Forex Fraud Frequently Related to Managed Accounts

Anyone taking the time to check the Commodity Futures Trading Commission’s (CFTC’s) website will soon discover that the Forex affords the unscrupulous a relatively easy way to take advantage of the unsophisticated investor, especially when it comes to managed accounts. The following CFTC findings are only a small sampling of the problem the CFTC has uncovered.

Fx.unigma.com & Fx-world.com

Carlos Alejandro Libera Saume

International Currency Exchange, Inc. (ICE), Michael Cottec, John Aucella, Eugene Aucella, and Worldwide Clearing, LLC

South Florida Boiler Rooms

Apart from rejecting out-of-hand any solicitation or website using advertising materials that suggest that a dealer or account manager can guarantee profitability, the only real defense you have as a passive Forex investor is to conduct a thorough background check so you know who you're dealing with. Most passive investors who get defrauded are those who don't bother to check the credentials of the people they're dealing with before they set up a managed account. A couple of good starting points would, of course, be the CFTC and National Futures Association.

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Traders May be Well Advised to Rethink Doing Business with Forex Brokers and/or Banks in Switzerland

Today an interesting story entitled Conspiracy Theory appeared on 7days.ae, a United Arab Emirates website that details the problems investors have been having getting their assets unfrozen in a Swiss bank. Should the story be true (I have no reason to think that it isn't), it should make anyone think twice about dealing with a Forex broker whose accounts are held by a bank in Switzerland. You make a deposit with them and those funds can be frozen for ten years or longer by a rogue government official who decides he doesn't like one or more of the principals involved.

Anyway, the story makes fascinating reading for those who enjoy the thought that the world is really being run by a small group of people who control everything from the price of oil to traffic signals.

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Beware of Websites Selling Forex Trading Systems that Guarantee High Profits and/or Minimal Risk

The United States Commodity Futures Trading Commission (CFTC), the federal agency that regulates commodity futures and options markets in the United States, has witnessed an increase in the number of Internet websites fraudulently promoting foreign exchange (Forex) trading systems and advisory services. Among other things, the websites they are concerned about lead prospective investors to believe that they can generate untold "riches" with little or no risk. The quotation in the graphic embedded in this entry is just one example of many. It suggests that if you just know a few trading secrets, you'll be in a position to buy a yacht and join the ranks of the "big dogs" cruising the Mediterranean.

Am I suggesting that the site using this terminology to attract clients doesn't have something to value to offer? Certainly not. I personally think there's something to be learned even from a washroom attendant. What I am suggesting is that legitimate Forex training providers don't have a need to use hype to promote their programs. Call me an idealist, but a good program ought to be able to sustain itself without using outlandish emotional appeals.

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Advantages of Trading Through A Dealing Desk Broker

In all fairness, I thought it would be a good idea to provide space for speculators to post the reasons they believe traders should use or continue to a dealing deak broker to trade the Forex. Anyone interested in modifying or making an addition to the list can ether drop me an email or post the recommendation in the comments section below and I'll be happy to post them.

ADVANTAGES OF USING MY DEALING DESK BROKER
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The Non-Dealing Desk: Advantages and Disadvantages

Over the past six months I've learned a lot about Forex trading platforms - the good and the bad. I hope this post, describing the advantages and disadvantages of non-dealing desk (non-trading desk) brokerage, will help clear the air. While certainly not comprehensive, I think the following hits the high points.

ADVANTAGES OF THE NON-DEALING DESK
1. No Inherent Conflict of Interest. Non-dealing desk brokerage firms do not trade against their clients. As facilitators of trading, they do not take positions that may from time-to-time conflict with the interests of individual traders.

2. Market Access. Non-dealing desk brokers offer every trader, big and small, equal access to the interbank market. The rates (bid and ask prices) on a non-trading desk platform are not those set by an individual broker but those derived from active trading between participating banks, institutional investors, FCM's and individual traders. The process itself makes every trader regardless of size an independent market maker.

3. Anonymity: Trading is done in total anonymity - the non-dealing desk broker does not know or have a need to know your positions so stop loss orders are not/cannot be targeted for takeout when a broker has a need to meet liquidity requirements.

