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Can we build a better broker?

Discussion in 'Commercial Startups' started by AsstModerator, Jun 30, 2011.

  1. AsstModerator

    AsstModerator FPA Forums and Reviews Admin

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    The FPA gets a lot of interesting emails. One caught my eye recently.

    I have a person who says he wants to create a fully transparent, user-regulated, STP brokerage. He says he wants to build an honest brokerage that will serve the needs of customers first.

    He wants input from FPA members.

    I'm creating this thread so everyone can talk to him, give input, and find out more. I'm asking him not to name the brokerage at first. I don't want people opening accounts because they think this brokerage might live up to the dream of being a better broker before there is some proof. I want to let some FPA members interact with him and find out more about this project first.

    I've specifically invited Pharaoh and F-Man to join in the discussion. Pharaoh claims to be an expert at everything. :p F-Man is starting his own company. It does due diligence research on forex companies. All other FPA members are welcome to participate.

    Is it possible to build a better broker or is it an impossible dream? Ask, watch, and find out.

    .
     
  2. RahmanSL

    RahmanSL Major

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    I would say that the single MOST IMPORT factor is some or preferably 100% guarantee from a well trusted bank or institution that the broker will pay all client's deposit & profits.

    Secondary importance would be competitive spreads, speedy trades execution, commissions, and ease & convenience of deposit & withdrawals....and, of course, full sets of currencies, commodities, oil/gas, and CFD.

    In actual fact, the broker that springs to mind meeting all above criteria is FXPRIMUS...though, for a one time fee of usd50 for client's fund to be held in segregation by an independent custodian Trustee called Turnstone Trustee (Mauritius) Ltd, I am still uncertain of their trust worthiness.
    Let me emphasize that this is not a recommendation from me in any way to sign up with this broker;yah!
     
    #2 RahmanSL, Jun 30, 2011
    Last edited: Jun 30, 2011
  3. Damon

    Damon Founder/Director Pellucid FX

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    Thank you for the introduction !!

    So, this is very simple, all I need to know is how I can prove that I am running a brokerage designed for the trader:

    OK, so it's not that simple :) How can I prove what I say is in fact happening at my brokerage. I do not want to be regulated, more and more regulating bodies are falling in line with the US, and that is death to the forex. I wish to be transparent to the trader so he can see for himself that I am on the up and up.

    I have been in talks with quite a few parties regarding starting a brokerage, I am leaning towards Boston Technologies (BT) to supply me with the software and the liquidity bridge. The liquidity bridge is access to 25 banks and MM prime brokers.

    I am still looking into jurisdiction.

    My Idea is to run it as a true STP-ECN, meaning the liquidity providers will take on my risk, you are filled straight through to market. I do not take the other side, in fact I will even turn off the hybrid system they recommend (small accounts are filled as MM and bigger accounts are filled STP), you must understand they are approaching me as if I want to be as profitable as possible (the normal) But I am first and foremost a trader and want to help make other traders profitable. From my view, if things continue as they are, the forex will not be available to you and me within ten years, it will be barred from us so only institutional accounts can trade. Or we will be trading at such a disadvantage that no one could hope to profit within a small account (the US is already well on its way). To me the forex is the perfect setting to trade, I have traded Futures and options for 10 years, I fell in love with forex 4 years ago, if someone does not create a good brokerage that works for the trader and does not try to churn them I feel we will all lose our playing field.

    I want to be viable as a brokerage. Per BT's own documentation an MM makes 10x profits over STP. So I need to make sure I create a brokerage that will be used, otherwise I will be forced to shut it down, I refuse to run a bucket-shop, I make it as STP-ECN or I shut her down.

    My liquidity cost is 0.20 pips from BT. The average Eur/Usd (per month) market spread is .48 pips, last month was lower at around .40, it does change from month to month. But is usually between 0.38 and 0.52 monthly averages.

    From my business model I expect I can be viable with some room for growth charging at .80 pips all pairs. So that would be a base to the end user of 1.00 (.2 plus .8) plus the market spread (between 0.38 and 0.52 normal and between 0.00 and 10.00 for extremes of highly liquid or news events with low volume).

    I do not intend to lower or raise the spread depending on the deposit, that's just stupid, the trader has enough to worry about when he is starting out, when I was learning to trade I really worried about the spread, now that I am profitable it does not bother me much, so why should the little guy starting out be penalized and have an even harder time -makes no sense.

    The bank I have chosen so far is HSBC, I want to be sure you can get your deposit plus profits out, any objections?

