Do Retail Brokers benefit from profitable traders?

[Pharaoh]

Of course, if a bank has to make a trade for a customer needing to convert $1,000,000 in cash to another currency, they can always pad the spread and charge other fees. Banks may lose a little playing the game against other banks, but not when playing one on one with individuals.

That guy at the teller window with $1 million thinks he's a big fish, but the bank is a hungry whale.

 

[WatanFX-Rep]

Of course, if a bank has to make a trade for a customer needing to convert $1,000,000 in cash to another currency, they can always pad the spread and charge other fees. Banks may lose a little playing the game against other banks, but not when playing one on one with individuals.

That guy at the teller window with $1 million thinks he's a big fish, but the bank is a hungry whale.

Most commercial banks lose money on conversions.

But, one thing that most don't understand is that the bank does not use leverage. The currencies in their very basic nature do not move that much in terms of pure percentage values - unless of course there is a major fundamental scenario, where banks have to bailed out like in the case of the euro or the recent swiss pegging drama.

Bank based conversions are a lot different from retail conversions, where high amounts of borrowed funds are being used.

 

[Pharaoh]

If I can find a bank that loses on converting money, I'll happily sit there all day "trading" currencies with 1:1 leverage.

 

[WatanFX-Rep]

If I can find a bank that loses on converting money, I'll happily sit there all day "trading" currencies with 1:1 leverage.

Here you go



Ex Deutsche Bank trader, who now manages money for a family office.

I would suggest all new forex traders watch it because he gives some insights on how the big banks work.

 

[nahiyar]

I think brokers charge from every trader .It could be a commission . swap or any thing more you had accept in terms and conditions. Spread is also a type of commission charged over every position we open with any broker. We have to pay it we loose or win in the trade.

 

[iMusingKiMi]

Most commercial banks lose money on conversions.

But, one thing that most don't understand is that the bank does not use leverage. The currencies in their very basic nature do not move that much in terms of pure percentage values - unless of course there is a major fundamental scenario, where banks have to bailed out like in the case of the euro or the recent swiss pegging drama.

Bank based conversions are a lot different from retail conversions, where high amounts of borrowed funds are being used.

I will never ever believe bank will loss their money on conversion rate. Their spreads are usually crazy, much crazier than those private own foreign exchange. If a bank loss money on conversion rate, how those private foreign exchange earn their money? Unless I do my currency exchange in airport that I have no other choices but to proceed to bank counter, otherwise only once in my life that I convert my money with bank.

 

[WatanFX-Rep]

I will never ever believe bank will loss their money on conversion rate. Their spreads are usually crazy, much crazier than those private own foreign exchange. If a bank loss money on conversion rate, how those private foreign exchange earn their money? Unless I do my currency exchange in airport that I have no other choices but to proceed to bank counter, otherwise only once in my life that I convert my money with bank.

Without getting into the semantics of this topic which would basically be a futile attempt, as an example, the banks that acquired euro assets (cross border conversions) when euro was trading at say 1.14 are now in a loss. Large banks have to hold all types of currency assets by rule. The businesses need to convert and banks need to comply, even if they lose money.

They also cannot start charging 100 pips to 200 pips for selling those euros because of the inter-bank competition.

The only companies that do not suffer are the exchange companies because they get guaranteed rates, and then sell or buy them with upwards to 300 to 700 pips spread.

The banks are always left with holding the baggage of losing currency assets over time.

Yes, they also profit in billions when those liquid assets recover in over the course of a few years.

 

[Froso@FXNET]

I think brokers charge from every trader .It could be a commission . swap or any thing more you had accept in terms and conditions. Spread is also a type of commission charged over every position we open with any broker. We have to pay it we loose or win in the trade.

Of course, so the broker still profit. It is already becoming their work. So we as traders must be profitable in order to survive.

 

[EuroTrader]

Of course, so the broker still profit. It is already becoming their work. So we as traders must be profitable in order to survive.

We all know that Forex brokers are the ones who are making a good income regardless of the fact that a trader is making income in his trades or not

 

[alaska27]

Everything depends on the broker himself and his conditions. Some companies make money on spread, others do on comissions. There're also those who deliberately wipe out their clients' money.