trade
Bank will
1. Accepts the client trade
2. Manage the currency
Risk
Request a Trade
Trade Accept Message
1. Trade is booked
2. Collateral account
debit or credited
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Now you have a short list of providers
Before you start trading
 Open
 Use
a demo
a demo from the broker you will trade with
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Now you have a process to choose a Forex
Provider
 You
have the questions to ask yourself about
–
Your investment levels
–
Your trading style
–
Your risk tolerance
 You
understand the different regulatory environments and
how they affect you
 We
have taken the mystery out of the words used regarding
how the providers manage their currency risk.
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Deutsche Bank FX
 Deutsche
Bank is recognized as the world leader in FX
Trading
–
Market share is over 20% of the global market,
Deutsch Bank is the #1 FX Bank voted by Euromoney
Magazine for the last four years
–
Constant innovation to provide the best market
information and market access to our clients
–
Award winning market research in FX and Global
Markets
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dbFX for Your Online FX Trading
What do you get ?
 Funds
deposited with Deutsche Bank
 Trading
directly with Deutsche Bank
 Access
to Deutsche Bank Research
 24
hour sales and support via phone, email or instant messenger
 Leverage
 Easy
of up to 1% or 100 times
to use Trading Platform
–
Real time charts
–
Trade from charts
–
Risk Management tools
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How to get started
 Go
to www.dbfxarabic.com
 Sign
up for a demo and PRACTICE
 Applications
 Accounts
are on-line or from our sales team
are funded with cash
 Fund
with as little as $5,000 USD or or the equivalent in GBP,
EUR or JPY.
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