A view from the inside.
We just went through the process of setting up our own brokerage, and I have to tell you, there is no such thing, or reason that I see, or anywhere in the process that was shown us.
Trades are recorded on the "Trade Server" and then sent on to the Liquidity Provider for processing. The liquidity provider also keeps transaction records that match the "Trade Server". Once orders are filled and done, they are done. There is no auditing. There is honestly no such thing.
The only thing is that if the trades were done at a dealing desk (all internal to the broker because they were your counterparty, and never sent to the market), then they can yell at the deal desk trader -- "How could you let this guy have these winning trades!" : - )
NOTE: Counterparty means that they take the opposite side of your trade (ie. counter - party). So if you say GO LONG, they say OKAY YOU ARE LONG and hold your order. At this point, if you take a loss, they show the profit, and also if you are in profit, the money must come from their pocket to cover your winner. This is the primary reason US Law states that counterparties must be registered, it's not really to protect your deposit, it's to make sure your winners are covered. Technically, it's legalized bucket shops.
Keep in mind that a broker that is acounterparty to you MAKES money when you have a LOSING trade. But more importantly (at least to them) is that whenever you have a winning trade, they have to pay you out of their own pocket (since your order was never in the market). So if you have a lot of winning trades, it reflects as a loss to their assets.
But if your broker is transacting your trades at the real market, then there is no such thing as an audit. We can't go back to UBS and say, hey remember those 7 winning trades from last week. They would laugh at us.
Now if you have a problem with a trade, you can go to the liquidity provider right away and pull up all the transaction records. But honestly there is no going back to them on a historical basis, especially to reverse something. Not only would they laugh at us, they would terminate our connection for being idiots.
So the only conclusion is that those are internal only, dealing desk trades.
It's easy, ask your broker, "ARE YOU EVER, EVEN FOR AN INSTANT A COUNTERPARTY TO MY TRADES?"
If they say yes, it means they can legally take the other side of your trades and do all that stuff. That's really the bottom line. There are lots of great brokerages out there, just ask them upfront, they have to tell you truthfully by law.
The reason I made this post is that it's an insider's view. It's just the facts from the inside operations since we just went through it all and setting it all up. There ARE lots of great brokers out there, just ask them.)
Trader 5of7 @ TheCollectiveFX.com