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Is your money safe with your broker?

  • #101
  • Feb 27, 2013 9:09am Feb 27, 2013 9:09am
Quoting kalas
where is the money.

ok, this may be a really newbie question, but i am wondering where the money comes from?

lets asumme that i deposit 100 usd with a ECN broker and i make those 100 dollar to 10000 usd. Who will pay me my profit off 9900 usd? Is it the brokers money or is it a several traders with other brokers who lost the 9900 usd? If yes then i asumme there must be tons of wire transaction every day from one brokker to another? Or how does it work?

And lets assume that i would open a brokerage, will i then need to have lots of millions...
The money comes from the ECN's liquidity providers.
  • #102
  • Feb 27, 2013 9:37am Feb 27, 2013 9:37am
Quoting kalas
where is the money.

ok, this may be a really newbie question, but i am wondering where the money comes from?

lets asumme that i deposit 100 usd with a ECN broker and i make those 100 dollar to 10000 usd. Who will pay me my profit off 9900 usd? Is it the brokers money or is it a several traders with other brokers who lost the 9900 usd? If yes then i asumme there must be tons of wire transaction every day from one brokker to another? Or how does it work?

And lets assume that i would open a brokerage, will i then need to have lots of millions on...
Does not work that way Kalas.
This is like any other regular business that buy something with a loan. Brokers lend you a lot with your with your deposit because they also
"hold" in their Banks what you purchased.

In essence, after you purchase a currency, whoever buys it from you pays your profit.
Example: with your $100 you can buy up to $10 000 worth of currency. Say you buy 2000 dollars (sell eur/usd 0.02 lot) if the price was
1,3120 you now own $2000 dollars and owe the broker 1524,39 euros. ... so, your 2000 purchase (the broker has them)+ your deposit of 100
cover the debt very well. Say you sell the dollars when price is 1.3020. That means you got 1536,09 euros , pay the debt of 1524,39 and have
11.67 euros profit. they exchange those euros to dollars and make a profit of $15.19.

No Broker, MM or not, need millions of dollars to operate. Just enough to satisfied requirement from their liquidity provider.
Also, no Broker MM or not, Hold all clients orders. They would go broke the first day of operation.

J.
  • #103
  • Feb 27, 2013 9:57am Feb 27, 2013 9:57am
I think that the very important issue is to make sure the broker uses regulated and reliable liquidity providers.
  • #104
  • Feb 27, 2013 10:22am Feb 27, 2013 10:22am
.
Only Banks can provide the service of liquidity provider. ASAIK every single country of the world regulate banks.
Obviously there are Banks and "Banks".

J.
  • #105
  • Feb 27, 2013 10:43am Feb 27, 2013 10:43am
Quoting jeuro
.
Only Banks can provide the service of liquidity provider. ASAIK every single country of the world regulate banks.
Obviously there are Banks and "Banks".

J.
This is incorrect - not all liquidity providers are banks.
  • #106
  • Feb 27, 2013 11:11am Feb 27, 2013 11:11am
Quoting TheMaxx
This is incorrect - not all liquidity providers are banks.

mmm.. thinking.
Probably, we are both right.

I am talking about the Institution that does perform settlements and reports to the "Banks
of settlements" at the end of the day. Only banks can do that. Every Brokers or anybody that exchange
money digitally that is not a bank must have one of these.

Now... all Brokers, hedge funds, retail traders like us , etc. "Provides liquidity" to the market to some extent
with their/ours orders... So, in this regard you are right. Not all that provide liquidity to the market need to be a bank.

J
  • #107
  • Feb 27, 2013 11:23am Feb 27, 2013 11:23am
Quoting jeuro
mmm.. thinking.
I am talking about the Institution that does perform settlements and reports to the "Banks
of settlements" at the end of the day. Only banks can do that. Every Brokers or anybody that exchange
money digitally that is not a bank must have one of these.
Are you sure?
http://www.cmegroup.com/trading/fx/fx-otc.html
https://www.theice.com/otc_fx.jhtml
http://www.lchclearnet.com/foreign_exchange/
  • #108
  • Feb 27, 2013 1:08pm Feb 27, 2013 1:08pm
Quoting TheMaxx
Are you sure?
http://www.cmegroup.com/trading/fx/fx-otc.html
https://www.theice.com/otc_fx.jhtml
http://www.lchclearnet.com/foreign_exchange/

yes.
The companies you mention provides services to the forex industry. They manage, reduce risk and act as short term financiers
for player in forex.

The risk that arise is explained in this link.
http://www.bis.org/publ/qtrpdf/r_qt0809x.htm

J.
  • #109
  • Feb 27, 2013 3:24pm Feb 27, 2013 3:24pm
Quoting jeuro
yes.
The companies you mention provides services to the forex industry. They manage, reduce risk and act as short term financiers
for player in forex.

The risk that arise is explained in this link.
http://www.bis.org/publ/qtrpdf/r_qt0809x.htm

J.
Wow I wish I was never wrong
  • #110
  • Feb 28, 2013 7:26am Feb 28, 2013 7:26am
Quoting hubby7
If you are trading with serious money try your local trusted banks.They usually offer very low leverage of 1/20-25 max.Your money will be 99.9% safe unless the bank go bust.They even pay you interest.
I actually agree with this also.
Anyway, all this regulation matters if you are investing serious money, but if for example you are trading with, say, $100 regulation seems to be not so important. Because even if there is a compensation fund and the broker is regulated then if anything happens the priority will be given to big accounts.
  • #111
  • Feb 28, 2013 12:18pm Feb 28, 2013 12:18pm
Well i am trading since quite a long time with my broker and i feel that my broker is a good one and my money is well place there. The important thing is to make sure that we are getting our money at the end and we dont have any problem when we try to withdraw money.
  • #112
  • Mar 1, 2013 11:23am Mar 1, 2013 11:23am
Quoting Kevin7
I think that the very important issue is to make sure the broker uses regulated and reliable liquidity providers.

