I received an email a few days ago from a reader who thought it was unfair to paint one of the dealing desk brokers listed in this blog with the dark color being used to paint everyone else. To that I will simply say this. If any dealing desk broker is concerned about being lumped together with the unscrupulous, then it’s that broker’s responsibility to start educating their trader clients regarding the distinction that should drawn between them and their counterparts.
If a broker offers a fair trading platform and genuinely interested in helping traders prosper, then I suggest that firm consider explaining publically how brokers routinely take advantage of their clients. They may not manipulate the game behind the scenes themselves, but its a stretch to think that they don't know how it can be and is being done.
Such a bold initiative would not only enable them to separate themselves from the herd, it would empower traders to avoid those who misrepresent themselves. and, perhaps most importantly, provide the CFTC and NFA the information they need to shut down the ethically challenged.
Here are a three issues they could start with.
1. What are the mechanics of stop hunting, i.e., spiking and/or stop phishing. How and when does a broker take a trader’s position out?
2. Explain, if possible, how traders and regulators alike can document the fact that trades are being spiked.
3. Explain why, when a trader initiates a market call, a dealing desk broker’s displayed rates suddenly disappear?
If providers really want to wear a white hat, why don’t they lead the charge for industry reform, e.g. fee disclosure and trading transparency for starters. A true non-dealing desk’s fees are fully disclosed. Why aren’t the dealing desk broker’s? If those who refer to themsevles as “white hats” are unwilling to take the initiative to inform traders about the games brokers play, they are obviously part of the problem and I don't have any sympathy for them.
I make no claim to know whether the particular broker the writer mentioned limits its earnings to the fixed spreads it quotes or not. Acknowledging the possibility that their fees are limited to their fixed spreads, if the particular broker mentioned gets off its derriere and starts publically pushing for industry reform I’ll consider revising my remarks.
Instead of buying into the nonsensical idea that this blog isn't being fair, I suggest readers consider the interests of the individual trader instead. Painting dealing desk brokers with a broad brush? You bet. I have no choice because the "white hats" prefer to remain silent.
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