Blatant Lies from a broker?

Hey peeps, I am working with a friend who is looking for a broker, and I gave him a little guidance but dint want to help him to much cause I figure that the time he take to search he will learn more than me just suggesting to him... EITHER-WAY he received this email in response to another email, is what I am wondering is what he is saying all true? He is trying to convince my friends that everyone is a MM and that a dealing desk is better.. its quit funny! what do you guys think?

"Well here is the down and dirty...

Just remember, when firms tell you they are not a market maker or they have no dealing desk... ask them how they place you trade then. Because if they don't have a dealing desk, they are using someone's to make your trade... it's just not theirs... which is a huge disadvantage to you.

An ECN puts together buyers and sellers. This begs the question who is providing the liquidity? specualting actually takes out the liquidity from the market. The liquidity is the biggest advantage in this market. Those who provide the liquidity are companies like Mercedes Benz that has a contract due in Japan and changes Euros to Yen. An ECN actually takes out the biggest advantage to the forex market... Liquidity.

Furthermore, (remember the Bear-Sterns fiasco) Interactive Broker decided that it was going to shut down that Friday and not let any of it's traders trade. No warning, no explanation, just sorry you can't trade. I don't know about you... but that sucks!

As far as a dealing desk... They have to have a dealing desk in order to make a trade. The biggest banks in the world have dealing desks. It is a necessity for this market to exist. And there is no way any consumer is going to trade directly with a bank. That's not going to happen.

Forget your computer going down. What if you don't get a fill on one of your orders, or if it blows through a stop or limit... What do you plan on doing? Without a dealing desk it is impossible to get that resolved.

Also, as far as trading with other traders. We have a function on our dealbook called ITX (top left corner of dealbook) that allows you to trade with other traders. The problem with the ITX and interactive broker is that you do pay a comission and the spread is not any better than just placing a trade through GFT. (Most of the time you are paying more... I know from experience)

I just think that you would be making a mistake not trading with GFT... but that's my opinion."

Would this be the same GFT that used to slip me a handful of pips on a fairly regular basis?

It is true, no matter what you do....sooner or later you are heading through a dealing desk. It could be GFT.....Oanada, or if you are with IBFX for example.....Lehman/DB/Citi, etc.

I dont think GFT was dirty......but they certainly stack the cards in their favor, in a big way. For entertainment....spend a weekend trying to figure out how many ways they stick it to you with interest payments.

I dont think they are thieves, but I would never recommend them.

I like to think of them as "used car salesmen"

Clockwork

exactly.

"I just think that you would be making a mistake not trading with GFT... but that's my opinion."

I agree, open an account and not trade enough, and they hit you with "Inactivity Fee" on top of the rest.


(I am assuming they still have it in force)

GFT has a cool platform but their execution is garbage along with everything else except the platform.

Hehe..some brokers have no patience.

I will tell you, this is one of the most frustrating parts of my days as a broker. There are a LOT of companies out there who say they have no dealing desk - and many of them are misleading the potential clients or clients in some way. Worse, I know exactly how some of them are getting away with it... and yet a potential client will whack me with "But they say they have no dealing desk" and I can't respond to tell them why.

Why, you ask? Unfortunately, when I get on the phone with the client, we generally aren't allowed to badmouth another brokerage (for various reasons including our own in-house policies and various regulatory bodies not liking it when brokerages talk bad about each other)... so I'm forced to talk about some of the advantages of having a desk. This is where I can sympathize to some degree with the GFT guy, because he probably ran into that problem. When that question comes to me, I end up saying "Well, ultimately, you have to make the decision as to what is best for you. I'll do my best to help you here and earn your business". I'd rather be honest and take the time to say it and do things the right way.

It's frustrating, but I take heart in that the NFA is looking at these claims of NDD by various other brokerages to see if they're telling the truth. I could easily pick apart some of the NDD stuff that some brokers toss out. Heck, I've called some of the other brokerages to see what they'll tell me on the phone so I have some idea of what they're saying and how they'll dance around certain questions (to be fair, they'll call us too to do the same thing). You want to have some real "fun" when you're working at an FCM? Call up another brokerage, mention that you're looking at another brokerage (namely, your own firm or another competitor of that firm), and see if the person on the line will take a cheap shot at your firm to make a sale. I don't do it often, but I am always curious to see what they know about the markets - it's amazing how many firms out there will put you on hold for 10 minutes because salesperson #1 who picked up the phone couldn't tell you what a swap is.

I will say this though, there is truth to the statement though that even ECNs have some sort of oversight on their trades. Depending on the brokerage, it may not be to the extent of a dealing desk's oversight, but when a company is telling you that they're letting millions to billions in trades pass by and not even peeking at the information in this market - that should ring warning bells in anyone's head.