Thanks for explayning
Karma Will give your pips!
  • #113
  • Mar 1, 2013 11:24am Mar 1, 2013 11:24am
Quoting jeuro
Does not work that way Kalas.
This is like any other regular business that buy something with a loan. Brokers lend you a lot with your with your deposit because they also
"hold" in their Banks what you purchased.

In essence, after you purchase a currency, whoever buys it from you pays your profit.
Example: with your $100 you can buy up to $10 000 worth of currency. Say you buy 2000 dollars (sell eur/usd 0.02 lot) if the price was
1,3120 you now own $2000 dollars and owe the broker 1524,39 euros. ... so, your 2000 purchase (the broker has...
Thanks
Karma Will give your pips!
  • #114
  • Mar 1, 2013 12:01pm Mar 1, 2013 12:01pm
Quoting Kevin7
I think that the very important issue is to make sure the broker uses regulated and reliable liquidity providers.
i agree with you...regulated liq.providers and segregated accounts...
  • #115
  • Mar 1, 2013 4:47pm Mar 1, 2013 4:47pm
In the US, check with your local bank if you have a large capital to begin with. For example, http://www.jpmorgan.com/pages/jpmorgan/au/tss/ts/fx

http://www.jpmorgan.com/cm/ContentSe...=1159381426012
  • #116
  • Jan 19, 2018 1:32am Jan 19, 2018 1:32am
Quoting FXOjafar
{quote} Actually no. ASIC are very good at surveillance of Australian financial companies. Even if a company was to do something so criminal in Australia, the law is quite strict in the handling of client money as well as the segregation of said funds from company money. Australian companies are also required to have insurance. If an Australian broker goes down, you are more likely than not to get 100% of your funds due to you since the law clearly states that is the case. You may argue that it's not the same as in Switzerland or UK, but the likelihood...
I represent investors who opened accounts, that collectively amounted to some US$4m, with a FX broker. The broker's licence was revoked by ASIC early last year after repeated failures to lodge audited financial statements with ASIC. The assets of the broker (what little was left) were only frozen mid last year by ASIC after the director behind the operation had already run off overseas with most of the funds, leaving the investors high and dry. Broker company may be liquidated pending outcome of court proceedings. Doubtful investors will see much of their funds returned. Overseas recovery actions are possible, but that path is fraught with difficulties and little guarantee of positive results...so, do I consider ASIC as being very good at surveillance of Australian financial companies? In a word, no.

As for insurance, my understanding is that licensees in Australia only need to obtain PI insurance, which is limited as a consumer protection mechanism. It is designed to protect the insured (ie the Licensee) and not the consumers directly.
  • #117
  • Feb 7, 2018 12:03am Feb 7, 2018 12:03am
Icmarkets & pepperstone provide "Professional Indemnity Insurance with Lloyds of London" . Amount is 50,000$.

Is this insurance the equivalent of fca's compensation scheme if a broker becomes insolvent?
  • #118
  • Feb 27, 2018 1:26am Feb 27, 2018 1:26am
Quoting PoundTrader
my money is safe as it gonna be, i trade with citifx pro part of citigroup and also have an account with pfgbest, this is as safe as it comes, you can also trade with admd, fcstone or set up a bank gan where your money stays in your own bank, start at 250k+
Hi PoundTrader, I checked out the firms you posted...they all look ancient (!) Their sites look like they haven't been updated for years...

The only one I could find that offers MT4 was PFGBest...what kind of leverage do they offer?

thanks
  • #119
  • Feb 27, 2018 10:15am Feb 27, 2018 10:15am
Quoting grandaevus
Icmarkets & pepperstone provide "Professional Indemnity Insurance with Lloyds of London" . Amount is 50,000$. Is this insurance the equivalent of fca's compensation scheme if a broker becomes insolvent?
I've asked to IC Markets customer service and the answer is "Professional Indemnity Insurance doesn't cover insolvency."

It only provides cover for the legal costs and expenses in defending the claim, as well as compensation payable to the client to rectify the mistake.

Regarding trades, your funds are held in a segregated account pooled with all other traders at IC Markets. If IC Markets becomes bankrupt then you would become a creditor of the company and would have to try and get what ever monies is left in your account through the liquidator. (Could result in no money back or say 10c for each $1 owed to you. Depends on how much money is recovered by the liquidator and is available to give back to clients)

If your account becomes a negative balance as a result of a move(like 2015 SNB event) that caused IC Markets to become bankrupt, you will be responsible to pay back the amount of money your account is in negative.

Segregated only means that Client funds can't be used by the Company. However the Segregated account still leaves all client vulnerable to losses of other clients in the segregated account.

If you account is in Australia then there is no back up Insurance to cover client funds in the event of IC Markets becoming Insolvent/Bankrupt which is offered for Some or All brokers in the UK.
  • #120
  • Feb 27, 2018 11:07am Feb 27, 2018 11:07am
Quoting meyoik
{quote} Hi PoundTrader, I checked out the firms you posted...they all look ancient (!) Their sites look like they haven't been updated for years... The only one I could find that offers MT4 was PFGBest...what kind of leverage do they offer? thanks
Citifx pro sold there retail forex broker and pfgbest stole money and the owner doing over 30yrs in prison, i guess my money wasn't safe after all
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