Are STP and ECN more reliable in terms of funds safety? | Forex Factory

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Are STP and ECN more reliable in terms of funds safety?

  • #1
  • First Post: Sep 17, 2008 7:51pm Sep 17, 2008 7:51pm
Hello. A market maker trades against their clients. when the client wins the market maker loses. and vica versa. That is why marketmaker bares risks. Because he is a counterparty. This risk may lead to bankruptcy of a marketmaker, and possible that it will not be able to return funds to their clients. (sorry if i understand anything incorrect). And what about STP and ECN brokers? If the broker is STP or the ECN, they are not client's counterparty, they route the orders to the bank (or match with other clients(ecn)). And they do not bare risks, they are just middlemen. If i understand it right, there are less chances that ECN and STP brokers face bankruptcy as they are middleman but not the counterparty.
  • #2
  • Sep 17, 2008 10:43pm Sep 17, 2008 10:43pm
In theory this is correct, a broker that only earns commissions would only go broke if they don't earn enough from commissions to cover their running costs.

However, every ECN broker I have looked at has terms and conditions that state that they may be taking the opposite side of the trade to you.

Any broker that allows you to trade less than 100,000 currency unit lots is almost certainly taking the opposite side of the trade, unless they can find another one of their customers to match your order (I can't be sure about that, but I highly doubt that big banks and institutions would be fiddling about with such small contract sizes. Also while you might be happy to have a bank as your counterparty, I doubt the bank would be happy to have you as their counterparty!)

There's a good chance that even the ECN brokers milk some extra profit by taking the opposite side of the trade for the 95% of their customers who lose money trading.
  • #3
  • Sep 17, 2008 11:40pm Sep 17, 2008 11:40pm
you want fund safety then go with dbfx or most currenex hubs are from giant compaines with billions of dollars in assets
  • #4
  • Sep 17, 2008 11:46pm Sep 17, 2008 11:46pm
Quoting SunRa
In theory this is correct, a broker that only earns commissions would only go broke if they don't earn enough from commissions to cover their running costs.

However, every ECN broker I have looked at has terms and conditions that state that they may be taking the opposite side of the trade to you.

Any broker that allows you to trade less than 100,000 currency unit lots is almost certainly taking the opposite side of the trade, unless they can find another one of their customers to match your order (I can't be sure about that, but I highly doubt that big banks and institutions would be fiddling about with such small contract sizes. Also while you might be happy to have a bank as your counterparty, I doubt the bank would be happy to have you as their counterparty!)

There's a good chance that even the ECN brokers milk some extra profit by taking the opposite side of the trade for the 95% of their customers who lose money trading.
thank you, SunRA, for your contribution to the topic. I agree, there's a big itch to take the money of 95%, even if the broker says they only route oreders.
  • #5
  • Sep 17, 2008 11:48pm Sep 17, 2008 11:48pm
Quoting Prettyboy
you want fund safety then go with dbfx or most currenex hubs are from giant compaines with billions of dollars in assets
thanks for the information.
  • #6
  • Sep 17, 2008 11:53pm Sep 17, 2008 11:53pm
Quoting vorschlag
thanks for the information.
your welcome, also will you feel safe with a compay who has 1million in assets or a company who has billions in assets, they both can go down as we seen with the lattes lehman brother and a.i.g but who's more likely the federal goverment will bail out.
  • #7
  • Sep 18, 2008 12:13am Sep 18, 2008 12:13am
What about cme currency futures??? I think its not possible that cme can go broke.
  • #8
  • Sep 18, 2008 3:23am Sep 18, 2008 3:23am
Quoting vorschlag
What about cme currency futures??? I think its not possible that cme can go broke.
i trade spot fx.
  • #9
  • Sep 18, 2008 4:09am Sep 18, 2008 4:09am
I was told that STP means Steal Their Profit

Straight Through Processing simply means all your orders are routed away from the broker and into another company either it be the Interbank or another Broker (which can be an ECN or a Market Maker).

If I remember it correctly, IBFX (intebankfx) used this gimmick to lure traders in. They claim to be STP because they route all our orders to another company. It so happend that this company is their "sister" company fully equipped with Deal Desks to delay execution of orders, add slippage, etc to give you the disadvantage.

Technically, IBFX is STP. But indept analysis, its not.

So be careful about STP, ECN, NDD or whatever. I had my fair share of these craps.

All these aside, yes, it is better to trade with an STP/ECN type broker than those Deal Desk - cheating type market brokers.
  • #10
  • Sep 18, 2008 6:47am Sep 18, 2008 6:47am
Quoting vorschlag
What about cme currency futures??? I think its not possible that cme can go broke.
CME is world's largest and most diverse financial exchange...
  • #11
  • May 27, 2009 2:32pm May 27, 2009 2:32pm
May I know which broker is safest and best for high balance account?
  • #12
  • May 27, 2009 3:08pm May 27, 2009 3:08pm
Quoting MyaNyx
May I know which broker is safest and best for high balance account?
What exactly is high balance? $25K+? $50K+? 100K+? 500K+?

If you have a high balance account, chances are you will be placing either high-frequency trades or larger sized positions (1 MM+ clip)

IMO, you should get set up at an established Currenex hub, such as ADM, CMS, DbFX...
  • #13
  • May 28, 2009 9:41am May 28, 2009 9:41am
Quoting BostonForex
What exactly is high balance? $25K+? $50K+? 100K+? 500K+?

If you have a high balance account, chances are you will be placing either high-frequency trades or larger sized positions (1 MM+ clip)

IMO, you should get set up at an established Currenex hub, such as ADM, CMS, DbFX...
Thanks for telling.
  • #14
  • May 28, 2009 10:00am May 28, 2009 10:00am
all ecn brokers take opposite side of your trades, just becareful
  • #15
  • May 28, 2009 10:06am May 28, 2009 10:06am
As an individual, the best safety is yourself. Doing basic homework about your broker can only bring you this far. Best is not keep excessive funds with your broker, keep just enough for you to trade effectively.
  • #16
  • Last Post: May 28, 2009 10:49am May 28, 2009 10:49am
Quoting shadowman
all ecn brokers take opposite side of your trades, just becareful
Wow, looks like you need to do a little more research.
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