Forex Behind the Computer

[TheBigMan 10]

I am aware in equities that you are dealing with a computer program (Black box) when you trade stocks. At one time it was a specialist (Human) All order are routed through various exchanges.

Now with forex, there is no centralized location. Therefor you are trading with just the people that go through that clearing house????? In addition, most small forex brokers are not really brokers but just websites. (Middle men)These brokers really just support you and some hold your trade if you loose all the time and keep your money. That is why it is difficult to get paid if you are a winner.

 

Can someone shed some light on this. I am trying to figure out how the forex chain really works

[SIUYA 11]

in simplistic terms some (but not all) FX brokers are just like bookies.

sometimes they lay off the trades you make, other times they dont.

But either way, its all a relative bet, as opposed to equities where you make actually own something - a share certificate, and this is exchanged by the clearing houses after brokers execute the trades.

For most FX there is no centralised clearing house for this reason. Nothing needs to be cleared or exchanged.

Whereas in equities, the share registries need to be updated, cash needs to be transferred from the buyers to the sellers and the share certificates are actually exchanged.

(also i would not say equities are like dealing with a black box - it is now just a computerised market place as opposed to a floor)

[nazia1230 10]

thanks the big man to share such a great information, i really find it very help full and i hope that you will keep it up and will share more information as like this

thanks

 

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[TheBigMan 10]

thanks the big man to share such a great information, i really find it very help full and i hope that you will keep it up and will share more information as like this

thanks

 

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I found more information than I wanted to. There are brokers who were sued for manipulative practices. Take a look at the attachments.

[Ingot54 13]

I found more information than I wanted to. There are brokers who were sued for manipulative practices. Take a look at the attachments.

 

Interesting ... is this for real?

 

When I questioned my broker about slippage - about not getting the price I clicked on - about requotes - he said "It is your computer's latency - your processor is not fast enough to catch the price you click on."

 

If I am to believe the info in your first attachment, it means that the broker is running an algo that purposely intercepts my offer.

 

The algo delays my order for up to 5 seconds, and if price moves in my favor, I get a requote.

If price moves in the broker's favor, I get slippage.

 

Hmmm. Can this be proved?

 

I actually told my broker I suspected he was using an algo that delayed orders exactly as you say here. Of course they could not admit it, but now it seems the truth is out.

 

Is this really the truth, though?

[BlowFish 10]

Indeed it is true.

 

A couple of weeks ago the CFTC announced they are suing 14 brokers.

 

http://www.cftc.gov/PressRoom/PressReleases/pr5974-11.html

 

FXCM have a class action lawsuit going on

 

http://www.globenewswire.com/newsroom/news.html?d=213350

 

Hopefully it is the begining of the end for these FX bandits. At least there are real brokers offering real direct market access now. That alone is a big change to how things where.