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carry trading with broker

  • #1
  • First Post: Sep 11, 2006 6:51pm Sep 11, 2006 6:51pm
Last Monday Morning, I had a phone conversation with an FXCM representative discussing certain issues I had with them.

One of the interesting issue we discussed was "interest" or "swap charges". I asked whether FXCM offers non-interest bearing accounts and they gave me a form which I attached in this post.

After having been lied to by brokers, I was suspicious. I asked the representative clearly, unfront and honestly of my intention. I was trying to do a full hedged long GBPJPY on an interest bearing account and a short GBPJPY on a second non-interest bearing account. Right there and then he quickly jumped the gun on me and said, sorry, we'd charge you appripriate commissions instead of interest. I asked how much this commission, how frequent the commission is etc and the rep made a wholesale shotgun answer repeating "appropriate commission" to effect that this strategy wont work against FXCM.

Simply put, FXCM is totally working against traders. They dont want traders to win no matter what strategy i'd use. They wont allow me to do a non-interest bearing account even if I'd get the interest bearing account from someone else.
Attached File(s)
File Type: pdf Interest-Free Commission Request & Application_20060117_fxcm.pdf   155 KB | 863 downloads
  • #2
  • Sep 11, 2006 7:13pm Sep 11, 2006 7:13pm
do a search for carry trading on this forum, there have been some in depth discussions about this issue a while back, including FXCM issues. i cant find the exact thread right now, but if anyone can find it please post.

here is a related thread...
http://www.forexfactory.com/forexfor...=carry+trading
Relax and be happy.
  • #3
  • Sep 11, 2006 7:14pm Sep 11, 2006 7:14pm
BK,

I tried to go this route with them as well. The commission charge, if I remember, equates to about $10 per lot, RT. For a mini, it's $3 per mini lot. The difference eliminates the possibility of using a mini lot and getting the higher leverage for such a hedge strategy.

Notice in the application that they ask for a reason for requesting the account. The ONLY valid reason is one where your religion prevents you from paying or receiving interest (Islam is one of the religions - not sure of any others.)

I thought the info would help. I've been through the same due diligence process you are going through right now.

Regards,

stockwet

Quoting BurgerKing
Last Monday Morning, I had a phone conversation with an FXCM representative discussing certain issues I had with them.

One of the interesting issue we discussed was "interest" or "swap charges". I asked whether FXCM offers non-interest bearing accounts and they gave me a form which I attached in this post.

After having been lied to by brokers, I was suspicious. I asked the representative clearly, unfront and honestly of my intention. I was trying to do a full hedged long GBPJPY on an interest bearing account and a short GBPJPY on a second non-interest bearing account. Right there and then he quickly jumped the gun on me and said, sorry, we'd charge you appripriate commissions instead of interest. I asked how much this commission, how frequent the commission is etc and the rep made a wholesale shotgun answer repeating "appropriate commission" to effect that this strategy wont work against FXCM.

Simply put, FXCM is totally working against traders. They dont want traders to win no matter what strategy i'd use. They wont allow me to do a non-interest bearing account even if I'd get the interest bearing account from someone else.
  • #4
  • Edited 7:51pm Sep 11, 2006 7:17pm | Edited 7:51pm
Here is one
http://www.forexfactory.com/forexfor...ead.php?t=7206

and here is the other one
http://www.forexfactory.com/forexfor...highlight=work


Quoting merlin
do a search for carry trading on this forum, there have been some in depth discussions about this issue a while back, including FXCM issues. i cant find the exact thread right now, but if anyone can find it please post.

here is a related thread...
http://www.forexfactory.com/forexfor...=carry+trading
  • #5
  • Sep 13, 2006 7:48pm Sep 13, 2006 7:48pm
Why would any broker in their right mind allow you to do that???

This is basically giving you free money with the broker eating the cost of your negative interest position.

Am I missing something?


