Rate Endpoints - OANDA

[Not my post] The Structure of Forex Brokers

Originally posted by Darkstar at Forex Factory.
Disclaimer: I did not write this. I found this post on ForexFactory written by a user called DarkStar, which I believe a lot of redditors will benefit from reading.
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There has been much discussion of late regarding borker spreads and liquidity. Many assumptions are being made about why spreads are widened during news time that are built on an incomplete knowledge of the architecture of the forex market in general. The purpose of this article is to dissect the market and hopefully shed some light on the situation so that a more rational and productive discussion can be undertaken by the Forex Factory members.
We will begin with an explanation of the purpose of the Forex market and how it is utilized by its primary participants, expand into the structure and operation of the market, and conclude with the implications of this information for speculators. With that having been said, let us begin.
Unlike the various bond and equity markets, the Forex market is not generally utilized as an investment medium. While speculation has a critical role in its proper function, the lion’s share of Forex transactions are done as a function of international business.
The guy who buys a shiny new Eclipse more then likely will pay for it with US Dollars. Unfortunately Mitsubishi’s factory workers in Japan need to get their paychecks denominated in Yen, so at some point a conversion needs to be made. When one considers that companies like Exxon, Boeing, Sony, Dell, Honda, and thousands of other international businesses move nearly every dollar, real, yen, rubble, pound, and euro they make in a foreign country through the Forex market, it isn’t hard to understand how insignificant the speculative presence is; even in a $2tril per day market.
By and large, businesses don’t much care about the intricacies of exchange rates, they just want to make and sell their products. As a central repository of a company’s money, it was only natural that the banks would be the facilitators of these transactions. In the old days it was easy enough for a bank to call a foreign bank (or a foreign branch of ones own bank) and swap the stockpiles of currency each had accumulated from their many customers.
Just as any business would, the banks bought the foreign currency at one rate and marked it up before selling it to the customer. With that the foreign exchange spread was born. This was (and still is) a reasonable cost of doing business. Mitsubishi can pay its customers and the banks make a nice little profit for the hassle and risks associated with moving around the currency.
As a byproduct of transacting all this business, bank traders developed the ability to speculate on the future of currency rates. Utilizing a better understanding of the market, a bank could quote a business a spread on the current rate but hold off hedging until a better one came along. This process allowed the banks to expand their net income dramatically. The unfortunate consequence was that liquidity was redistributed in a way that made certain transactions impossible to complete.
It was for this reason and this reason alone that the market was eventually opened up to non-bank participants. The banks wanted more orders in the market so that a) they could profit from the less experienced participants, and b) the less experienced participants could provide a better liquidity distribution for execution of international business hedge orders. Initially only megacap hedge funds (such as Soros’s and others) were permitted, but it has since grown to include the retail brokerages and ECNs.

