Brokers Do Take Opposite Trades!

I thought I wud just make people aware in case they wasnt sure of the rumers that brokers do place trades against you. I have just read alpari's agreement and it clearly states that they do take the oposite trade to you and if it suits their interest they will give you a poor price. Basically its like theyre saying if they dont like your trade they will make you loose.
I know a lot of you are probably already aware of this but I myself wasnt 100% sure it was as serious as some people claimed, but reading in their agreement kind of backed up everything I have read. Hopefully it helps others.
I hope this link is allowed, just to prove what Im saying.
http://www.alpari-us.com/files/doc/agreement.pdf

Look mid-way through page 2 and you will see in BIG CAPITAL LETTERS.

And there it is in BIG, BOLD LETTERS...


Excellent due diligence on your part, fry2010. These days, not a lot of traders read the Contract before signing on the dotted lines.

thank you Jhig. It is a slightly worrying comment. Ill have to go for an ECN, although they require much more dough.

This wouldn't surprise you if you knew how market makers and brokers work. Forex is an OTC market. There is no central exchange. They are there to provide liquidity and be a counterparty. Then they (except bucketshops) lay off their exposure. In times they can't lay off exposure, spreads will increase to help cover their risk.

Thats the great thing about forex, but also the bad thing at the same time. I prefere the fluidity in these markets, and the fact its 24 hour 5 day a week. Much more action. It is just a shame that if you do make profit the brokers are gna make it hard work for you.

The fact that retail brokers (or bucketshops, take your pick of name) take the opposite side of your trade is well known. Not only that: it is how the system works, and it doesn't make them the bad guys automatically. From you post it sounds like the whole thing came as a surprise to you, and in your eyes it proves that they are out to get you. Not necessarily.

If you haven't done it, please read very carefully the three stickies of this section, "The Structure of Forex Brokers", " Market Makers & ECN’s, Is the grass greener?" and "MarketMakers". It is very good stuff and therein you'll find how the whole system works.

Just one snippet: for a trade to take place in forex, somebody is buying and somebody is selling. If you are buying, then you have a counterparty somewhere. Good luck finding somebody that will let you trade microlots in the interbank... THAT is the role of retail forex brokers: they let you take those trades because they are the counterparty, and then they choose what to do with those trades they are taking (let them run, match them with an opposite trade from another customer, group it with other trades and pass them to the interbank... their choice). So yes, they are on the other side of your trade... because without them we little guys wouldn't be making trades to begin with.

Does it create a conflict of interest? Absolutely. It is in their best interest that you lose. However that doesn't automatically mean that they are screwing you or tampering with the prices. Some, of course, will do that and more.

yes.

Obviously the formulation in the contract is broad enough that it would allow them to do anything, I agree with you. But to take a more innocent situation as an example...what do you think offering you a fixed spread means?? Exactly that: tampering with the quotes. In a true interbank, ECN or similar environment the spread fluctuates all the time depending on supply and demand. You could have a ZERO pip spread, then 0.5, a little later 3 pips, then at news time 18 pips and so on an so forth... whatever (hell, I have even heard of negative spreads!). So, how comes a broker is offering you a fixed spread when spreads are natively not fixed?? Because they are not offering you the quoted interbank price, only something close.

So, as you see, offering fixed spreads like all retail brokers do (except at times of great volatility) is already tampering with the quotes. If at a given moment in the interbank the EURUSD bid is 1.5000 and the ask is 1.5000 (zero pips spread) but your broker is quoting you an ask price of 1.5002, he IS tampering with the quotes by your very definition. He is not offering you the best possible price, period. So he better includes that into the letter of the contract or at some point somebody is going to sue them for that.

Again, I agree that the letter of the contracts is typically broad enough that it would allow them to do basically whatever they want with price. Yes. And I am pretty sure some brokers will do all sort of weird things to get your money. Some others won't be so blatant about it. That is how this business work, and it is a good thing that you are aware of it. But that doesn't make all of them the big bad wolf. They are all wolves to some degree, but that is what retail forex is.

yes sure, i appologise for my name calling. At least alpari have actually got the decency to tell you about it. im sure it is not much of a deal anyways. What choice have i really got anyway, got to use some kind of broker.

