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Order Execution Quality

Why we disclose Order Execution Quality

We strive to provide transparent brokerage service – with special focus on order execution quality. This is why we’ve recently added an Order Execution Quality section to the offering. Customers may now cross-check, for every fill:
  • Requested vs. Fill Price
  • Round-trip latency

WYSIWYG – How to assess execution quality?

wysiwyg (pronounced: “wiz-ee-wig”) is tech jargon, short-hand for what you see is what you get. Wiz-ee-wig coding interfaces empower developers by visually updating their end-product as they code.
 
In an OTC, last-look marketplace like FX the spreads you see aren’t always the fills you get. Every broker these days publishes spreads, but spreads don’t always fill as advertised… all of which makes fill transparency all the more relevant. If you want to learn about the mechanics of OTC liquidity aggregation, check out our recent webinar on this very subject, as unfortunately it is a topic that is not universally understood.

One of our PB relationships, the LMAX Exchange, recently published an interesting (and brainy!) white-paper on how to assess execution quality. Their insight is that spread is but one of 5 elements to assess:

  1. Fill ratio: what good is a tight spread if you don’t get filled?
  2. Price variation: what if you’re slipped asymmetrically?
  3. Hold time: on technically possible vs. actual latency…
  4. Market impact: how deep is the market? You might also want to watch our recent divergence webinar!
  5. Bid-offer spread: all the above prove that this is not the be all and end all!

Collective execution quality

In addition to the individual reports submitted per user, we’ll do our best to regularly publish aggregate data for the community. In that spirit, here’s some stuff to whet your appetite!
So, what do the numbers look like for the overall community?
Some insights:
  1. 87% of trades fill within 0.1 pip of the advertised Top of Book
  2. The distribution isn’t fully symmetric. So our LPs are crooks? Don’t shoot them just yet!
  • We measure slippage vs. advertised 10 lot Top of Book – because 90%+ of trade requests are within top of book depth. It’s therefore “normal” / “fair” that orders of 10+ lots incur slippage
  • Most strategies trade the trend – e.g. systematically buying a rising market yields asymmetric, but “fair” fills – watch the “Price Variation” LMAX video above – which again stresses the importance of “Hold time”
How does volume impact fills?

The above charts plots the distribution of slippage for all orders sized 10+ lots – because 10 lots is the typical depth of the Top of Book spread we stream into MT4:

  • The blue columns on the Y Axis plot the frequency of any given slippage outcome
  • The X Axis labels slippage, measured as fill price – request price (negative means customer got worse than Top of Book stream)
  • The Red series shows the average size (in lots) of trades in each slippage bucket

E.g. for all trades exceeding the advertised Top of Book depth

  1. 45% odd of all trades larger than 10 lots filled at the advertised bid or offer
  2. 5% odd slipped positively
  3. 2 out of 3 filled within 0.1 pip of target
  4. 7-8% odd were slipped worse than -0.3 pips from request, etc.

The way forward for global FX

We have written on and pleaded the need to align interests in retail FX... alas it’s taking a while.
How long FX takes to trade on exchange is anyone’s guess, BUT things are moving forward:
Please hang in there until things become fairer – in the meantime, we’ll wiz-ee-wig FX trading for you!

2 Comments

  • Pure Pip Producer
    Posted November 16, 2017 at 4:46 pm

    Really nice…!

  • Jon Grah
    Posted May 7, 2018 at 3:46 pm

    Honestly, if prime of primes would accept retail clients directly (a few do), there would be nothing left for retail brokerages. Unless they do something like what darwinex does (e.g. rally investor capital which can be traded alongside your own or independently), there is very little value-add.
    Only value-subtract from these bucket-shops.

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The Darwinex® brand and the http://www.darwinex.com domain are commercial names used by Tradeslide Trading Tech Limited, a company regulated by the Financial Conduct Authority (FCA) in the United Kingdom with FRN 586466, with company registration number 08061368 and registered office in Acre House, 11-15 William Road, London NW1 3ER, UK. and by Sapiens Markets EU Sociedad de Valores SA, a company regulated by the Comisión Nacional del Mercado de Valores (CNMV) in Spain under the number 311, with CIF A10537348 and registered office in Calle de Recoletos, 19, Bajo, 28001 Madrid, Spain.

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