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Instead of calling, the electronic broker can be used, can it not?

Yes, the electronic broker has replaced market making to a large degree and it works very well for highly-liquid currency pairs. This is because there are enough orders to sustain an order-driven market. however, by putting an order in the 'public' market, although this is anonymous, the market will know that there is a seller or a buyer around (depending on the direction of the order). It may have the opposite effect than the desired one, especially in 'thinner' or more illiquid markets. That is why these markets, especially 'emerging' markets are still dealt mainly on a direct dealer to dealer basis.

The most popular system in use by the banks is EBS, which is owned by a broker called ICAP. It was originally owned by a consortium of banks, It is very good in the 'majors', where there is a lot of liquidity. Otherwise, Reuters provide their Reuter Dealing 3000 system, and there is a system called Lava.


What are the pros and cons of quoting other dealers?

The main advantage in quoting other traders is that the market maker will build a good reputation and be at the centre of the action. This allows one to see what is happening in the market first hand and in the best case, allows one to 'be the market'. This is where the price is adjusted according to the overall size of the position; if the position gets 'long', the price is moved down to sell the excess position, and vice versa.


What are the pros and cons of requesting other dealers for quotes?

If the market with the electronic broker is 'thin' or 'wide', then calling another dealer should give a better price. It may also highlight the other dealer's intention. Care is usually taken not to call too many times without dealing; a asker may lose credibility.



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