Our main aim is to be the lowest cost provider in the Retail FX & CFD Brokerage space. It’s our mission to offer a competitive yet reliable brokerage service and, provide our global client base with the best pricing, regardless of changing market conditions.
Tickmill also offers an institutional liquidity solution. We’ve designed it specifically for institutional and high-volume traders looking for easy and quick access to institutional FX and CFDs on indices and commodities. Cultivated to create exceptional conditions such as ultra-low spreads, super-fast execution, and competitive commission rates, it’s an unbeatable offering.
So, Johnny, what is liquidity?
Liquidity is the main element that makes any market efficient and competitive. It’s the extent to which a product or asset can be bought or sold at a stable price that reflects its real value. In simple terms, it comes down to the fact that if there are more buyers and sellers in the market, then the liquidity will be deeper.
For a market to be highly liquid, there must be a substantial number of buyers and sellers. In FX, the liquidity is measured by the depth of market, the trading volume, and the Bid/Ask Spread. The quality of the liquidity correlates directly to the quality of the trading experience.
Who are the Primary Liquidity Providers (LPs) in FX and what are their roles?
The primary LPs in the FX market are the large investment banks and financial institutions. They are the ones willing to quote a buy and a sell price on an instrument to their counterparties. The quotes they provide are usually based on how they anticipate currency movements will take place and what they believe the counterparty might be interested in doing. They often make their money by taking the counter position in the trade rather than relying on the spread.
In recent years, Non-Bank LPs have started playing a vital role in providing and improving access to liquidity in OTC FX products. Firms like XTX Markets have ranked in the top 5 largest FX liquidity providers globally.
So, it is better to work with multiple liquidity providers?
Thehigher the concentration of Liquidity providers the more competitive theenvironment will be in pricing the instrument. The more liquid an asset is, thetighter and more readily available the price will be. However, having multipleLPs can have its drawbacks. The broker will need to split resources andcapital requirements, which is unwieldy and makes the business susceptible toerrors.
At Tickmill we carefully select our LPs andconstantly monitor their performance based on various metrics.
OK. So, what are the metrics that you monitor?
- Response Time / Latency
- Execution Speed
- Fill Ratio
- Market Impact
I’d like to understand a bit more about who Tickmill’s Trading Counterparties are & the liquidity network constitute of. Can you tell us a bit more?
We’re connected to a large number of Liquidity providers that include Tier1 Banks, Non-Bank Market Makers, Prime of Primes & ECN Trading Venues.
Tier1 Banks Include: Barclays, JPMorgan, UBS, Deutsche Bank, Citi, Goldman Sachs, HSBC
Non-Bank LPs Include: XTX Markets, HCTech, Citadel Securities, Jump Trading
Prime/Pops: Saxo Bank, ISPrime, CMC, ADMIS, CFH
ECN Trading Venues: 360TGTX, LMAX
Wow, that’s quite a list! So, why are Tickmill’s Spreads lower than its competitors?
As one of the largest brokers in the world, we have spent years building a deep liquidity network and investing in our pricing technology. We capitalize on our established institutional relationships across the globe to provide deep liquidity pools with low-latency connectivity and extra tight pricing.
Our advanced order routing capabilities ensure client fulfillment even during the most volatile market fluctuations. Our highly developed liquidity networks provide intuitive, customizable pricing to facilitate superior trade transactions and reduce each client’s cost of execution. This also allows us to cater to all client types and all different kinds of trading strategies.
With all the investment in building the liquidity network, can you tell us more about the Infrastructure & Pricing Technology?
Ourservers are located at the Equinix LD4 (in London, United Kingdom) and EquinixNY4 (in New York, United States) which are the world’s leading sites for FX lowlatency connectivity. To ensure ultra-low latency connectivity, we haveestablished cross connects with our Liquidity providers combined withstate-of-the-art price aggregation and execution technology. For the past 5+years we’ve partnered with OneZero which is a global leader in tradingtechnology and has been key in helping us achieve our current position.
A solid optimized technology infrastructure plays alarge role in providing a seamless trading journey for the clients. Webelieve that investing in technology is one of main factors for future growthand retaining quality clients.
Do you aggregate liquidity between different LPs?
In short, yes. To be able to get the tightest spreads, we aggregate pricing from various LPs and transmit the best bid and best ask from the aggregated pool to our clients. This will also ensure that in the case the connection with any single LP drops, there is a constant back-up that guarantees that the trading experience of the clients is not interrupted.
