IB now Forex Dealer Member!

S

sxm

Hi, this is my first post, but I've been lurking for quite some time. Thanks for sharing your collective wisdom :)

On to the topic. I got a message from IB:

"
Dear IB Customer:

Interactive Brokers LLC (“IB”) has recently been approved by the National Futures Association (“NFA”) as a Forex Dealer Member (“FDM”). As an FDM, pursuant to NFA rule 2-36(l), IB is required to provide you with the following risk disclosure regarding your foreign exchange transactions executed through IB.
"

And from the risk disclosure sheet:

"WHEN YOU SELL, THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER
IS THE SELLER. As a result, when you lose money trading, your dealer is making money on such
trades, in addition to any fees, commissions, or spreads the dealer may charge."

I am not a FOREX trader, but it gave me good feeling that IB was just routing the orders to a third party. It seems these days are gone.

Is any of you FOREX traders concerned about stuff like stop fishing?
 
I have two forex feeds running side by side. One is IB's the others is a data provider's feed. Normally they are basically identical to the pip. On the EURUSD pair I saw 2 cases during the last 4 month which I considered stop hunt on IB: a spike taking out previous high where the other feed did not show a spike. (Not much to worry yet, imo.)
We'll see if it changes in the future.
 
As long as you're getting a competitive spread with low commissions, or a good spread with no commission, why do you care who's making money from your trades?
 
So they are no longer ECN, they are solely market making? They still charge commission, I hope they don't plan on widening spreads or skewing their quotes.
 
As long as you're getting a competitive spread with low commissions, or a good spread with no commission, why do you care who's making money from your trades?
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Well, the IB risk disclosure summs it up nicely:
... YOUR DEALER IS YOUR
TRADING PARTNER WHICH IS A DIRECT CONFLICT OF INTEREST.
More...

As far as I understood, before, you got the best prices from several dealers, IB didn't make money off of you, thats why they charge commissions. Now, they do make money off of you, additional to the commissions. If the spread stays small, that might not be a problem. But the conflict of interest remains.

I was just wondering if other people see that as a problem or at least as a loss of quality regarding forex trading.
 
Quote from sxm:

Well, the IB risk disclosure summs it up nicely:


As far as I understood, before, you got the best prices from several dealers, IB didn't make money off of you, thats why they charge commissions. Now, they do make money off of you, additional to the commissions. If the spread stays small, that might not be a problem. But the conflict of interest remains.

I was just wondering if other people see that as a problem or at least as a loss of quality regarding forex trading.
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There have been no changes of the type you suggest to IB's spot forex model. We do not charge a mark-up or change the spread as quoted by our liquidity providers and only charge a commission.

While it's understandable that one might draw that conclusion based upon a reading of the disclosure document, please note that this document contains specific disclosure language which the NFA requires for all member forex dealers. As example, the classification of IB as the counterparty to each customer transaction is a legal distinction, although in practice that transaction is fully offset in terms of both quantity and price with the liquidity provider supplying the quote. In effect, it's a matched book with IB the legal counterparty to both sides.
 
Quote from IB-AN:

There have been no changes of the type you suggest to IB's spot forex model. We do not charge a mark-up or change the spread as quoted by our liquidity providers and only charge a commission.

While it's understandable that one might draw that conclusion based upon a reading of the disclosure document, please note that this document contains specific disclosure language which the NFA requires for all member forex dealers. As example, the classification of IB as the counterparty to each customer transaction is a legal distinction, although in practice that transaction is fully offset in terms of both quantity and price with the liquidity provider supplying the quote. In effect, it's a matched book with IB the legal counterparty to both sides.
More...

Thank you very much for jumping in and clarifying. That disclosure was leading to all kinds of questions. Now, I feel much more confident.

Just for being absolutely clear, you are saying IB will continue to follow NDD, STP model especially for the trades that clear on IDEALPRO. So, no skewing of quotes or different prices to different clients as disclosure says is possible. Can you please confirm? Thanks in advance.
 
Quote from gmst:

Thank you very much for jumping in and clarifying. That disclosure was leading to all kinds of questions. Now, I feel much more confident.

Just for being absolutely clear, you are saying IB will continue to follow NDD, STP model especially for the trades that clear on IDEALPRO. So, no skewing of quotes or different prices to different clients as disclosure says is possible. Can you please confirm? Thanks in advance.
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Correct. This disclosure has no impact upon quotes.
 
Quote from IB-AN:

There have been no changes of the type you suggest to IB's spot forex model. We do not charge a mark-up or change the spread as quoted by our liquidity providers and only charge a commission.

While it's understandable that one might draw that conclusion based upon a reading of the disclosure document, please note that this document contains specific disclosure language which the NFA requires for all member forex dealers. As example, the classification of IB as the counterparty to each customer transaction is a legal distinction, although in practice that transaction is fully offset in terms of both quantity and price with the liquidity provider supplying the quote. In effect, it's a matched book with IB the legal counterparty to both sides.
More...

Is Timber Hill one of your liquidity providers? Thanks in advance.
 
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