Dark underworld of forex trading: "A-books" and "B-books"
- Thread starter OddTrader
- Start date
I don’t mind to trade with Hybrid model brokers which combine A-Book and MM under certain circumstances, but the firm should be well-known and reputable, and at least have license from CySEC. I’m currently testing waters with Hanseatic broker, medium size CFD contracts, mostly DAX and European shares, but sometimes trade spot forex too. I do feel some orders are on A-book as they have natural spreads and different execution speed during different trading sessions.
If you can profit consistently they will put you in STP anyway
If you can profit consistently they will put you in STP anyway
I don’t mind to trade with Hybrid model brokers which combine A-Book and MM under certain circumstances, but the firm should be well-known and reputable, and at least have license from CySEC. I’m currently testing waters with Hanseatic broker, medium size CFD contracts, mostly DAX and European shares, but sometimes trade spot forex too. I do feel some orders are on A-book as they have natural spreads and different execution speed during different trading sessions.
If you can profit consistently they will put you in STP anyway
CySec? what's so special about CySec?
I'd rather have it regulated by the FCA or FINMA (Dukascopy), or even ASIC.
And since you don't mind a hybrid model, then why not check out Dukascopy or FxPro, or better: AxiTrader which is one of the more honest ones with an interest in helping consistent traders move on to the institutional side to manage high net worth client funds?
But if you want a A-book only model, then Darwinex and LMAX (the more affordable ones) and CFH Clearing and Baxter-FX and INVAST (the higher initial capital ones) are the ones I'd recommend.
Actually, CySEC is not much special in UK on the other hand very much special here. It depends on where are you trading from? FCA won’t cover a trader from India and there is no way to deposit via bank transfer. So, CySEC is the most trusted regulator from asia.
Dukascopy and Saxo had huge issues during the EURCHF floor crash at early 2015, check them at YouTube. They showed 3:39 minutes extra low liquidly time and charged millions from clients and took the profit away who had short. I didn’t hear anything from their regulators. And I traded with FxPro, you won’t be able to trade cross and exotic currency pairs due to wider spread. LMAX is better but costly. Axi is better for aussie, I still have live account with them but I don’t trade in that account due to slow execution from my end.
I want a broker with wide range of cFD and low cost FX (lower spread/commission), I traded more than 20 pairs included S&P, Gold, WTI with hanseatic and did not find anything bad yet.
thanks for the reminder, i had forgotten about SAXO and DC debacle in 2015. taking away short profits, that's the worst.
what about Alpari? have you tested them post-SNB? are they still as good as some traders used to tell me?
looking at hanseatic now... funny... when you scroll down the home page, you can see a screenshot of cTrader and MT4, only thing is: they don't support cTrader. somebody forgot to update the marketing material.
what about Alpari? have you tested them post-SNB? are they still as good as some traders used to tell me?
looking at hanseatic now... funny... when you scroll down the home page, you can see a screenshot of cTrader and MT4, only thing is: they don't support cTrader.
somebody forgot to update the marketing material.I did not notice that! Their support just told me they are testing cTrader in beta and going to launch very soon.
Actually I had live account with them (Alpari) to test their binary option platform but their awful and reckless staff from support forced me to search for other options; so running some ea tests with hanseatic.
The largest 2 broker FXCM and Alpari got out from the business at SNB 2015 action, So, I will try to avoid them for now to see if they can overcome the situation.
Actually I had live account with them (Alpari) to test their binary option platform but their awful and reckless staff from support forced me to search for other options; so running some ea tests with hanseatic.
The largest 2 broker FXCM and Alpari got out from the business at SNB 2015 action, So, I will try to avoid them for now to see if they can overcome the situation.
actually, in 2015 FXCM lost close to 300M/USD and almost went bankrupt, and Alpari, well, the UK branch went bankrupt, but not Alpari Group.
now, FXCM and its CEO got banned from doing business in the USA by the CFTC because of fraud, but FXCM outside the USA survives and goes on. Leucadia just took control of the board of directors, will keep the brand name FXCM, but change the company name to Global Broker.
Alpari still exists and if i remember correctly, is now headquartered in the Caribbeans (they started in Russia almost 15 years ago).
re hanseatic, i just finished reading the legal docs. i like what i see. they act as agent on behalf of clients. very good.
only issue i do have is that they are allowed to deal on own account. if some of their traders screws up in a trade of their own and causes hanseatic to blow up, you and i will be the last to learn about it, that is, when it's too late to get all your money out.
also 1 thing i don't like: all instruments are CFDs, which means FX trading is CFD on FX trading and not trading the underlying rolling SPOT contract. now that, i do not like at all.
it is also interesting how their legal docs reads: so different (and i mean this in a good way) from the legal docs from the other brokers out there (and i mean the usual names)--hanseatic is precise, clear, to the point. no mistakes here.
interesting...