There are so many brokers out there advertising low spreads but they don’t seem to maintain the promise. How does Tickmill ensure that the current tight pricing will not deteriorate over time?
Part of our duty in the brokerage department is to monitorindustry spreads to see where we stand and be able to offer that genuinetrading edge to our clients. We tend to see lots of brokers offeringtight spreads for a short period of time, only to see that pricing degrade.This happens because very few brokers have the technology, tools and experienceto be able to manage their flow & relationships with their LPs. Notall trading flow is of the same quality, and if that’s not actively andcorrectly managed, it eventually leads to problems between the Broker and theLP, which by default negatively affect the spread.
At Tickmill, we heavily rely on technology and experience tomanage the large amount of business we face daily. We maintain very strongrelationships with our LPs, based on trust and transparency.
We can group flow profiles in a meaningful mannerbased on several metrics that are closely monitored. We ensure that theflow sent to each LP within that pool is executed correctly upstream on the LPside.
As we know; the majority of clients focus on spreads. So, are there additional costs that they need to be aware of?
The spread is arguably the number one cost traders look at beforetrading. However, a lot of inexperienced traders tend to ignore othercosts and fees that can highly affect their trading.
We’ll give a brief breakdown of these costs and explainwhere Tickmill stands on each one of them.
2- Trading Commission
3- Currency Conversion
4- Overnight Rollover & Financing (Swaps)
5- Account Balance Interest Fee
6- Inactivity Fee
7- Withdrawal Fee
8- Slippage / Rejections
The Spread is the difference between the Bid &Ask price of a certain product. The tighter the spread, the lower the cost.At Tickmill we work very hard to obtain and maintain the lowestspreads in the market. Our spreads on FX Majors, Gold and Major Indices placeus among the top 3 providers worldwide based on our market analysis and theanalysis of independent third-party providers that we continuously monitor. Forexample, our spreads on the EURUSD average 0.1 pips throughout the 24h hourtrading day and come to 0 pips during the European & American sessions. OnGold, our spreads average 7 cents.
Additionally, given thelarge increase in demand due the expansion of our business worldwide, we’vebeen adding more liquidity on Exotic pairs. This has allowed us to provide hardto compete with spreads on currencies such as the Turkish Lira, Mexican Pesoand the Scandinavian currencies.
2. Trading Commission:
The trading commission is a charge that is debitedfrom your account at the time you open a trade. The commission is usuallycharged on a ‘per million basis’ or on a ‘per traded lot’basis. Brokers that can offer very low / zero spreads will usually becharging commission.
Less experienced clientstend to forget about the cost of the commission since it’s usually not chargedfrom the balance until the trade is closed. This allows some brokers toadvertise low spreads while charging high commissions.At Tickmill with a 1 per side (10 per million) commission on VIP accounts,and a 2 (20 per million) per side commission on a Standard Pro account, ourcommissions are among the lowest in the industry. Factoring in both our spreadsand commissions makes us arguably the lowest cost provider in the Retail FXspace.
Let’s illustrate with asimple example:
Let’s assume you’rea Tickmill VIP client.
Tickmill’s spread on USDJPY is 0.2, and thecommission on the Tickmill account is 1 per side for every 100Ktraded. Your total cost for opening a 1 lot trade and then closing it is equalto:
$2 in commission + $1.84 in Spread = $3.84
You’ve also got an account at another broker that hasa spread equal to 0 on USDJPY, and a commission equal to $3.5 per lot perside. Your total cost for opening a 1 lot trade and then closing it isequal to:
$7 in Commission + $0 in spread = $7
So, despite pickingthe 0-spread broker, your total cost was 1.8X more.
By trading with Tickmill you would besaving more than $3 per round lot.
The argument here though is that not everyone canafford 50K to open an account and get a VIP status with Tickmill, that’s acompletely valid argument. So, in this case the second-best option would be toopen a Pro account that has a $100 minimum deposit requirement only. Thespreads match the VIP account’s spreads, but the commission is higher. Despitethat, the total cost will remain lower than other competitors.
With the above example in mind the total trading costfor a Pro Account at Tickmill would be $5.84, which is still roughly16% lower than that of the toughest of competitors.
