1. Your Bourse Platform User Guide

Price Markup per Volume Band

This page is devoted to the Price Markup per Volume Band (further - Price Bands). It is a pricing parameter for MT4 and MT5 on the Your Bourse cloud. The main idea behind this feature is that a client is able to create his own order book based upon the liquidity from one or several liquidity providers and, as a result, increase the profit from markups from the trade execution.

 

What are the Price Bands?

 

The Price Bands is a parameter for Metatrader 4 and Metatrader 5 that allows one to specify customized market depth by means of creating different layers of volume with the respective price for each volume. The price is determined by the markups for each layers.

Price Bands can be used by brokers for at least two scenarios. The first scenario is when a broker can increase their profit by putting additional markups for the specified traded volume. In this scenario a trader might pay more markups to the broker during the trade execution. The number of the markups is based upon two modes of the Price Bands functioning (please see them below).

Besides, the Price Bands can be used to combine several layers from a liquidity provider to offer the traders more volume with the VWAP price.

In any case, the Price Bands give the broker more flexibility to work with the volume of liquidity and its respective price.

 

How to configure the Price Bands on the Cloud portal

 

To configure the parameter on the Cloud, one needs to go to the “MT4 Bridge and MT5 Gateways” page, click “Manage“ next to the MT4 or MT5, and select “Configure Pricing“. On the new page, one should find the parameter “Price Markup per Volume Band“.

Afterwards, there are two ways to set up the parameter. It can be configured as a default parameter or a symbol parameter. To configure it as a default parameter, one needs to click “(NOT SET)” right under the name of the parameter. To setup a symbols parameter, one needs to press “(not set)” next to a specific symbols. In both of the cases, the new window is opened with the following fields.

Mode - is type of markup calculation for the parameter

• Volume-weighted markup across all affected tiers. In this mode, the final markup will be calculated as a weighted average for all the markups for all the affected bands.

• Markup from the last affected band. In this mode, the markup from the last affected band will be used.

Volume (notional) - the volume traded for a particular tier.

Price markup - markup charged per the volume in a particular tier.

What one needs to do here, is to create tiers with particular volume and corresponding markups.

 

How to check that the configured Price Bands works for the clients

 

Assume that we have created the following rule for the Price Bands

After the parameter is configured, one can check that it works for the clients. For that, one needs to go to the MT4/MT5 Client Terminal, click on any symbol and select “Depth of Market“.

On the new window there will be a Market Depth window consisting of 3 columns: “Volume“, “Price“, and “Trade“.

The volume in the window should correspond to the specified volume in the Price Bands, while the difference in the “Price“ should be based upon the specified markups.

Let’s consider the diagram for the ask price (for the bid price the logic will be the same)

We see the Top of the Book (TOB) - first layer with 97.229 ask price for AUDJPY (contract size 10 000, decimals 3). We see that this price corresponds to 5 lots (50 000) AUDJPY. It’s matched with our Price Bands since we have 0 markup for the first 50 000 EURUSD.

Then we have a layer with another 10 lots and price of 97.231. The difference from the TOB is 2 points.

The following layers has 20 lots and price of 97.232. TOB difference is 3. The final visible layers has 30 lots and 97.234 price. The difference with the TOB is 5 points.

If we check our preliminary rules we can see that the difference in the Depth of the Market MT4 diagram follows the specified markups. It means that the artificial Market Depth was successfully created for the client.

The Price Bands test scenarios for MT5

 

To clarify and instruct how the Price Bands can be used, let us describe a couple of test scenarios.

 

The first test scenario will use “Volume-weighted markup across all affected tiers“ mode of markup calculation

 

Let’s assume that we want to create the Price Bands for AUDJPY. We go to the Cloud portal - MT5 Gateway Pricing - and put the following tiers:

Let’s now check that the client in the MT5 has this new artificial Market Depth.

Let’s consider the diagram for the ask price (for the bid price the logic should be the same)

We see the Top of the Book (TOB) - first layer with 96.403 ask price for AUDJPY (contract size 10 000, decimals 3). We see that this price corresponds to 5 lots (50 000) AUDJPY. It’s matched with our Price Bands since we have 0 markup for the first 50 000 EURUSD.

Then we have a layer with another 10 lots and price of 96.423. The difference from the TOB is 20 points.

The following layers has 20 lots and a price of 96.433. TOB difference is 30. The final visible layers has 30 lots and a price of 97.453. The difference with the TOB is 50 points.

If we check our preliminary rules we can see that the difference in the Depth of the Market MT4 diagram follows the specified markups. It means that the artificial Market Depth was successfully created for the client.

Now let’s buy 20 lots of AUDJPY. Since we use “Volume-weighted markup across all affected tiers“ mode, then the calculation formula should the following.

20 lots = 200 000 AUD. It means that its volume is at the tier 3 which have a markup 30. The volume will be:

200 000 = 50 000 (1 tier) + 50 000 (2 tier) + 100 000 (3 tier).

Hence, the weighted average markup for 200 000 traded volume will be:

(50 000 x 0 + 50 000 x 20 + 100 000 x 30) / 200 000 = (0 + 1 000 000 + 3 000 000)/200 000 = 4 000 000/200 000 = 20

So the Price Band markup for buying 200 000 AUDJPY should be 20.

Let’s buy 20 lots and check the price.

In the Trade Blotter (above), we see that the taker requested price is 96.359 and the client price is 96.376. That is, the difference is 17 points. It is close to 20 points that should be as per our calculations. The changes might be due to the oscillations in prices.

Let’s now buy 40 lots of AUDJPY.

40 lots = 400 000 AUD. It means that its volume exceeds the volume of the last affected tier. The volume will be:

200 000 = 50 000 (1 tier) + 50 000 (2 tier) + 100 000 (3 tier) + 200 000 (4 tier).

The calculation will be based upon the weighted average formula: (50 000 x 0 + 50 000 x 20 + 100 000 x 30 + 200 000 x 50) / 400 000 = (0 + 1000 000 + 3000 000 + 10 000 000)/400 000 = 14 000 000/400 000 = 35

So the Price Band markup for selling 400 000 AUDJPY should be 35.

Let’s sell 40 lots and check it.

In the Trade Blotter (above), we see that the taker requested price is 96.440 and the client price is 96.413. That is, the difference is 27 points. It is somewhat close to 35 points that should be as per our calculations. The changes might be due to the oscillations in prices.

 

The second test scenario will use “Volume-weighted markup across all affected tiers“ mode of markup calculation

 

According to the logic, only the markup for the last affected band will be used. E.g., if we have a rule

And a client buys 20 lots (200 000) then there should be 30 markups. And if a client buys 30 lots (300 000) and more then there should be 50 markups.

Let’s buy 20 lots of AUDJPY. The markup should be 30.

In the Trade Blotter (above), we see that the taker requested price is 96.422 and the client price is 96.452. That is, the difference is 30 points. The same as expected.

Now let’s sell 40 lots of AUDJPY.