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Why do Brokers Refuse to pay the traders? - The broker's prespective

Discussion in 'General Forex Talk' started by Romeo, Apr 13, 2012.

  1. Romeo

    Romeo Sergeant

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    We have seen this scenario happening again and again. A broker refuses to pay the profits and many times also the deposits of a trader.

    Let's analyze very briefly how brokers work:

    1. Before you start trading, they need to have your money in their pocket. They don't have any credit expenses.

    2A. If they are an STP, they want their traders to make volumes, since they are earning on each trade. The bigger the volume, the bigger the profit. A real STP broker would love to see their clients earning money, because the clients will open larger positions and they will increase their profitability.
    If they have issues with their liquidity providers, they can increase the spread of specific clients. That will increase their profitability and make the life of profitable traders difficult (Because the liquidity provider might instruct them to do it)

    2B. If they are a bucket shop, according to the statistics, 90% of the traders are losing. They benefit from the lost money of the traders and they profit from the spread as well. They can also widen the spreads, if a trader is very profitable and give the trader a lot of re-quotes. In that way they can reduce the profitability of the trader to a degree, where he might choose to change the brokerage.

    The way I see it, the brokers always have the upper hand and can twist the cards to their convenience. Why do so many brokers go bust? And why are there so many brokers that decide to disappear with their clients money? WHY?????

    We would appreciate it if the reps of the brokers give us their point of view on this subject as well.
     
  2. WaveRider

    WaveRider Sergeant

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    Why are you mugging me right now? Great question.

    Brokers probably go bust for same reasons all businesses go bust.
    1. The owner thinks the business is his own personal piggy bank.
    2. The company is owned by several family members or partners that all think the business is their own personal piggy bank.
    3. The owners make bad investment decisions (including maybe forex) and try to use the company to bankroll other investments.
    4. People are lazy and disorganized and have resources but just aren't good business people.

    I talked to a woman this weekend who said her father owned a little bakery in Newark NJ in the late 60's and early 70's. He was Cuban and he employed some illegal Portuguese because there were a ton of Portuguese moving to the area. Still are. These kids were so poor coming from Portugal. They didn't own shoes and didn't understand what proper hygiene was. He bought them shoes but a lot more than that. Over the next 20 years, he paid for several of them to go to college and eventually produced 3 surgeons and one dentist. At times they would come to visit and were so grateful for his kindness, they would work doing dishes and making bread for free, just to spend time with him and the family. The father died of cancer a couple years ago and she says he could have made more money doing business differently but he had no regrets.

    That was before lowest common denominator business. The above story is stupid business practice. The lowest common denominator is profit. People aren't important. They are an asset like a printer or DVD player, easily replaced. Honesty is really unimportant. Brokers think ethics and legality are the same thing. It's too bad. Possibly the answer is making unethical behavior illegal. Or Jesus coming to fix it.
     
  3. Pharaoh

    Pharaoh Colonel

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    I think some of those bucketshop brokers aren't really going bust. I think many of them are just creating "new" brokerage websites to replace the old ones that "failed". The old ones fail not because they went broke, but because enough people post enough complaints in enough places and the supply of new traders throwing money at them declines while the time spent hitting the delete button to get rid of complaints while looking for messages from potential new victims increases. Once a certain ratio of expenses to new money coming in is passed, the old site's plug is pulled and the new one starts getting promoted. In many ways, this is very much how HYIP scams decide when it's time to adopt a new identity.

    This level of criminality is based on a combination of arrogance and utter disdain for victims. The though going through the fake broker's warped little brain is that the people putting money in are so stupid that they deserve to lose their money. The bucketshop owner also feels that he's so smart that he's entitled to be the one to take all this money.

    Even a broker that isn't totally fake has temptations - throw enough delays into the withdrawal process and a certain number of clients will give up, leaving the cash in the broker's hands - just add an inactivity fee and all that money will legally flow into the broker's pockets. Another tactic is to accuse successful traders of cheating, delay their withdrawals for months, and then offer some sort of compromise to keep some of those very real profits from going back to the trader.

    Building up a good client base that makes a broker a pile of cash from spreads takes time and effort. It's so much easier to steal from clients today than to hope for more happy clients tomorrow.
     
  4. Romeo

    Romeo Sergeant

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    Does any Broker rep want to have a go?
     
  5. Pharaoh

    Pharaoh Colonel

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    I would have suggested inviting Javier from FigFx, but it looks like he's disappeared, along with the website. :p
     
  6. WaveRider

    WaveRider Sergeant

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    I'm pretty sure any broker who pokes his head in here will be hunted and have their website exploded by the FPA. Between willful scamming and horrible ineptitude, we've probably covered all the bases.
    Maybe we should invite Jason from FXCM to comment about why his company won't pay back UK traders for willful scamming on price slippage but he did already say simply: "They are not eligible." Because I'm gullible and simple minded, I think giving people's scammed money back is like getting double coupons at Super Stop n Shop. Some times you're eligible and sometimes you're not and there are unseen forces too big and wonderful for little me to understand. And I really wanted the organic minced garlic! Freakin' jerks. There is a vanishing point big brokers have established between scamming so bad FPA nukes their website and scamming just a little, enough to earn some respectably ill-gotten gains without drawing too much attention. Get a regulated broker, folks. Self-regulation only helps the criminals.
     
  7. Alesssandro

    Alesssandro Recruit

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    I have my 2 cent's, in Forex bussines there is no way to find 100% good broker, even banks and big companys like fxcm can do what they want - cause they have reputation cover.
    For me, not very big Dealing companys with lifetime up to 3 years is best choice - cause they need to be good in compare with big brokers, and trying delivery to us better service. Look guys even MF Global goes in bancrupt. Or remember REFCO for example. There is no rules here i think - except company life time.:cool:
     
  8. ewan_savage

    ewan_savage Private, 1st Class

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    It may be stupid business practice, but it's also such a sad reality people generally are....well, SHOULD always be more important than the almighty profit....but as long as we live in a breeding ground of greed, your example will continue to be 100% correct as it shows the best way to lose profit. :(
     
  9. yideng

    yideng Private, 1st Class

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    very good thread at fpa, and this will help us a lot in choosing a good broker, normally you can only be successful after the right choice of the brokers.
     

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