Most foreign exchange brokers are not traditional financial brokers on Wall Street. When operating in the international currency and contract for differences market, a full understanding of the structure and strategic objectives of foreign exchange brokers may mean the difference between the success and total failure of traders. This problem is not just the transparency of the commission structure and hidden costs. Learn how to find a real professional intermediary solution to help protect your own interests, rather than putting money in your own pocket.
Dangerous business model or B-Book
What is the business model of most foreign exchange brokers? How do they make money? What is the traditional structure and fundamental difference of stock investors’ habits?
There are only two business models among thousands of brokers around the world. The first and most commonly used model is market composition, or B-Book. Whether they are supervised or not, these brokerage companies bring the greatest financial loss and profit loss risk to customers. B-Book is a technical term that means the supplier executes the transaction without sending the transaction to the real-time market. With this method, when a virtual broker records all transactions and assumes that most customers will eventually lose all their funds, he can become a counterparty to all transactions. The customer loss here becomes the intermediary profit, and vice versa.
You may have read many reports. These include various manipulative intermediary techniques that traders encounter when trading in the foreign exchange and balance contract market, such as stop loss, forced postponement of transaction execution, unreasonable price inflation, artificial shortage, unexpected decline and sharp rise of interest margin, as well as many other suspicious behaviors reported by witnesses. Perhaps few people know the underlying reasons behind this broker behavior. In fact, it all comes down to opportunities and financial rewards. Their profitability and financial survival are driven by customers’ losses. Therefore, these intermediaries often abuse the technical facilities of the B-Book system, hinder customers’ transactions, manipulate execution, or even pretend to quote, in order to maximize their profits.
Unfortunately, as practice has proved, even intermediaries under supervision are prone to such abuse. The reality and the practical experience of investors and market creators show that without a good credit B-Book intermediary, the business model itself is fundamentally distorted and brings benefits to the intermediary at the expense of customers.
The profitability of managers with three employees is incredible. They make money without foundation. B-Book middlemen will not conduct actual market transactions initially, but convert virtual customer transactions into profits of the middlemen themselves. The next day, the fund was used to pay more advertising expenses and sell the concept of easy to make money to trusted investors. This is why there are a lot of advertisements. The most famous intermediary on the network uses the B-Book model. Professional ECN intermediaries have relatively little influence on the network and advertise their quotations within a reasonable budget. Due to the fierce competition for advertising branches, the marketing costs of intermediaries have increased dramatically. Usually, only B-Book brokers operating in the market can bear the cost. They basically pay for advertising with customers’ money.
Terrible consequences of B-Book business model
The most common gray technology used by B-Book Manager is shown in the screenshot below. Obviously, the middleman has the technical means to force delay. When traders withdraw from the market due to huge price changes, customer accounts will be damaged. They can ignore the request to prevent losses, or execute orders at a lower price, artificially expand the profits of customers’ funds in transactions, and use other complex tools to protect the interests of intermediaries. These systems are not designed to provide honest intermediary services or long-term customer satisfaction. What they need to do is to maximize the loss of customers and get the maximum return from intermediaries.
In the worst case, this may actually be legal. The same is true for regulated intermediaries.
Strangely, most of the techniques discussed above may be perfectly legal. This is true even for intermediaries registered and operating in reputable jurisdictions. This is because the customer contract, that is, according to the terms and conditions accepted online when the customer opens a foreign exchange broker account, fully discloses the market shaping role of the broker when drafting. According to these contracts, the broker has the right to provide a way of execution, believing that he is the exclusive trader of all foreign exchange and difference contract transactions, which is legally acceptable. If this is the case, if the customer is making money and stops the successful transaction, it may be most beneficial for the intermediary to reverse the earnings. If this is perfectly legal, nothing can stop the manager from doing so.
alternative DMA/STP solutions for professional pallets
DMA/STP is usually referred to as ECN agent. Unlike the above methods, it pursues the best interests of customers. DMA/STP is also known as A-Book Brokerage Company and operates a solid brokerage business according to its original intention. The DMA/STP agent has a technical means to provide a customer-centric business model and the best transaction execution solution to continuously improve services, reduce transaction costs, and help customers achieve better results. DMA/STP brokers provide actual market prices and send all customer transactions to international banks and other liquidity providers through the ECN environment. Concord bay is an example of an international brokerage company operating under the 100% DMA/STP business model. In a fair and transparent business relationship, brokerage firms are motivated to help clients succeed in the market, increase trading volume and promote clients’ profitability- It’s a WINWIN relationship
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If you ever wanted to make money with a marketer, you might as well forget it completely. Because your dreams have little chance to come true. For professional foreign exchange and CFD traders, the only feasible intermediary solution is that the financial motivation of the broker is related to the success of the client, using commission based compensation instead of the more common B-Book model. In other words, intermediaries make money through customer losses. DMA/STP companies, such as Concord bay, also known as A-Book brokers, are specialized in providing traders and investors with excellent execution and first-class electronic trading services to help customers succeed.