however, that being said, these sections from the client agreement may become a problem later on:
16.6. The Client understands, accepts and agrees herewith that the Company may pass money received from the Client to a third party (e.g. a market, intermediate broker, OTC counterparty or clearing house) to hold or control in order to effect a Transaction through or with that person or to satisfy the Client’s obligation to provide collateral (e.g. initial margin requirement) in respect of a Transaction. The Company has no responsibility for any acts or omissions of any third party to whom it passes money received from the Client. The third party to whom the Company passes money may hold it in an omnibus account and it may not be possible to separate it from the Company’s money, or the third party’s money. The financial institution(s) (of paragraph 16.1 of this Client Agreement) where Client money will be held may be within or outside Cyprus or the EU/EEA. The Client understands, accepts and agrees herewith that the legal and regulatory regime applying to any such financial institution outside Cyprus or the EU/EEA will be different from that of Cyprus. Hence, in the event of the insolvency or any other equivalent failure or preceding of that person, the Client’s money may be treated differently from the treatment which would apply if the money was held in a Segregated Account in Cyprus.
16.8. The financial institution to which the Company will pass Client money (as per paragraph 16.1 of this Client Agreement) may hold it in an omnibus account and it may not be possible to separate it from the Company’s money, or the third party’s money. Hence, in the event of the insolvency or any other analogous proceedings in relation to that financial institution or third party, the Company may only have an unsecured claim against the financial institution or third party on behalf of the Client and other Company Clients, and the Client will be exposed to the risk that the money received by the Company from the financial institution or third party is insufficient to satisfy the claims of the Client and all other clients with claims in respect of the relevant account.
and as long as the following remains true, clients should be OK:
37.7 ... the Company has in place Chinese Walls procedures based on which no communicating of information and data between the various business units of the Company and especially, whether the Company’ s officers and employees have access to data in the possession of business units to which such access is not permitted. In particular, the necessary Chinese Walls shall be erected between the Reception & Transmission Department, the Execution Department and the Dealing on Own Account Department, as well as with the rest of the Company’s organisational units, so that to prevent the flow of confidential information in a way that may adversely affect the interest of the clients. The Compliance Department shall be responsible for maintaining such Chinese Walls, by means of regular checks and monitored by the Company’s Internal Auditor.
now, FXCM and its CEO got banned from doing business in the USA by the CFTC because of fraud, but FXCM outside the USA survives and goes on. Leucadia just took control of the board of directors, will keep the brand name FXCM, but change the company name to Global Broker.
Alpari still exists and if i remember correctly, is now headquartered in the Caribbeans (they started in Russia almost 15 years ago).
re hanseatic, i just finished reading the legal docs. i like what i see. they act as agent on behalf of clients. very good.
only issue i do have is that they are allowed to deal on own account. if some of their traders screws up in a trade of their own and causes hanseatic to blow up, you and i will be the last to learn about it, that is, when it's too late to get all your money out.
also 1 thing i don't like: all instruments are CFDs, which means FX trading is CFD on FX trading and not trading the underlying rolling SPOT contract. now that, i do not like at all.
it is also interesting how their legal docs reads: so different (and i mean this in a good way) from the legal docs from the other brokers out there (and i mean the usual names)--hanseatic is precise, clear, to the point. no mistakes here.
interesting...
however, that being said, these sections from the client agreement may become a problem later on:
16.6. The Client understands, accepts and agrees herewith that the Company may pass money received from the Client to a third party (e.g. a market, intermediate broker, OTC counterparty or clearing house) to hold or control in order to effect a Transaction through or with that person or to satisfy the Client’s obligation to provide collateral (e.g. initial margin requirement) in respect of a Transaction. The Company has no responsibility for any acts or omissions of any third party to whom it passes money received from the Client. The third party to whom the Company passes money may hold it in an omnibus account and it may not be possible to separate it from the Company’s money, or the third party’s money. The financial institution(s) (of paragraph 16.1 of this Client Agreement) where Client money will be held may be within or outside Cyprus or the EU/EEA. The Client understands, accepts and agrees herewith that the legal and regulatory regime applying to any such financial institution outside Cyprus or the EU/EEA will be different from that of Cyprus. Hence, in the event of the insolvency or any other equivalent failure or preceding of that person, the Client’s money may be treated differently from the treatment which would apply if the money was held in a Segregated Account in Cyprus.
