CFD orders and stp ndd brokers.

idk77

Recruit
Messages
1
hi
sorry if my question is somehow naive
the institutional banks trade actual currency in the forex spot although they trade online right? so with a huge amount of money they can move the market. but for retailers, they just trade CFD or futures and in CFD they buy or sell to the market maker not to another retail trader right? so if I am right to this point and the CFD is a derivative of price and doesn’t impact on the price then how this liquidity providing of banks happen for retail traders through brokers(stp or ndd) because of brokers orders are CFD but the bank's orders are spot forex? I mean it is not logical right? or I didn't get that right I can't find the link between this two
 

Pharaoh

Colonel
Messages
20,127
A true ECN or STP broker should be connecting your trades to one or more liquidity providers (LPs). These may be independent LPs that assume all the risk, or they may pass risk up to higher LPs. The final LP above the biggest banks are the national banks or banking system - like the US Federal Reserve)

A lot of forex brokers trade currency like a CFD (contract for difference). In this case, your order stays with the broker. Your losses are the broker's gain and your gains are the broker's loss, just like a casino. If they keep all trades in house, these are market makers / bucket shops that have a HUGE conflict of interest with their clients.

In the middle are some brokers that may or may not call themselves market makers or ndd, but that act like bucket shops with a modest difference. These brokers realize that they can make a lot of money keeping the trades in house, but that a sudden up move of a pair when their clients are mostly long on that pair can leave them in loss. These brokers aggregate their client's net positions and hedge against a bigger broker or other LP every so often. These are easy to spot. If a broker has a rule about minimum hold time on a trade (typically 2 minutes, but sometimes even over 10 minutes), that's because they aren't passing net client positions up to their LP very quickly.
 

perryjohn765

Private
Messages
215
A true ECN or STP broker should be connecting your trades to one or more liquidity providers (LPs). These may be independent LPs that assume all the risk, or they may pass risk up to higher LPs. The final LP above the biggest banks are the national banks or banking system - like the US Federal Reserve)

A lot of forex brokers trade currency like a CFD (contract for difference). In this case, your order stays with the broker. Your losses are the broker's gain and your gains are the broker's loss, just like a casino. If they keep all trades in house, these are market makers / bucket shops that have a HUGE conflict of interest with their clients.

In the middle are some brokers that may or may not call themselves market makers or ndd, but that act like bucket shops with a modest difference. These brokers realize that they can make a lot of money keeping the trades in house, but that a sudden up move of a pair when their clients are mostly long on that pair can leave them in loss. These brokers aggregate their client's net positions and hedge against a bigger broker or other LP every so often. These are easy to spot. If a broker has a rule about minimum hold time on a trade (typically 2 minutes, but sometimes even over 10 minutes), that's because they aren't passing net client positions up to their LP very quickly.
a very nice and detailed explaination
 

pashaev

Sergeant
Messages
127
Most brokers hedge only a strong skew in the overall position of their clients. But this is always at their discretion and cannot be checking. The main thing is that the broker is large enough for your deposit and withdraws funds to clients.
 

bigdolly

2nd Lieutenant
Messages
1,194
Most brokers hedge only a strong skew in the overall position of their clients. But this is always at their discretion and cannot be checking. The main thing is that the broker is large enough for your deposit and withdraws funds to clients.
So do you think they are dealing desk most of the time?
 

Eryk Martin

Recruit
Messages
177
A true ECN or STP broker should be connecting your trades to one or more liquidity providers (LPs). These may be independent LPs that assume all the risk, or they may pass risk up to higher LPs. The final LP above the biggest banks are the national banks or banking system - like the US Federal Reserve)

A lot of forex brokers trade currency like a CFD (contract for difference). In this case, your order stays with the broker. Your losses are the broker's gain and your gains are the broker's loss, just like a casino. If they keep all trades in house, these are market makers / bucket shops that have a HUGE conflict of interest with their clients.

In the middle are some brokers that may or may not call themselves market makers or ndd, but that act like bucket shops with a modest difference. These brokers realize that they can make a lot of money keeping the trades in house, but that a sudden up move of a pair when their clients are mostly long on that pair can leave them in loss. These brokers aggregate their client's net positions and hedge against a bigger broker or other LP every so often. These are easy to spot. If a broker has a rule about minimum hold time on a trade (typically 2 minutes, but sometimes even over 10 minutes), that's because they aren't passing net client positions up to their LP very quickly.
Greatly explained, thanks :)
 

Keithstyles1

Private
Messages
143
A true ECN or STP broker should be connecting your trades to one or more liquidity providers (LPs). These may be independent LPs that assume all the risk, or they may pass risk up to higher LPs. The final LP above the biggest banks are the national banks or banking system - like the US Federal Reserve)

A lot of forex brokers trade currency like a CFD (contract for difference). In this case, your order stays with the broker. Your losses are the broker's gain and your gains are the broker's loss, just like a casino. If they keep all trades in house, these are market makers / bucket shops that have a HUGE conflict of interest with their clients.

In the middle are some brokers that may or may not call themselves market makers or ndd, but that act like bucket shops with a modest difference. These brokers realize that they can make a lot of money keeping the trades in house, but that a sudden up move of a pair when their clients are mostly long on that pair can leave them in loss. These brokers aggregate their client's net positions and hedge against a bigger broker or other LP every so often. These are easy to spot. If a broker has a rule about minimum hold time on a trade (typically 2 minutes, but sometimes even over 10 minutes), that's because they aren't passing net client positions up to their LP very quickly.
Right on the point
 
Top