Quoting merlin
do a search for carry trading on this forum, there have been some in depth discussions about this issue a while back, including FXCM issues. i cant find the exact thread right now, but if anyone can find it please post.

here is a related thread...
http://www.forexfactory.com/forexfor...=carry+trading
  • #6
  • Sep 13, 2006 8:00pm Sep 13, 2006 8:00pm
I've been using FXCM and my leverage is set to 1:200. No matter what position I take, I'm charged interest. Long GBP/JPY = $24 per day per lot interest charged. On their website, they say that they will pay interest if and only if the leverage used is 1:50 or lesser. So they'll lose my business as soon as I max out my mini account. ($50,000) I'll switch to an ECN then.
  • #7
  • Edited 11:17am Sep 14, 2006 10:40am | Edited 11:17am
My main concern was WHY in hell was FXCM discouraging me to do this Interest Trade?

They specifically implied charging me a FEE that will make this kind of strategy a failure. I also ask GFT about it last moring and they also gave me the same answer!

WTF! At first they will charge me a flat out commission and then they change the rule to charge me a commission that will make it fail to the point that I will be charge even HIGHER than the interest itself everyday!

These brokers change their rules! Or was i too naive to be honest putting up front my intention? Thus far the only broker I know that charges TOTALLY NOTHING for holding positions is
( MARKETIVA, Moderator note... Marketiva is a scam company)
. But this one is banned from accepting American Clients - very suspicious. Perhaps, Osama's Al Qaeda is a huge partner.
  • #8
  • Sep 14, 2006 12:52pm Sep 14, 2006 12:52pm
No broker will allow interest arbitrage. If broker discover that u do it deliberately,they will close your account.
ThinkForex
  • #9
  • Sep 26, 2006 2:15am Sep 26, 2006 2:15am
What I wanted to do is BUY GBPJPY on an interest bearing Broker, then go short GBPJPY on a 2nd non-interest bearing broker..

Is this also known as Interest Arb?

Can anyone explain this "Interest Arbitrage" as compared to what I was trying to do?

After all those conversation with FXCM/GFT, I am totally confused with their commission thing.

For all I know, the commission is round trip - NOT per lot per day. Yet why in hell are they telling me that it wont work>

For those who knows non-interest bearing account with FXCM, how much do they trully charge for a 1 LOT SELL GBPJPY held for 5 months?

Right now, I trully dont have any "non-interest" broker other than Marketiva.. I sure need your help with this one.. I spent almost a month and ended in dead end.
  • #10
  • Sep 26, 2006 10:01pm Sep 26, 2006 10:01pm
Quoting BurgerKing
What I wanted to do is BUY GBPJPY on an interest bearing Broker, then go short GBPJPY on a 2nd non-interest bearing broker..

Is this also known as Interest Arb?

Can anyone explain this "Interest Arbitrage" as compared to what I was trying to do?

After all those conversation with FXCM/GFT, I am totally confused with their commission thing.

For all I know, the commission is round trip - NOT per lot per day. Yet why in hell are they telling me that it wont work>

For those who knows non-interest bearing account with FXCM, how much do they trully charge for a 1 LOT SELL GBPJPY held for 5 months?

Right now, I trully dont have any "non-interest" broker other than Marketiva.. I sure need your help with this one.. I spent almost a month and ended in dead end.
you can try migfx. this broker offer free interest account too. but if you not moslem , migfx offer you small interest . for gbp/jpy you just paid U$2.3/ days. be sides that Migfx is member of arif and this broker is reliable too. you can try hegde between migfx and fxcm or man financial.
  • #11
  • Sep 26, 2006 11:56pm Sep 26, 2006 11:56pm
Hey hamburgerman,

If you succeed to open an interest free account, you'll have to be aware that no broker will allow you to only take the negative swap for long periods. They know about this game and they're loosing money if you always take the interest negative side and they will shut down your account if you do.

But,
yes there is a but,
it can be done!