Market Structure:
Now that we have established why the market exists, let’s take a look at how the transactions are facilitated:
The top tier of the Forex market is transacted on what is collectively known as the Interbank. Contrary to popular belief the Interbank is not an exchange; it is a collection of communication agreements between the world’s largest money center banks.
To understand the structure of the Interbank market, it may be easier to grasp by way of analogy. Consider that in an office (or maybe even someone’s home) there are multiple computers connected via a network cable. Each computer operates independently of the others until it needs a resource that another computer possesses. At that point it will contact the other computer and request access to the necessary resource. If the computer is working properly and its owner has given the requestor authorization to do so, the resource can be accessed and the initiating computers request can be fulfilled. By substituting computers for banks and resources for currency, you can easily grasp the relationships that exist on the Interbank.
Anyone who has ever tried to find resources on a computer network without a server can appreciate how difficult it can be to keep track of who has what resources. The same issue exists on the Interbank market with regard to prices and currency inventory. A bank in Singapore may only rarely transact business with a company that needs to exchange some Brazilian Real and it can be very difficult to establish what a proper exchange rate should be. It is for this purpose that EBS and Reuters (hereafter EBS) established their services.
Layered on top (in a manner of speaking) of the Interbank communication links, the EBS service enables banks to see how much and at what prices all the Interbank members are willing to transact. Pains should be taken to express that EBS is not a market or a market maker; it is an application used to see bids and offers from the various banks.
The second tier of the market exists essential within each bank. By calling your local Bank of America branch you can exchange any foreign currency you would like. More then likely they will just move some excess currency from one branch to another. Since this is a micro-exchange with a single counterparty, you are basically at their mercy as to what exchange rate they will quote you. Your choice is to accept their offer or shop a different bank. Everyone who trades the forex market should visit their bank at least once to get a few quotes. It would be very enlightening to see how lucrative these transactions really are.
Branching off of this second tier is the third tier retail market. When brokers like Oanda, Forex.com, FXCM, etc. desire to establish a retail operation the first thing they need is a liquidity provider. Nine in ten of these brokers will sign an agreement with just one bank. This bank will agree to provide liquidity if and only if they can hedge it on EBS inclusive of their desired spread. Because the volume will be significantly higher a single bank patron will transact, the spreads will be much more competitive. By no means should it be expected these tier 3 providers will be quoted precisely what exists on the Interbank. Remember the bank is in the business of collecting spreads and no agreement is going to suspend that priority.
Retail forex is almost akin to running a casino. The majority of its participants have zero understanding how to trade effectively and as a result are consistent losers. The spread system combined with a standard probability distribution of returns gives the broker a built in house advantage of a few percentage points. As a result, they have all built internal order matching systems that play one loser off against a winner and collect the spread. On the occasions when disequilibrium exists within the internal order book, the broker hedges any exposure with their tier 2 liquidity provider.
As bad as this may sound, there are some significant advantages for speculators that deal with them. Because it is an internal order book, many features can be provided which are otherwise unavailable through other means. Non-standard contract sizes, high leverage on tiny account balances, and the ability to transact in a commission free environment are just a few of them…
An ECN operates similar to a Tier 2 bank, but still exists on the third tier. An ECN will generally establish agreements with several tier 2 banks for liquidity. However instead of matching orders internally, it will just pass through the quotes from the banks, as is, to be traded on. It’s sort of an EBS for little guys. There are many advantages to the model, but it is still not the Interbank. The banks are going to make their spread or their not go to waste their time. Depending on the bank this will take the form of price shading or widened spreads depending on market conditions. The ECN, for its trouble, collects a commission on each transaction.
Aside from the commission factor, there are some other disadvantages a speculator should consider before making the leap to an ECN. Most offer much lower leverage and only allow full lot transactions. During certain market conditions, the banks may also pull their liquidity leaving traders without an opportunity to enter or exit positions at their desired price.

Trade Mechanics:
It is convenient to believe that in a $2tril per day market there is always enough liquidity to do what needs to be done. Unfortunately belief does not negate the reality that for every buyer there MUST be a seller or no transaction can occur. When an order is too large to transact at the current price, the price moves to the point where open interest is abundant enough to cover it. Every time you see price move a single pip, it means that an order was executed that consumed (or otherwise removed) the open interest at the current price. There is no other way that prices can move.
As we covered earlier, each bank lists on EBS how much and at what price they are willing to transact a currency. It is important to note that no Interbank participant is under any obligation to make a transaction if they do not feel it is in their best interest. There are no “market makers” on the Interbank; only speculators and hedgers.
Looking at an ECN platform or Level II data on the stock market, one can get a feel for what the orders on EBS look like. The following is a sample representation:
You’ll notice that there is open interest (Level II Vol figures) of various sizes at different price points. Each one of those units represents existing limit orders and in this example, each unit is $1mil in currency.
Using this information, if a market sell order was placed for 38.4mil, the spread would instantly widen from 2.5 pips to 4.5 pips because there would no longer be any orders between 1.56300 and 1.56345. No broker, market maker, bank, or thief in the night widened the spread; it was the natural byproduct of the order that was placed. If no additional orders entered the market, the spread would remain this large forever. Fortunately, someone somewhere will deem a price point between those 2 figures an appropriate opportunity to do something and place an order. That order will either consume more interest or add to it, depending whether it is a market or limit order respectively.
What would have happened if someone placed a market sell order for 2mil just 1 millisecond after that 38.4 mil order hit? They would have been filled at 1.5630 Why were they “slipped”? Because there was no one to take the other side of the transaction at 1.56320 any longer. Again, nobody was out screwing the trader; it was the natural byproduct of the order flow.
A more interesting question is, what would happen if all the listed orders where suddenly canceled? The spread would widen to a point at which there were existing bids and offers. That may be 5,7,9, or even 100 pips; it is going to widen to whatever the difference between a bid and an offer are. Notice that nobody came in and “set” the spread, they just refused to transact at anything between it.
Nothing can be done to force orders into existence that don’t exist. Regardless what market is being examined or what broker is facilitating transactions, it is impossible to avoid spreads and slippage. They are a fact of life in the realm of trading.

