With regard to exactly who is the other side of the trade, remember that you are using the broker's credit lines with his participating banks to execute the trades (I am talking about ECN models only). Therefore the broker technically must be the other side of the trade, even though you are dealing directly on the participating bank's prices. The bank hasn't extended you credit directly, which is why for instance Hotspot states that they are counterparty to all trades. This is (or should be) the same for all ECNs. The same is true if you use a prime broker for HotspotFXI or EBSprime. The name you see is the name of your prime broker, even though you are dealing with dozens of other market participants directly.
But if your price is not inline why would it be filled unless the market moved against your direction? Example: EUR/USD @ 1.999 Your long retail order @ 1.996
OK, then I have several specific questions. Let's say I leave a stop order and it doesnt get filled although the market was trading at that level. Who do I call? Let's say I get taken out on a margin call, but I believe this should have not been the case, who do I call ?
LoosenUp - I have $50K to place somewhere and just like Jerry11901 I have come to the conclusion that I must divide those funds between 2-3 brokers. It will cramp my trading style but I will adapt and accept it as the price I have to pay if I am ever going to sleep at night. As a Refco client with a frozen account I am more than paranoid about safety of funds and have spent the last 2 months trying out numerous platforms and trying to do my due diligence to the best of my ability. I'm probably alone in the fact that I don't care if brokers earn more than their advertised spread by whatever means at their disposable as long as what they advertise to me they deliver and my money is safe. At this moment I can say that Oanda is a definite and I am seriously considering Fx Solutions, CMC, MG Financial and Gain Capital. Hope this helps.
Big corporate players and hedge funds deal directly with banks but remember they have credit lines with many different banks, so as the bank dealer you really don't fully know their position (they may be buying with one bank and closing the position with another).
VERY GOOD question, I'm surprised it hasn't been asked before (unless I missed it). Jim does know a lot about the Forex market and I also would like to know who his broker is.
This is a completely different case, futures are traded on the exchange, so that the exchange is your counterparty. Spot FX is OTC, therefore whoever holds your margin or executes margin calls will be your legal counterparty, Interactive Brokers in this case. The rest, I apologize to say, is just a marketing smokescreen.
????????? This was the question that I replied to: "OK, then I have several specific questions. Let's say I leave a stop order and it doesnt get filled although the market was trading at that level. Who do I call? Let's say I get taken out on a margin call, but I believe this should have not been the case, who do I call ?" - You can't call the exchange and ask about a stop order - because they will only talk to your broker. Also the majority of exchanges don't support a stop order, so again your recourse is with the broker. - If you get taken out by a margin call - its your broker that will take you out, not the exchange. In both cases, the fact that you are trading on exchange is irrelevant. (Although it would be relevant if the exchange held you stop). In effect, IDEAL-Pro, is IB's FX exchange. We do not post prices or make the market. This means that they are a number of differences between the traditional shop, including, but not limited to: a.Client stops sit on our server, the market participants cannot see your stops. b. Market particpants can see market depth but not who is posting the quote. c. Everyone trading the market has equal information. In the traditional model, the FX broker makes the market and can see all client pending orders, all client stops, and know's each clients breaking point. d. With the traditional model, you are totally at the mercy of the spreads posted by one counterparty. With an ECN model, you have multiple parties posting quotes so for spreads to widen you would need multiple parties, all of which are completely independent, to pull or widen their quotes to give a wide market. d. Clients can make their own markets and be represented on the order book. In the usual model you can only trade against the dealer. In an ECN model you can trade against other clients. e.g. if GBP is 1.7810 / 1.7812. You have a limit order to buy at 1.7811. Another client has a limit order to sell at 1.7811. What happens? The quote remains 1.7810/12 and neither order is filled... the buy order is not filled until the dealer moves his quote to 1.7809/11. The sell order is not filled until the dealer moves his quote to 1.7811/13. In an ECN model, after the client posts his buy limit order, the market becomes 1.7811/12. The client positing a limit order to sell will then trade against the 1.7811. Thus, I do not really see any smokescreen here, without doubt an ECN model is very different from the traditional model. Nevertheless, if you still disagree that's ok too. We'd be pleased to provide you with access to the FX futures on the CME instead.