Check out the forum at w w w . g o l d e n m o n e y t r e e . c o m . There it is discussed in length..

Good luck
  • #12
  • Sep 27, 2006 1:08am Sep 27, 2006 1:08am
Quoting BurgerKing
What I wanted to do is BUY GBPJPY on an interest bearing Broker, then go short GBPJPY on a 2nd non-interest bearing broker..

Is this also known as Interest Arb?

Can anyone explain this "Interest Arbitrage" as compared to what I was trying to do?

After all those conversation with FXCM/GFT, I am totally confused with their commission thing.

For all I know, the commission is round trip - NOT per lot per day. Yet why in hell are they telling me that it wont work>

For those who knows non-interest bearing account with FXCM, how much do they trully charge for a 1 LOT SELL GBPJPY held for 5 months?

Right now, I trully dont have any "non-interest" broker other than Marketiva.. I sure need your help with this one.. I spent almost a month and ended in dead end.
If u mix some of your trades with positive swaps then u should be ok. Don't hold your large negative swaps for long period but close them after some periods...
ThinkForex
  • #13
  • Sep 27, 2006 1:23am Sep 27, 2006 1:23am
Hello Burger King,

I have a non-interest account with FXDD on special request as im a muslim and i gave them sufficient proof of it so they can open me a non-interest account as it interest based transactions are prohibited in our religion. If you can request them or find someone who has such an account with them maybe that can help. And yes they dont charge me any commission or fee.

hope this helps

Thanks

Ahmed Jilani
  • #14
  • Mar 15, 2007 3:48am Mar 15, 2007 3:48am
ahmedjilani >> Can you explain where and why paying interest if forbidden in your religion?
  • #15
  • Mar 15, 2007 8:13am Mar 15, 2007 8:13am
Hero,

I could be wrong, but I don't think it's paying interest that's forbidden as much as it is charging interest. Again, this is complete conjecture.

With that said, there are a handful, albeit very few (I've only found one) had non-discriminatory swap-free accounts. However, if you put them in a position where they have to sell your trade to another tier (because the risk is too great for them to carry), they'll revoke your swap priviledges (and subsequently categorize it as "abuse"). You won't be fined or anything, but obviously, if you're making money on a trade, they HAVE to sell that trade to another tier (that will subsequently charge them interest). My guess is that they would have revoked swap-free privileges on muslim accounts as well.

I can attest to this, because during the carry trade boom, my account was almost $70K in the red, and they did nothing for months. The moment this account showed a $40K profit from the reversal of the carry trade, within a week, they revoked my swap free.

The thing is this, a broker can house your position while it's negative because they aren't paying anyone interest for those positions (it's all virtual money for them) and even though they aren't making money on the swap, the position can be held because it isn't making any money. Once the position becomes too large for them to carry, they need to move sell that position to another tier to offset the risk. Obviously, THEY can't incur the costs of your swap-free account (especially if those daily swaps would be large)...so they naturally, need to pass that on to you.

This is how brokers make their money...they keep as many negative positions as they can to hedge new positions. Once positions get to a certain profit level, they sell the trade to offset the risk of further growth. As long as the losing positions keep losing they can keep that money in house. Once those losing positions are liquidated, that's all money they've kept in house without having to spend a dime selling it to the next level. It's just how they manage their risk.

That's why swap-free accounts work only work when you're not costing them anything to hold your account.

Quoting Hero Doug
ahmedjilani >> Can you explain where and why paying interest if forbidden in your religion?
  • #16
  • Last Post: Mar 16, 2007 7:26pm Mar 16, 2007 7:26pm
Nice reply mrmikal. It makes sense that a broker would want to move your trade away if it's costing them an arm and a leg; I know I wouldn't want to just give money away.

What do you mean by another tier? Is that another level of trading?

As for the reasoning behind the Muslim issue, sounds possible, like a way doing a good deed without expecting reward.
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