Implications for speculators:
Trading has been characterized as a zero sum game, and rightly so. If trader A sells a security to trader B and the price goes up, trader A lost money that they otherwise could have made. If it goes down, Trader A made money from trader B’s mistake. Even in a huge market like the Forex, each transaction must have a buyer and a seller to make a trade and one of them is going to lose. In the general realm of trading, this is materially irrelevant to each participant. But there are certain situations where it becomes of significant importance. One of those situations is a news event.
Much has been made of late about how it is immoral, illegal, or downright evil for a broker, bank, or other liquidity provider to withdraw their order (increasing the spread) and slip orders (as though it was a conscious decision on their part to do so) more then normal during these events. These things occur for very specific reasons which have nothing to do with screwing anyone. Let us examine why:
Leading up to an economic report for example, certain traders will enter into positions expecting the news to go a certain way. As the event becomes immanent, the banks on the Interbank will remove their speculative orders for fear of taking unnecessary losses. Technical traders will pull their orders as well since it is common practice for them to avoid the news. Hedge funds and other macro traders are either already positioned or waiting until after the news hits to make decisions dependent on the result.
Knowing what we now know, where is the liquidity necessary to maintain a tight spread coming from?
Moving down the food chain to Tier 2; a bank will only provide liquidity to an ECN or retail broker if they can instantly hedge (plus their requisite spread) the positions on Interbank. If the Interbank spreads are widening due to lower liquidity, the bank is going to have to widen the spreads on the downstream players as well.
At tier 3 the ECN’s are simply passing the banks offers on, so spreads widen up to their customers. The retailers that guarantee spreads of 2 to 5 pips have just opened a gaping hole in their risk profile since they can no longer hedge their net exposure (ever wonder why they always seem to shut down or requote until its over?). The variable spread retailers in turn open up their spreads to match what is happening at the bank or they run into the same problems fixed spreads broker are dealing with.
Now think about this situation for a second. What is going to happen when a number misses expectations? How many traders going into the event with positions chose wrong and need to get out ASAP? How many hedge funds are going to instantly drop their macro orders? How many retail traders’ straddle orders just executed? How many of them were waiting to hear a miss and executed market orders?
With the technical traders on the sidelines, who is going to be stupid enough to take the other side of all these orders?
The answer is no one. Between 1 and 5 seconds after the news hits it is a purely a 1 way market. That big long pin bar that occurs is a grand total of 2 prices; the one before the news hit and the one after. The 10, 20, or 30 pips between them is called a gap.
Is it any wonder that slippage is in evidence at this time?

Conclusions:
Each tier of the Forex market has its own inherent advantages and disadvantages. Depending on your priorities you have to make a choice between what restrictions you can live with and those you cant. Unfortunately, you can’t always get what you want.
By focusing on slippage and spreads, which are the natural byproduct of order flow, one is not only pursuing a futile ideal, they are passing up an enormous opportunity to capitalize on true inefficiencies. News events are one of the few times where a large number of players are positioned inappropriately and it is fairly easy to profit from their foolishness. If a trader truly wants to make the leap to the next level of profitability they should be spending their time figuring out how identify these positions and trading with the goal of capturing the price movement they inevitably will cause.
Nobody is going to make the argument that a broker is a trader’s best friend, but they still provide a valuable service and should be compensated for their efforts. By accepting a broker for what it is and learning how to work within the limitations of the relationship, traders have access to a world of opportunity that they otherwise could never dream of capturing. Let us all remember that simple truth.
submitted by Cross_Game to Forex [link] [comments]

Trading overseas? Volume/Time related.