Fry,

Every US broker has to legally have that disclaimer or one similar to it depending on how they operate. It's been that way since July or so... Has nothing to do with Alpari being a decent company. Why dont you try and open an account with one of their non US subsidiaries and see if you see that disclaimer? I am guessing you wont see it.

BTW - this disclaimer is something that is obvious in all markets when dealing with Market Makers. Deal with any big bank for Millions or Billions and the same thing happens. The Market Maker is always the counterparty, they manager their positions/risk however they see fit and without Market Makers we would have a very illiquid market. If you dont like it then try an ECN that connects to MARKET MAKERS.

ok. anyway, has anyone noticed the massive price spike for GBPCHF monthly? I dont think iv ever seen such a massive range for a candle.

Oh actually i think retail brokers give different prices that banks and institutions get such as the large brokers themselevs.
What alpari are actually stating is that they will modify the price to suit their needs i.e. if they cant actually sell or buy from you at the price given there will be slippage. Read this little quote here my friend :
"ALPARI ESTABLISHES THE PRICES AT WHICH IT OFFERS
TO TRADE WITH YOU. THE PRICES ALPARI OFFERS MIGHT NOT BE THE
BEST PRICES AVAILABLE..."
case closed.

not the brightest bulb on the tree? capital letters seem to work best for you so here goes....

ALL CFTC and NFA MEMBERS THAT ARE MARKET MAKERS HAVE TO SHOW THAT DISCLAIMER! BANKS CAN CHANGE THE PRICE TO SUIT THEIR NEEDS TOO AND THEY DO!

Yes banks do give different prices for larger clients BECAUSE THEIR SERVICES ARE FOR INSTITUTIONAL CLIENTS AND NOT FOR YOU.

Oh, thats right some banks started a retail divisions and they offer the same prices if not worse than some retail brokers.

CASE CLOSED?

Just to add to FXTrader42's comments...

Most retail traders seem to think that every broker is out to get thier 500 bucks (or 50,000 for that matter). it just doesnt work like that. generally retail brokers will show you either A) fixed spread in which they are definitly holding the risk on your trades for a time before either hedging off some risk or just watching you fail. OR B) they are marking up the spread X ammount and showing you a reflection of the interbank market plus a pip or 2. inwhich the orders are passed directly through and the broker makes the markup.

in situation A) you will not be allowed to scalp or news trade and odds are you will try to take advantage of the broker with your silly EURGBP EA and they will end up burning you.
In situation B) the broker will take almost any order but you end up paying a price for it. hence the marked up spread.

EITHER WAY the broker HAS to write that in their contract because it is the LAW.

Imagine that your broker had a server crash and you desperatly wanted out of aposition. wouldnt you like to call up and get out with the broker holding the risk on your trade because of the server crash then hedge the risk off later? I

quote: 'not the brightest bulb on the tree?'
I cant see why such a proffessional such as ur self is arguing with me about something I am quoting from a brokers terms and conditions. Really your quite pathetic.

In my experience, Brokers will trade against you if you don't do that well statisticly speaking. I guarantee you, when I take a trade there is someone at my broker with some kind of alert on their computer. I thik they have learned to trade with me over the years. But then again... I may only take 2 trades per month. I didn't take any trades during sept. and oct. I just didn't see any recognizable patterns for my strategy. but.. back on track now. wierd because dec. and jan. usually are slow for me.

denver, why do they say that in their terms and conditions that when you buy they sell and vice versa? now you say that they go with you if your profitable? I can see why they might do this but it goes against their terms and conditions. Plus if they are the counter party how can they buy if you buy? I hope however that this is true.

You already know the answer to that. They do what suits them and their interests. As you know they engage in spread covering, BUT if they keep the trade (your trade) "in house" they'll make more money if you lose. Most brokerages do not have the power to "move" or "shape" the market. So on trades that they believe are good trades (based on market orders from their deal desk) they pass those through the interbank feed and allow them to become part of the general market ECN (electronic currency network). I'm with you man.... brokers are shifty little sons a b......

Of course they take the opposite side, who wouldnt? Brokers and Banks are the only ones who really make money in the forex market.

That's why they give every new trader a warm welcome.