Broker reverses $20K winning trades for alleged latency arbitrage

I read that part you quoted 3 times and having hard time figuring out what you want me to elaborate on.

1) Yeah I know there's few retail brokers that atleast give you books (ladder) and ability to match with other customer quotes, that's great if you have that but it's still very different from say futures or (based on what I've read) reuters/ebs. And by different I mean that if you are doing trading in volatile low liquidity situations, there's less risk of what happened to op if you say traded through futures/fop, swap execution facilities etc - largely because with MM-broker you get quotes that are not real but something the MM-broker assumes they can hedge if need be without losing. If it turns out they would lose they'll cancel your profits and invent simplistic explanations. Above I reasoned more detailed explanation for why they have a case for cancelling just the profits. Some other posters had similar arguments too I noticed (eg. just the profitable trades were out of market)


2) I admit that I haven't written the algorithms behind the bucket shops books & hedging so it's possible I am wrong and they somehow are able to perfectly hedge all the time...


3) The part about understanding is that if your profitable strategy is such that it eats your counterparty for lunch and you have always the same counterparty then that counterparty either defaults or stops trading with you. What I am trying to say that if you are getting profitable and suspect it could be due to some sort of arbitrage, understand what you are doing and "stay under the radar" instead of trying to kill your own golden goose so to speak.

You are still not making sense, no offence intended. A broker shouldn't accuse a trader of something just because he made some profits especially consistent profits. Period.

Ah I see what the confusion here is. Yes we both agree then. Broker indeed shouldn't be doing that. However if you have a company (or person) that you are think of as a broker and they are giving you prices that are somehow manipulated by your "broker" instead of reflecting the actual market (which can be defined as the place where the most liquidity is, or incase of fx, an aggregate of various such places), then there is a conflict of interest and that broker is not an "agency".


(below by "broker" I mean a market maker that you can't cash your profits from if you guessed that CHF peg would end similarly as the GBP peg when Soros bet against BOE - I mean if you shorted usdchf or eurchf at 1.2 using some massive leverage at retail "broker" I guarantee you'd not get paid if you did it just before the unpeg - if you had massive position built up prior, you'd probably have to fight in court and if the "broker" (market maker) was not hedged proper they might opt to close shop and open another, leaving you with possible loss if you had also hedged elsewhere for some reason)

The way I think about this is that these "brokers" have a market making algorithm that is based on mathematics (ie. complete non-sense) instead of market conditions. This means there is a lot of times during which the "broker" is making up fictitious prices that if traded on, tend to result in retail trader stops getting executed. Now you get some smart trader who noticed this and devices a plan to turn the "brokers" daylight robbery against them, robbing the "broker" of what they stole "fair". By "fair" I mean that because of the illiquidity that is not visible to retail platforms.

The key issue here is that the "broker" can claim to be both broker (they can make latency argument with relation to need to hedge) and "market maker" - this is because they have to hedge sometimes, and usually when it's profitable to them. And even if they are straight about that, I don't believe there is any regulation about market making - all the regulation is designed such that market makers stay in business. As they are acting as "broker & market maker", they can "have their cake and eat it too". That's why some *real brokers* went out of business due of CHF unpeg - they had latency to deal with and no "cookie jar" (large market making proceeds). With "broker"-market maker they could cancel negative balances which obviously means they can cancel any profits too without any legal issues, just by using the argument above "well we are reaaaally brokers (when it suits us) and we couldn't hedge as the real market was illiquid". These "brokers" are at one point brokers (when they hedge losers) and other market makers.

What I'm saying is that if the courts understood this whole thing perfectly, these "brokers" would be made illegal. If that is the goal here, proceed. I am personally ambivalent whether this industry sound be made illegal globally - if you want to make safe money it's possible precisely because they are doing this gaming and that's what the op discovered - safe money - if the market was perfectly fair then it would be more close to random and only established market makers would be eating the pie. He should have understood what he was doing and "stay under the radar". By making noise about this he is possibly causing lot of peoples "holy grail" system to come to end. If you found holy grail then why not keep it instead of trying to destroy it... I think the holy grail here is fair in that "brokers" "stole" the money, and then you can pocket it from the "broker". But if you try to get more from the "cookie jar" than the "broker" has put there resulting in empty or negative "cookie jar", then guess what happens. (ok yes- there's a LOT of cookies in the jar but you can't grab it all quick like the op - if you try grabbing it in very small portions and there's fixed cost it's possible that you can't profitably grab the cookies atleast without being noticed - ideally you could match vs the other customers quotes and thus beat the "broker" in their own market making game fairly but the added spread/commission makes this harder and they can always get priority in the queue. In illiquid stock/futures you can try this game if there's no competition you can't handle).