So I've been interested in trading for awhile. Dabbled in stocks, fx, and crypto in the past, but want to take it more seriously. I'm trying to decide on which market or product to focus on first. But, I'm currently living in Japan which severely limits what markets I can trade due to market open/close and time differences.
Stocks are off the table. I've narrowed it down to: futures, forex, or crypto. I'm using http://forex.timezoneconverter.com/ as a reference
Futures - Seems appealing given the basically 24/5 markets. But volume looks really low during off hours. NYSE open is around 9pm-5am local time, which does work well since I do have a day-job, but worry I may get stuck in a position for hours and lose a bunch of sleep. I like being able to focus on a single future, like the ES. Commissions are relatively low as well, with good leverage. Currently the most appealing option.
Forex - Real 24 hour markets. Volumes are high almost all-around, and similar to futures can focus on a single pair such as USD/JPY or USD/EUR at the beginning. Unfortunately as a US person I'm not allowed to open accounts with many ECN brokers. Oanda seems like the only real option, but they are a MM. Anyway spreads/commissions are big here and dependent on the broker, and I can't seem to find any other good brokers for FX which allow US clients. Maybe I'm searching for the wrong things?
Crypto - The dark horse. I would 100% be day trading crypto if: exchanges weren't crappy compared to real trading platforms, nor was I worried about hacking. Margin rates for shorting crypto also sucks, and given the current bear market it seems stupid to get into this only being able to trade long.
Given my situation, what would you trade?
submitted by Zerve to Daytrading [link] [comments]

Couple questions around brokers and currency conversion

I've just been getting into trading forex. I've mostly been focusing on learning and back testing some different strategies. I haven't jumped the gun yet on trading live and had a couple questions on currency conversion and how brokers handle it. I plan on trading with Oanda.
1) If my account is using a base balance of CAD and I want to trade EUUSD, when I close a position will my broker automatically add/subtract my profit/loss to my account using my accounts base currency at the current exchange rate? If I'm using leverage, will the loans automatically close after a position has been closed?
2) I'm trying to write some automated back tests and realize that in order to correctly calculate my risk per trade at a given point in time, I need historical exchange rates. What APIs are typically used for this? One I've come across is fixer.io. I've noticed that Oanda has one, but it looks rather pricey.
Thanks in advance.
submitted by bdicasa to Forex [link] [comments]

Two important dates

Normally, I would not post this as we should all be adults and know how to use a forex calendar and read the news. However, a rash of posts both here and abroad on the net that essentially are asking how to get megapips off of the Brexit vote have me concerned, so here we are. Also, people seem to be overlooking the big elephant in the room, the June FOMC.
Short version:
WED JUNE 15 1400 EST FOMC STATEMENT Whether you like it or not, the USD touches everything you do, like those bad decisions you made in University.
THURSDAY JUNE 23 UK BREXIT VOTE This really could be underwhelming.... or it could be horrific.
If you are a n00b, stop trying to get rich off of the Brexit vote. You need to concentrate on successful, positive trades, not big wins. Go gamble if you want that rush. The Brexit vote is one of those events that can cause such precipitous damage to accounts that Brokers are limiting retail leverage and raising margin rates: (from Oanda)
Dear Huachi
During events such as the upcoming Brexit referendum, market movements can be significant leading to the potential for large profits, but also large losses. To help ensure our customers are more insulated from such movements, we will be temporarily lowering the maximum leverage available on GBP pairs to 20:1 after the market close on June 17, 2016. The affected pairs will return to prior leverage levels after the market close on June 24, 2016.
As a result of this change, you may need to close trades or add funds to your account or risk a possible margin closeout if you currently have an open GBP positions with higher levels of leverage and do not have enough funds in your account to cover the increased margin requirements. To determine the impact this change may have to your margin, you can use OANDA’s margin calculator.
Margin rates on pairs not containing GBP will not be affected.
If you have any questions, you can contact our Client Experience Team whenever markets are open.
Regards, The OANDA Team
And FOMC? The June FOMC is not just any FOMC, it will really be a bellwether for 2016 for the Fed's direction with interest rates until election and Christmas. Will they stick to their word and raise rates? Or change course and have a flat rate, showing their weak hand? There are estimates in both directions (some showing preciptious cliffs, some showing seismic movements back and forth), but again, unless you are confident in your analysis, market intel, and skill set, pay attention because the June FOMC has a potential for a radical whipsaw.
I'll take this down in a few days, it is not a soapbox, but there is some real shit in the market right now that has capacity to wipe out accounts. Noobs watch out, you pros too!
~Huachi
submitted by El_Huachinango to Forex [link] [comments]