3. Currency Conversion Fee
Trading in markets that settle in a differentcurrency from your account's base currency may incur a currency conversioncharge. For example, if your account base currency is US Dollars and you tradeUSD/CAD, your profits will be automatically converted from CAD back to USDbefore posting to your account. Most brokers charge a percentage on thisconversion and, the fee usually ranges between 0.5% to 1%. This is a fee that alot of people overlook but, it can add up! This is especially true if you’retrading products that settle in a currency that is different than your accountbase currency.
At Tickmill wedon’t charge any conversion fees, your PL is converted based on the live spotrate.
4. Overnight Rollover & Financing Costs(Swaps)
The rollover cost issomething you should be paying close attention to if you hold trades for longperiods of time. A rollover, also known as the swap, is the simultaneousclosing of an open position for today's value date and the opening of the sameposition for the next day's value, at a price reflecting the interest ratedifferential between the two currencies.
Financing cost is another important cost that isusually bundled into the rollover fee. The ‘swap charge’ you see on youraccount for CFD products are usually financing costs. When you trade CFDs withleverage, you broker is basically lending you money to be able to open aposition that you wouldn’t be able to open with your own equity. The brokercharges a small fee to cover the cost of the money you've effectively borrowed.
At Tickmill weperiodically review our rollover rates and adjust them to fit with currentmarket and industry conditions. Just as with spreads, we leverage ourrelationships with our LPs to get the best rates possible. Any positiveadjustment to the rate, we pass on to our clients.
5. Account Balance Interest Fee
Some Brokers charge interest fees on the accountBalance that you hold with them. Given that we’re in a low/negative interestrate environment across the globe, some brokers charge you fees for holdingmoney with them in the currencies such as EUR, CHF and JPY.
If you have a balance with your broker in any ofthose currencies, make sure to check whether or not you are being charged.At Tickmill we don’t charge any negative interest on client balances.
6. Inactivity Fee
A lot of brokers chargeyour account with an inactivity fee if you don’t trade for a certain period oftime. There is no specific standard that brokers rely on in setting thischarge. However, at Tickmill we do not enforce any account inactivityfee.
7. Withdrawal Fee
Withdrawal costs are also an important cost toconsider when trading on the Forex market. To withdraw your profits from yourbrokerage account to your personal bank account, most brokers will charge awithdrawal fee. This is either done to cover payment processing fees or todiscourage clients from withdrawing their funds.
Guess what… Tickmill doesn’t chargewithdrawal fees either.
8. Slippage / Rejections
Last but not least, there are some indirect coststhat clients incur and need to be aware of; those are mainly Slippage andRejections.
So, what is slippage?
In simple terms, slippage is the difference between the price yousaw on the screen before opening a trade and the price at which your trade gotexecuted. When you click the BUY/SELL button on your platform, you’re basicallyplacing a market order with your broker. The broker will try to get you thebest possible price in the market, but that doesn’t always mean you will getthe price you traded on.
Why does slippage occur?
The most common reason why slippage occurs is because of an imbalance between buyers and sellers.
When does this imbalance usually occur?
Slippage most often occurs during periods of low liquidity (such as Market Open, Rollover Period, Holiday sessions) or very high volatility (such as major financial announcements, unexpected news, important economic events or simply during a sharp market move).
It is important to mention that the size of the trade plays an important role in determining whether the clients will be filled at the price they see on the platform or will be slipped.
Most platforms in the Retail FX space allow traders to see the Top of Book (ToB) price. The ToB liquidity may not be always large enough to cover a large order, that order would sweep the liquidity book and be filled on a VWAP (Volume Weighted Average Price) basis depending on the available liquidity. That’s why it’s important to trade with brokers that have solid liquidity relationships with major Liquidity providers.
So, in summary, being slipped is an indirect cost that a trader should keep in mind.
The same applies to trade rejections, having your trade rejected is by default an opportunity cost due to the lost opportunity. Even though it is harder to quantify it relative to slippage, it is definitely something that you should be monitoring very well. After all what’s the point of having extremely competitive spreads if the broker can’t honor them.
And, just in case you were wondering, Tickmill has maintained an excellent Execution quality record:
For example on EURUSD which is the most traded FX pair (based on Tickmill Europe’s 2021 Statistics):
Fill Ratio: 99.99%
Rejection Ratio: 0.01%
Slippage Statistics :
At Quote / No Slippage: 82%
Positive Slippage: 5% (average +0.27 pips)
Negative Slippage: 13% / (average -0.25 pips)