Single trading account for trading currency pairs, stocks, commodities, etc.
A single trading account is a set of brokerage services that allow a client to trade on multiple segments of the financial market using only one single account.
In recent years, the number of companies providing services on FOREX and CFD markets is constantly growing. In this regard, there is a rising competition of brokerage companies operating in this business. In turn, it improves conditions for company’s clients and creates more opportunities for efficient trading.
First of all, spreads in companies have become lower. When this resource was exhausted, ECN technology and PAMM accounts have appeared. Companies which actively offered these services by aggressive advertising planted the idea in the minds of clients that these innovations would allow them to earn big money on this market. Today the enthusiasm for these innovations has noticeably dimmed and a need for new ideas and opportunities has appeared.
Nowadays, a large number of trading instruments is one of the most important benefits for attracting clients. Previously, companies offered their clients almost only currency trading, now the necessary condition for attracting clients is the possibility of trading a large number of instruments from all segments of the financial market (stocks, indices, commodities, etc.) using a single trading account. This service is one of the principal development trends in attracting clients.
Currently, there are two basic schemes for providing this service.
Let’s examine the features of both schemes, their pros and cons.
The very core of the first scheme is that companies announce an opportunity to trade various financial instruments through DIRECT ACCESS to dozens of leading stock exchanges and trading facilities of the USA, Europe and Asia via their own trading terminals using a single trading account. At first sight, it looks very attractive for clients. However, lots of questions arise when considering it in detail. The indispensable requirement of direct market access or, in other words, trading without intermediaries directly on the market involves opening an account and, therefore, special documentation. In fact, this scheme suggests that a client usually opens an account directly in the company using one single document (ID card). Moreover, direct access through company’s trading platform suggests that this platform must be licensed on each stock exchange. In most companies that advertise such a service this condition is not met.
Therefore, it can be stated that direct access is not provided to the client, and trading is executed through company’s subaccount or with the help of other brokerage firms. The company is usually silent on this matter. In this regard, there is no guarantee that all client orders are transferred to the market. In addition, spread on all instruments is not fixed and, regarding all the mentioned above, this creates opportunities for taking control over order results.
The second scheme, using a single trading account for financial instruments traded on the major stock exchanges and trading facilities of the world, is quite clear and transparent. It involves trading of all kinds of market assets through CFD (CFD on stocks, indices, commodities). The absolute leader among companies providing such a service is IFC Markets.
Unlike the first dim scheme, direct market access is not declared. The company itself issues CFDs and provides the necessary liquidity for these contracts, limited by clients’ deposits. At first, the company buys and sells CFDs from clients, and then, as a part of its risk management strategy, hedge positions either directly on the stock exchange or through primary stock liquidity suppliers.
It is important to note that unlike the companies operating with the first scheme, spreads on all CFDs in IFC Markets are fixed. This is a great benefit for clients. Floating spreads don’t allow planning properly trade entries and exits and, therefore, planning gains and losses with the required accuracy.
IFC Markets offers its clients to trade CFDs on major world stock indices, stocks of the United States, Europe and Asia, and also a large number of commodities. Approximately 500 CFDs are currently traded. Moreover, the figure is constantly rising and soon IFC Markets plans to boost them up to 1000.
Summing it all up, we can say once again that the CFD scheme is clear and transparent for clients and allows them to use their trading strategies more efficiently.