Welcome to r/Lykke Community, start here!

 

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Lykke is building a global marketplace for the free exchange of financial assets. By leveraging the power of emerging technology, our platform eliminates market inefficiencies, promotes equal access from anywhere in the world, and supports the trade of any object of value. The Lykke Exchange is fast and secure. Users receive direct ownership of assets with immediate settlement from any mobile device. You can try Lykke Wallet, available for both iOS / Android. Here’s a quick video to get you started.

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The Lykke marketplace uses the distributed ledger, which is blockchain technology pioneered by Bitcoin. This technology incorporates a protocol for decentralized data storage in the chain of blocks, where the consistency of the data is guaranteed by the cryptography and consensus of multiple nodes.

What are LKK coins?

A Lykke coin (LKK) is a cryptographic token that represents ownership of Lykke, a Swiss registered corporation. There is no mining and currently it's not listed on other exchanges (although that may change). 100 LKK represent 1 share of Lykke Corp. Read more at our Information Memorandum  

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How does LKK1Y works?

Lykke 1-year forward coin (LKK1Y) is essentially a derivative on LKK. Buyer of 1 LKK1Y can purchase the right to receive 1 LKK in 365 days after they ask for the delivery. In other words, there is no fixed maturity date: if you buy a Lykke forward contract, you can execute it at any date and after 1 year passes the Lykke coins will be delivered. You can read more at What is Lykke Forward? blog post.

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Commissions are zero, so Lykke earns revenue from value-add services such as liquidity provision, issuance services, white-labeling, and B2B consulting.

If I own Lykke coins, am I considered to be a shareholder of Lykke Corp?

Yes. If you own Lykke coins, you are entitled to become shareholders of Lykke Corp, provided that you submit to our minimum KYC requirements. Shareholders have additional rights, such as voting and receiving dividends.

Will LKK coins pay dividends?

Yes. They will when the company decides to pay profits to investors, rather than re-invest to fuel growth. As with most startups, dividends may be some time away.

Are there plans to list LKK in other exchanges?

Yes, the roadmap currently states it’s a medium term goal.

How does Lykke differ from other crypto ventures?

Lykke is not a cryptocurrency or distributed ledger technology venture; we are building a marketplace that integrates seamlessly with the existing financial system. Our trading venue uses a matching engine to cross buy and sell orders. The accounting, delivery, and settlement of traded assets use distributed ledger technology. Our initial focus is the foreign exchange market with a daily transaction volume of 4 trillion USD, the biggest financial market in the world.

I am a US citizen and can't download the App. When will Lykke be available in my country?

Hopefully soon, this is only temporary as Lykke requires licenses to be fully compliant in many countries. It’s currently not available in Australia, Japan, Canada and the US (which greatly differs from other countries as states have different laws). At first only some states would be available (or only certain assets could be tradeable) but eventually with more blockchain technology acceptance and adoption more should follow.

Is Lykke Exchange only available on mobile?