Note: There is a growing suspicion that dealing desk brokers spike rates to take out trades when it suits their purposes. An insider a friend of mine talked with recently, a key programmer working for a dealing desk brokerage firm on the East coast, acknolwedged that brokers spike rates of up to 10 pips on a routine basis and for a variety of reasons. Whether used to fill unbalanced trades, leverage the broker's own account, or to meet immediate liquity requirements, spiking is a fact of life and difficult to prove. Sooner or later he believes the NFA will find a way to document the practice, but until then a lot of dealing desk brokers will continue to manipulate rates to their own advantage. At this point, they don't have any compelling reason not to.

4. Pricing Intervention (Bias). Non-dealing desk broker rates as well as bid/ask prices come directly from the interbank system. They are not filtered or otherwise manipulated to maintain established (undisclosed) profit margins or spiked by the broker to gain a trading advantage.

5. Reorders. Non-existent. Traders never get "reorders" from a non-dealing desk because they serve no purpose - the broker has nothing to gain or compensate for.

6. Full Disclosure. The non-dealing desk broker's fees are limited and clearly disclosed.

7. Transparency. No mind games. What you see is what you get.

PERCEIVED DISADVANTAGES OF THE NON-DEALING DESK
1. The Cost of Trading: A large number of traders still believe that there is such a thing as commission free trading, a myth that continues to be perpetuated by a large number of dealing desk brokers. Make no mistake, the so-called "commission free" broker generates a transaction fee every time a trade is executed.

The difference is that the non-dealing desk fee is fully disclosed; the dealing deak broker's "fees" are not. What's more, the dealing desk's offer of fixed spreads also affects the individual trader's profitability because he/she is locked out of trades when market spreads drop below the broker's fixed differential. Instead of executing a market order, the broker responds with a reorder which guarantees that broker a fixed, undisclosed profit while at the same time depriving the trader the opportunity to take maximum advantage of a pricing move.

2. Spreads are Variable, Not Fixed. The Forex is an extremely fluid market. Spreads are in a constant state of flux and when traders trade through a non-dealing desk, they may see a dozen or more banks posting rates - the most attractive appearing above all the others.

During peak trading hours, spreads can drop to zero, a fact most traders using a dealing desk are not aware of. During off-peak hours, spreads can be considerably higher.

Non-dealing desk brokers don't offer or execute trades based on fixed spreads. They charge a nominal transaction fee. Such is not the case with the dealing desk broker. Whether interbank spreads are high or low, they just boost their rates to guarantee the profits they have imputed in their fixed spreads. They also generate an undisclosed amount of income trading against their trader clients.

Kicking Off the Forex Robots SCAM Campaign

Just thought I’d let my readers know that the NDD forum is active again. If you enjoyed the dealing vs non-dealing desk debate, you’re really going to love the in-your-face challenge we’re dealing with now.

The issue? Gypsy programmers selling bogus forex robots. I know you’ve seen them and they all look and sound alike. Here are but a few illustrations.

“I turned a profit of $50,212 in just one week and I didn’t spend more than ten minutes at my computer doing it.”

God awful testimonials that read like this: “I’m a 57-year-old, x-truck driver and thanks to you, Bob, I just closed escrow on my dream home in the Hamptons, bought a brand new Rolls Royce convertible, a 120 foot yacht, and married a 20 year old babe with the intelligence of a grape. You’re the man.”

And how about this? At the top of the developer’s website one see the logos of major media giants like CCNMoney, Forbes, FoxNews, MSNBC, Bloomberg, and the Wall Street Journal preceded by the words “Forex as seen on.”

And this? “Gosh, we’re sorry. This robot has sold out. If you’d be interested just enter your email address and we’ll let you know if we decide to allow additional traders to buy it."

And finally this. “Just enter your email address and we’ll send you proof.”

The long and short of it is that traders are in a position to put developers offering bogus forex robots out of business. All they need to do is contribute to the discussion.

Let’s put to rest the all the hype and fantasy. Robots work or they don’t work and traders should demand they be given the opportunity to examine a robot before they purchase it or take their business elsewhere. Money back guarantees are worthless.

If you agree, please visit NDD Forum and let your thoughts be known.