Cash FX firms are like Casinos!

Many cash FX firms are counter party to your trade up to $20,000,000. Therefore, every dollar you lose is potentially that company’s gain. The "No Dealing Desk" promotion and disclosure aims to reassure customers that they are really trading with other customers and/or banks and thus, the firm no longer has a huge financial incentive for you to lose every red cent you have on deposit with them. How very refreshing, don’t you think?

The problem is, the OTC market has less regulatory oversight and I'm not aware of any way to confirm that the firm really isn’t in some way still on the other side of your trade, or that the banks providing liquidity have the ability to make sure they get their pound of flesh in some way as well. Thus, the attempts at creating a legitimate marketplace may fall short, based on the lack of bankruptcy protection and the ability to verify affirmations from firms that in the past may have been selectively disingenuous in what they disclosed to their clients.

Perhaps the most prominent entities that matter-of-factly disclose that they’re seeking to profit from your loss are casinos. While we may not hold casinos in the highest regard, and much has been portrayed of their amoral transgressions, millions flock to the desert each year for some glitz, glam and gambling. I don’t begrudge casinos their revenue model, because they’ve been honest with us up front, and they show us a good time while we’re there. So, many of us go expecting to lose, but hoping we have a good enough time to justify the expense.

Many cash FX firms are on the other side of your trade, and with that model, seek to profit dollar for dollar from your losses, just like a casino.

So, there we are, cash FX firms are like casinos, what do you think?

I thought it was equally relevant there also. The powers that be disagree. C'est la vie - comment in either.

I have been lucky enough recently to work on a major banks retail FX dealing desk. Deal sizes were quite small ranging from USD1,500 to USD1,000,000. Sometimes you would get the odd customer wanting to do larger trades. I can tell you that 100% that any trade over a certain threshold (I believe that it was $50,000) got back straight out into the interbank market. All the smaller positions would get aggregated a few times a day and then backed straight out. The idea is to make money by 'double-dipping'. Charging the retail customer a margin (say anything from 3 to 30 points) then when the deal is done the position gets managed with the trading desk who then back the position out to the interbank market and again make a few more points.

The lesson is that the big boys can make good money without having to take on risk by trading against the customer, partly because they are a market maker and don't necessarily have to cross the spread like we do.

That said, I would expect that the above scenario would be different in a brokerage firm. However, it would be a risky proposition to not back out a large proportion of any position they deal to the greater market, IMHO.

My first oppinion was that It didn't affect me in any way.
But it does, in forex, like in every other market the price forms thru demand and suply. This so called brokers keeping our trades in-house lacks the market (forex) of it's most important componemt, the human one, the traders. So basicly, the price is formed only by the big players, the ones that brokers send their trades directly to the interbank system.
They get rich on our back

I thought there might have been more comment on this. Oh well, there we are. Have a great week guys.

Surprising.

untill I have a solution I choose to consciously forget about this fact

Most obviously share your view and are blocking the reality. Maybe that's the best way to handle it.