16.8. The financial institution to which the Company will pass Client money (as per paragraph 16.1 of this Client Agreement) may hold it in an omnibus account and it may not be possible to separate it from the Company’s money, or the third party’s money. Hence, in the event of the insolvency or any other analogous proceedings in relation to that financial institution or third party, the Company may only have an unsecured claim against the financial institution or third party on behalf of the Client and other Company Clients, and the Client will be exposed to the risk that the money received by the Company from the financial institution or third party is insufficient to satisfy the claims of the Client and all other clients with claims in respect of the relevant account.
and as long as the following remains true, clients should be OK:
37.7 ... the Company has in place Chinese Walls procedures based on which no communicating of information and data between the various business units of the Company and especially, whether the Company’ s officers and employees have access to data in the possession of business units to which such access is not permitted. In particular, the necessary Chinese Walls shall be erected between the Reception & Transmission Department, the Execution Department and the Dealing on Own Account Department, as well as with the rest of the Company’s organisational units, so that to prevent the flow of confidential information in a way that may adversely affect the interest of the clients. The Compliance Department shall be responsible for maintaining such Chinese Walls, by means of regular checks and monitored by the Company’s Internal Auditor.
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I am not sure how long they would go with ‘Global Broker’ all the best for them.
Most of the retails brokers has the similar conditions due to have multiple of regulators and they always want their best interest (outside of FCA).
Actually I love cFD and trade mostly of them. CFD trading spans a larger set of financial markets, as these contracts can involve various commodities or equity indices of several countries. Some brokers even offer CFDs on stocks traded in different exchanges, opening a very wide realm of trade opportunities!
Compared to spot forex trading which is limited to the currency market, CFD trading does seem to offer a much broader array of trading choices.
Most of the retails brokers has the similar conditions due to have multiple of regulators and they always want their best interest (outside of FCA).
Actually I love cFD and trade mostly of them. CFD trading spans a larger set of financial markets, as these contracts can involve various commodities or equity indices of several countries. Some brokers even offer CFDs on stocks traded in different exchanges, opening a very wide realm of trade opportunities!
Compared to spot forex trading which is limited to the currency market, CFD trading does seem to offer a much broader array of trading choices.
There are many books that could help you learn the Forex Trading, but real knowledge would be only obtained through the Real Trading.
Yes BUT
CFDs are derivatives whose price is based on an underlying market and most retail brokers only create a synthetic market for their clients. As an example: the only DMA CFD broker in Australia is INVAST; everyone else only acts as a market maker: the only counterparty to any of your CFD trades is your broker, and the only venue accessible to you, the client, is your broker.
Implications are: if the underlying market (whose prices are quoted on exchange) in a particular CFD happens to go against your position, the best exit price you can get is what your broker decides to give you, not what you could have gotten by trading on the underlying exchange on a central limit order book (which is what an ECN is) on which there is real competition to offer the best price to market participants.
And since you don't see the volume available at each price point, your broker can very easily claim to not be able to close your position at the better price you want because 'liquidity was not available.' But if you traded directly on the underlying market, you could adjust your strategy exactly to the liquidity available since you could actually see it and thus manage your risk much better.
Furthermore, when the underlying market is closed, yes, you can still trade the CFD but you don't trade against available real liquidity in that instrument, and that's true even when the market is open. Which means, and that's true either when the underlying is closed or not, your broker can give you whatever price he wants when you decide to close your position, and you have no choice but to accept it. Ouch. A lot of trust in your broker you must have.
Finally, you are totally dependent on your broker's IT infrastructure and have to hope it is performant enough for those times when you need to get out of a position very fast. Meaning that, let's assume that your broker is honest and always tries to hedge your trade on the underlying, what could happen is that the underlying price moves suddenly really fast and you want to take advantage of this fast move by getting out with a profit now instead of waiting 5 secs for the broker's system to actually execute the full chain of the trade. Well, if the broker's system is slow, during that 5 sec window, you might miss your chance. But on the real underlying market, you only depend on a proven infrastructure, that of the exchange, and the available liquidity, and if you see the liquidity is there for you to get out, then you would be able to take it in a sub-10 ms time window. But with CFDs, good luck trying to do that.
I understand it's convenient and cheaper that paying all the exchange fees and what not, but in the end, if you trade serious money and not just pocket money, CFDs the way they are offered today IMHO represent more of a liability for the retail trader and a golden goose for the retail market maker, which is why they are so heavily marketed to an unsuspecting public, just like binaries, since at least in this arena brokers still can tune the product to be a market making product whereas in SPOT FX, it has become really impossible to justify to a client who wants to trade on an ECN A-book why he should accept a market making solution with its lower execution quality environment when there are no more technological obstacles preventing brokers to offer ECN A-book trading conditions to everyone. The only obstacles are business reasons only both from the retail broker's perspective and the LPs which often times have outrageous fee requirements for the retail brokers--credit line must be secured and when that proves impossible, the possibility to offer retail clients access to an ECN such as HotSpotFX, for ex, disappears and suddenly the next best thing is a hybrid environment like Dukascopy's ECN or a non-ECN environment such as a STP solution like CFH Clearing or Darwinex.
Although, with 50K, Baxter-Fx will offer an institutional ECN trading environment to its clients via FXall, HotSpotFx, and Currenex (not the B-book Currenex but the A-book setup).