    I will not be promoting in the UK and can accept UK citizens, I cannot accept US citizens but I will have a link so that they can set up offshore if they want. The best I can find is around $1000 dollars so I do not expect many US clients.

    The minimum deposit is $500 US and standard accounts trade right down to Micro lots (0.01).

    If you would like a segregated account you will need a larger deposit, I cannot cover the fees for segregation and give it to everyone unless I raise my spread, I don't want to do that. I don't care about segregation personally, I care about what bank I am with. For those that want segregation they can pay for it.

    I will host PAMM accounts.

    I want to host a collection of EAs plus my personal custom indicator plus Sive Mortens daily videos plus link back to FPA to distinguish the **** EAs and keep them from being traded by my clients, I want to do anything else that might help the trader be successful.

    I will personally guarantee via video on the brokerage site that you will be able to withdraw funds and profits and that all types of scalping is welcome. As I won't be betting against you I do not have any motives to keep your funds if you are successful, I welcome ANY EA, speed scalping, arbitrage, this is actually a guarantee from BT that I have from them, so I am just passing it along.

    By the way I do not intend to do IB services, I have seen that IBs have not been giving any exchange to the clients (helping them learn forex or make money otherwise on the forex) and that the whole system is being undermined by Super IBs that send some of the spread back to the client, this defeats the purpose of an IB -The way it is now an IB works his ass off to get a client interested then that client goes to a super IB to get a discount, so the IB system has fallen in my opinion.

    So, I would like to know if this would be something that is desired? How could I accomplish winning your trust?


    Damon Hunt
     
  4. Damon

    Damon Founder/Director Pellucid FX

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    I cannot get a guarantee from a bank that my brokerage will pay it's depositors, impossible as the brokerage controls who gets paid and has the the ultimate say in the end. I can say that I have no reason not to pay, I hold none of the risk as an STP I am completely flat except for my retainer deposit. In fact, I would pay you as timely as possible.

    I am still finding out about my funding and withdraw options, I will have to get back to you on that.

    Does my STP spread seem competitive? 1.00 flat plus STP of .48 average on Eur/Usd ?

    BT offers a full set of Currencies plus Metals and commodities and even some world stock market indexes.

    Why are you uncertain of FXprimus trustworthiness.. this is what I am trying to get the answer to :)
     
  5. Normbell

    Normbell Private

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    What I am looking for in a Broker is honesty first and foremost, for me that means no spikes, no huge widening of spreads, slippage or requotes, sudden lowering of leverage or the use of Boston Technologies Virtual Dealer plug-in.
    I am looking for unrestricted 500:1 leverage that will not be reduced if funds grow or is dependent on the amount of Lots traded.

    I am using a few Demo accounts successfully(MT4 platforms) that meet all my requirements and they allow scalping, hedging and use of EA's but when I read the reviews on the live platform it makes me worried to invest money with them because this is when the problems seem to start.

    I started off Spreadbetting (I am in the UK) but soon decided ECN/STP is the way to go thinking I would be safe from the dirty, dishonest tricks they can use but apparently even these NDD Brokers on the whole are not to be trusted.

    Also besides the stress of trading there is the concern that if profitable there will be difficulty in withdrawing funds, hassle we don't need.

    I am not bothered about using an IB, regulation was something I was looking for but I see your point on that matter.

    Would you be offering MT4 (because I don't know if the EA would work on another platform), 500:1 leverage?
     
  6. RahmanSL

    RahmanSL Major

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    "Why are you uncertain of FXprimus trustworthiness...?"

    I was primarily referring to Turnstone Trustee (Mauritius) Ltd as I am unfamiliar with them even after visiting their website.

    "I am still finding out about my funding and withdraw options, I will have to get back to you on that."

    Take a look at FXPRIMUS funding & withdrawal system as I have found them to be the least frill free of all the other brokers which I have used.

    And do make registration and verification hassle free since the one thing which turns me away is requirements like those applying for an exclusive high end club.

    "The bank I have chosen so far is HSBC, I want to be sure you can get your deposit plus profits out, any objections?"
    HSBC is a very well trusted and well known bank, but they do not share common money withdrawal via ATM kiosk with GIRO banks. in other words, HSBC is an exclusive bank.

    "I will personally guarantee via video on the brokerage site that you will be able to withdraw funds and profits...."
    To be perfectly honest, that simply is not good enough. A segregated account held in a well known and trusted bank is the only accepted guarantee. By all means, make that optional to and payable by clients.