Well 1) If those brokers hedge, it should be for neutralizing the risk from having traded against the trader, and that's why they do it on net positions taken by the traders IF they are decent and the hedge should be on real-time so there shouldn't be any "latency". Why would they want latency on that anyway if they want as perfect as a hedge possible against the risk? It doesn't make sense. Any form of latency is a result of substandard data server or deliberate price manipulation or both so there is no excuse for its existence whatsoever.

2) The Market making vs. agency model is not necessarily an issue of legality but of supply & demand. They supply it because they believe they can make higher profit at the expense of the traders and eventually we traders will have less and less demand for it once we see the true nature of it. And more and more traders are aware of the pitfalls of market-making brokers and many times it's just a matter of recognizing the broker's true business model in the hopes of extracting more lucrative business from traders.

Bottom line: Just like any industry, you want people to stay long-term with your business, you need to play fair and play smart. You do neither, you are not going to last long. You mark my words, in five years, all of these unscrupulous market making brokers like forex.com and etc. will be gone.

Put a link on your facebook about this scam. Post every where you can about this scam broker. Search google and post all you can. Make sure they run out of business

Looks like Gain (forex.com) is going through a rough patch...
GAIN Capital saw its Net Income fall to $8.3 in Q1 2015 compared to $17.6 million due to declining revenue capture from retail trading.

http://www.financemagnates.com/forex...1-2015-period/

Maybe that's why they're trying out new ways to boost revenue...

File a complaint with the CFTC at http://www.cftc.gov/ConsumerProtecti...aint/index.htm. I have worked with them in the past and had good results in them following up shady trading practices. Don't give up your fight. If necessary, file legal action.

Newbie to CFD Question.

I keep hearing that if you make too much profit while trading CFD that you will have your account closed or limited , While searching for this subject on Google i found this thread.

I thought the entire idea of CFD is that both you and the broker make a profit from the difference so if you make a profit they make a profit too?

I currently have 2 live accounts with this broker. I have finally found a system which is turning out to be profitable. I fear this might happen to me as well because forex.com customer service told me they trade against customers. Can anyone recommend a good broker who don't care how much money you make and accepts credit card deposits as I can't wire money. After reading this thread I am convinced that forex.com is nothing but a casino. You're welcome if you lose, make consistent wins and you're kicked out.

They have been trading against customers ever since they opened their business; this is their business model so it's nothing new. It's just right now traders are getting more educated and are seeing the true nature of their business and are avoiding them like Ebola so this might be why their income is dropping.

Serves them right. I hope they close their doors permanently. Brokers like forex.com have no place in the forex market, whether it's retail or institutional.

Yup they have been a casino since day 1 of their business opening and it hasn't changed since. At least other brokers would try to hedge against their customers' positions. Them, they don't even hedge and they brazenly trade against you.

Same here, was accused of latency arbitrage once I made to much profit, it´s totally funny. Forget these guys, they are outright scammers, nothing less. They are market makers, so they will ALWAYS find excuses to why to cancel your profits, especially if those are big profits on big accounts. They have been fined several times by several regulators, should tell you something about how their business works!

They are like a horn that dont act propley when she is in others cities .,all USA ,UK brokers think they are superior

F.them dont trade with USA,UK brokers that is an advice i wish bobmarly was alive

Have a nice day all

Just surprised that they are still around.

All Retail forex brokers are casino, not just forex.com
what do you think you are buying or selling? Physical currency? Of course it is not. Unlike stock trading where u can request a certificate of shares u own. U never ask your retail broker/dealer to show the currency u sold or bought because they never existed!! Think of it. It is just a online casino game. Many brokers accept deposit/withdraw from SKRILL, which is linked to poker games and gambling. What is the difference between online gambling and online forex trading. There is not much. MT4 platform was built for gambling initially. I have seen fxopen au allows bitcoin trading. what does that tell u?? The currency we are trading is the same as bitcoin which is fake money?

For real currency exchange, U have to go to a branch or a shop in person.

Hi Yunben, maybe if you can share your strategy with us we can see whether you were scammed or not

Yup, no kidding. I agree !!

I believe that this thread also helped in falling revenue for forex.com

I will keep it going

It sure puts me off ever wanting to go with them, thats for sure.