Bucket Shop Arbitrage

Quote from asiaprop:

its pretty easy to figure out when someone scalps you for a few pips. Plus it shows on their p&l very soon because they need to hedge themselves in the market pretty regularly.
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No scalping is involved. The arb is entered, and your gain locked in, when the spread between your bucket shops is (temporarily) wide. Later, when your bucket shops are quoting closer to each other, you exit, keeping the difference between the big and small discrepancies.

Neither of your two counterparties ever knew about the other. Each one only saw you take a directional position, wait a while (maybe hours) and then exit.
 
of course they know. Maybe years back they did not but now as soon as they figure that their quote was off "market" they put certain individuals on a "black list". If you are found trading again at precisely the time when they figure out their quotes were off track then you are done. Simple as that.

Quote from Sodajerk:

No scalping is involved. The arb is entered, and your gain locked in, when the spread between your bucket shops is (temporarily) wide. Later, when your bucket shops are quoting closer to each other, you exit, keeping the difference between the big and small discrepancies.

Neither of your two counterparties ever knew about the other. Each one only saw you take a directional position, wait a while (maybe hours) and then exit.
More...
 
Quote from asiaprop:

of course they know. Maybe years back they did not but now as soon as they figure that their quote was off "market" they put certain individuals on a "black list". If you are found trading again at precisely the time when they figure out their quotes were off track then you are done. Simple as that.
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So at certain times these bucket shops can quote me a price and if I take them up on it they get to keep my account balance? Awesome business model!!!

Another reason to stay with ECNs and futures.
 
This is why "arbitrage" between two bucket-shops don't work.

When you go LONG, the firm clears to their sell-side operation. This results in your LONG position being quoted the sell-side Ask. (usually behind the market)

When you are SHORT, firm clears to their buy-side operation. This results in your SHORT position being quoted the buy-side BID (usually ahead of the market)

Bucket-shops make $ of new trader's lack of knowledge. Retail FX traders have NO ACCESS to market-depth, well at least RELIABLE MARKET DEPTH. so you are basically trading with your eyes closed.

The dealer can execute at any price. Retail FX traders are bound to trade what the broker quotes. They can place their bid's and offer's AT ANY PRICE (within or outside the spread). This information instantly shows up on ECNs.

You also have to understand that this "special" ability (which comes with PURE ECN) allows them to off-set their exposure. As they bundle all their client positions & place a offer/bid (most likely outside the spread by 6-7 points)

A bank or trader sees this volume@$ information & acts on it (either buys/sells @ what the broker is bidding/offering and drives prices higher or starts to sell because they believe prices can go lower.) Which allows the BROKERS to unload THEIR RISK.
 
It's actually really simple. There is a human there making the market deviate. So they know exactly when they are doing it.

During those times the broker knows they are vulnerable to arb (which they call cheaters, which is funny), they put the system on manual execution.

Manual Execution mode means all orders coming in show up in a little box where they decide to fill you, delay, or requote you.

Once they have you on manual, of course they won't fill you at their deviated price, they will do any one of the above little games.

This isn't to say that you might be able to get away with it once or twice, but that's pretty much it.

When you have an account with a bank, their agreement specifically spells out that you are not allowed to arb them, and it's a violation of your user agreement.

In a perfect world, we should be able to slash them hard the moment they start playing games. Hey, they are stealing from someone at that moment, why isn't turnaround fairplay?

Trader 5of7
 
i have an account set up with gcpfx, i have access to ebs, hotspot, currenex and all the real market platforms.... they even offered me reuters but having the other 3 i dont need any more... best brokerage around, awesome service
 
Quote from algo:

i have an account set up with gcpfx, i have access to ebs, hotspot, currenex and all the real market platforms.... they even offered me reuters but having the other 3 i dont need any more... best brokerage around, awesome service
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They are introducing to FxSol. Since you obviously are a gcpfx rep, can you explain why they didn't even manage to register as an IB ?
 
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