    I'll get back more on my "wish list" of other requirements from a good and trust worthy broker.
     
  7. f-man

    f-man 4Xangels Representative

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    Started the Investigation

    I would like to thank the FPA for trusting me in this extraordinary mission, to run an investigation on Damon and inform all members about our findings.
    I had a first contact with Damon earlier today, where I asked him for some of his personal details and he gave us all the necessary information.
    It will take a few days, till we have our first results and be ready with some announcements.
    In the meanwhile, in this thread, we will be discussing with Damon all possible issues and making him understand what traders really need. I would like to ask all members reading this to write their opinions and suggestions.
     
  8. f-man

    f-man 4Xangels Representative

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    Regulated - To be or not to be

    I understand that being regulated with CFTC, brings some disadvantages for your clients and their trading systems, but being unregulated is also not a good decision in my opinion.
    There are many regulators that allow you to give trading freedom to your clients, but they are watching you closely, so that you don't start breaking the rules and provide safety to all your clients.
    Don't take this personally, but if one day you wake up and realize that you have access to XXX million dollars, there is always a small chance that you might start making second thoughts.
     
  9. Damon

    Damon Founder/Director Pellucid FX

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    Some answers

    BT only allows me to go 100:1 leverage. I am looking into other liquidity solutions but this seems to be the best so far.

    I will not use the the plugin you mention nor any of there other stock churn-and-burn settings.

    MT4is the platfrom.

    HSBC is the safest bank I can find but you are correct in that do not have many options for withdrawal, I have not fond a happy medium, my priority is in the safety of the funds not in it's affiliation with a ton of 3rd party payment solutions. This may change as I do my research.

    Thank You F-man for taking the time to investigate me. The reason I want to go unregulated is that more and more regulators are accepting CFTC's rules, this is uncomfortable to me. The whole purpose of this discussion is to see if it is possible to somehow devise a way that makes the brokerage transparent. Although there is a few regutors that I like, I am not excited to go through their hoops just to have them take on CFTC's rules.

    Maybe I could create a software that shows the brokerages settings to a realtime webpage? I don't know, that is what I am trying to discover.
     
  10. Pharaoh

    Pharaoh Colonel

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    HSBC's withdrawal options may depend on account type and country. A business account in Hong Kong does come with an ATM card that can be used on a number of networks. I don't have any info regarding other account types or countries. Personally, I'm also fond of the concept of depositing/withdrawing by check - with no fees. Fewer and fewer brokers are offering this option.

    Personally, I do like having a variety of deposit and withdrawal methods, but want to make SURE that bank wire is one. Even if I don't use it, I like my broker to have a bank account that can be used to help find the broker if anything goes terribly wrong.

    My biggest concern is the liquidity provider's policies. I want to know exactly what it takes to retroactively cancel a trade. I want to know what the time limit on such cancellations (against the client as well as for the client in the event of a bad tick) will be.

    For example, the NFA (an organization that I have a love-hate relationship with) placed some amazingly short limits on how long a broker has to cancel a trade based on price feed, etc., but did leave the door open for a client to complain about an issue for a longer period. This ended the dreaded "compliance audit" in the US.

    For those who don't know, a compliance audit is done by some brokers whenever you request a withdrawal. They go through ALL your trades, looking for anything that might possibly violate the rules and cancel those trades. Of course, 98% of the time, all the canceled trades were profitable ones.

    I also want to know how the liquidity provider deals with scalping. Too many brokers ban scalping. Others ban faster EAs, claiming "arbitrage". Few if any EAs can connect to an external, faster data feed, so this claim is just proof that the broker or it's liquidity provider isn't really passing trades through to the real market.

    Regarding real arbitrage - the use of a faster data source, I'd want to see exacting definitions, and if a claim arises, I'd want to see proof provided immediately. I'd want to know what external data source (in a market without a central exchange) would be used by the liquidity provider to prove "true market prices" that are different from the broker's offered prices BEFORE any such claim was made against a trader.

    Of course, I'd greatly prefer that the broker and liquidity provider give a price feed that's fast enough that the liquidity provider wouldn't lose anything no matter how fast the trader (or EA) managed to open and close trades. That would end the whole arbitrage excuse that's overused by so many brokers to steal from traders.

    Regulation - The NFA and CFTC have clamped down so hard on so many things that although I feel safe with a US brokerage, I can no longer trade as I'd like to with one. I love the idea of traders helping to create an acceptable set of trading rules, but would be happier if there was some government somewhere that could make certain that these rules were enforced.
     

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