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OANDA Market Insights - Episode 81 (Highlights)  OANDA MarketPulse WTI Suffers in Flooded Market  OANDA MarketPulse GBPUSD Holds Ahead of BoE  OANDA MarketPulse Let's Talk About: Oanda - Are They A Good Broker? - YouTube OANDA Market Insights - Episode 82 (Highlights)  OANDA MarketPulse OANDA  Exchange Rates API on Acumatica Cloud ERP

Spreads: OANDA’s bid/ask spreads, which are the fees clients pay to trade, are most comparable to FOREX.com and FxPro, while the minimum spread cost available (or lowest advertised rate) may be slightly higher than other firms that list a sub-pip spread (i.e., less than 1.0 pip). For example, the average non-core pricing at OANDA was 1.2 pips on the EUR/USD pair during Q1 2019. Oanda is regulated in the United States, Europe, Canada, Asia-Pacific and Australia and is one of the only brokers providing forex trading to traders and investors in the United States. OANDA is regulated by The Commodity Futures Trading Commission (CFTC) which limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. TD ... Oanda Leverage Forex trading explained by currency traders professionals, all about Oanda Leverage CFD trading products and foreign exchange currencies, For more information about Oanda Broker you can also visit Oanda review by ForexSQ.com forex trading website, The TopForexBrokers.com ratings forex brokers, or Fxstay.com Forex investing company and get all information you need to know about ... Learn more around margin and leverage and how OANDA offers competitive margins within 70 different major and minor currency pairings. We use a range of cookies to give you the best browsing experience. By continuing to use this website, you agree to our use of cookies. OK close. Choose another country or region to see content specific to your location Trading expand_more. Products & services ... forex Oanda Leverage. Oanda Broker . Dezember 4, 2018 by oandareviews posted in Uncategorized • Keine Kommentare. Oanda Überprüfung durch ForexSQ Forex-Experten, alles, was Sie über Oanda Broker wissen müssen, wie Sie Oanda Login oder Oanda Demo Konto eröffnen, herausfinden, was Oanda Währungsrechner ist oder wie Sie… more. Recommended Brokers. Review Visit. Schlagwörter. forex ... A 3% margin rate will be represented as 0.03. halted: ... Please refer to the NFA's FOREX INVESTOR ALERT where appropriate. OANDA (Canada) Corporation ULC accounts are available to anyone with a Canadian bank account. OANDA (Canada) Corporation ULC is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), which includes IIROC's online advisor check database (IIROC ... The Commodity Futures Trading Commission (CFTC) limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. OANDA Asia Pacific offers maximum leverage of 50:1 on FX products and limits to leverage offered on CFDs apply. Maximum leverage for OANDA Canada clients is determined by IIROC and is subject to change. For more ... Free currency converter or travel reference card using daily OANDA Rate® data. Convert currencies using interbank, ATM, credit card, and kiosk cash rates. FOREX.com provides traders 91 currency pairs (e.g., EUR/USD) compared to OANDA's 70 available pairs. Forex pairs aside, FOREX.com offers traders access to 4500 CFDs while OANDA has 55 available CFDs, a difference of 4,445. Overall, between FOREX.com and OANDA, FOREX.com is the better forex broker. FOREX.com Review OANDA Review Forex trading. Trading; MarketPulse; Foreign Exchange Data Services. Currency converter; Historical currency converter; Exchange rates API; FX Payments. Corporate; Individual; About OANDA . Group. We are OANDA. We do all things currency trading. Forex trading. See prices on 70 major and minor currency pairs with two transparent pricing models. See trading. Currency converter. Access real-time ...

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OANDA Market Insights - Episode 81 (Highlights) OANDA MarketPulse

📈 Learn more about Oanda and get rebates on every trade: https://d2t.link/oanda In this new series "Lets Talk Brokers" I'll be reviewing different Forex brok... OANDA Senior Market Analyst Craig Erlam discusses GBPUSD ahead of the Bank of England rate decision. The currency pair has come under pressure as rate cut odds have grown, can it continue to hold ... This app allows customers to easily integrate the OANDA Exchange Rates API with their Acumatica Cloud ERP instance, giving access to daily average exchange rates for 38,000+ currency pairs, over ... OANDA Senior Market Analyst Craig Erlam explains why oil is suffering so badly in the current environment and discusses whether that may change soon. OANDA Europe Limited Accounts: This ... OANDA Accounts in All Other Divisions: Leveraged trading carries a high degree of risk. Carefully consider your financial objectives, level of experience and appetite for such prior to entering ... OANDA Senior Market Analyst Craig Erlam previews the week's business and market news with Jazz FM Business Breakfast presenter Jonny Hart. This week they discuss the week in Parliament in the UK ...

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