MM platform ≠ black platform, STP platform ≠ good platform

In the foreign exchange market, it is often heard that a platform has obtained an MM license or an STP license, and in most people's minds, the platform with an MM license basically maintains the idea of ​​​​"black platform". So do you really understand the difference between these two platforms? First of all, let's briefly talk about their definitions (not official definitions, just for easy understanding):

STP platform: straight-through platform, which is to send your order directly to the bank and let the bank process your order. We commonly call it "sell the market".

MM platform: a market maker platform, which will process investors' orders before deciding whether to sell them to the bank. It may also be for this reason that there is an alias for the "VAM" platform.

So the STP platform is good, but the MM platform is not good? the answer is negative. Let's think about a problem first. The foreign exchange market itself is a "zero-sum game". That is to say, if you transfer money, someone will lose money, and if you lose money, someone will make money. So what you think of as "throwing the market" platform (stp platform) is just throwing it to a higher-level "opponent".

From the above picture, we can clearly see that for our investors (retail investors, identified as customers A/B/C/D in the above picture), we belong to the bottom layer, and our retail investors can be mutual As opponents, retail investors and platforms are opponents, platforms are also opponents, platforms are opponents of general small investment banks (LP), and these LPs are also opponents. LPs and top investment banks (market maker banks) , such as Goldman Sachs, JPMorgan, Citibank, etc.) are also rivals, and these top investment banks will also be rivals. Let’s spread the knowledge here. There is also a market among top investment banks. Only among them can communicate with each other, and ordinary retail investors are definitely out of reach, so I won’t talk about it any more.

Haha, have you been dizzy by me? In fact, it is very easy to understand sentence by sentence with pictures. ​If you can understand this picture, then continue to look down. As mentioned just now, the orders on the stp platform are actually thrown to a higher-level "opponent", and there is almost no processing in the middle, so from the above picture, the orders on the stp platform are thrown to the LP. Let LP be your opponent. As for the MM platform, it will decide whether to allow customers to trade against each other based on the orders at the same time. drop), or between the platform itself and the customer as a counterparty, or throw the customer's order to a higher-level market.

At this point, some people may say that there are very few people who can make money in this market itself, so wouldn't it be good for the platform to directly "gamble" with retail investors? This sentence sounds right, but for the risk control of a platform, such a risk control is the same as we do not set a "stop loss" in the transaction, it is actually a process of waiting for the "explosion". To give an example, when a large number of orders of the same direction and the same variety appear on a platform, if the platform takes all of them, then the direction of these orders is opposite to the market, and the platform will indeed make a lot of money, but if the direction is correct, then The platform will suffer huge losses, and even lead to direct bankruptcy. Another point is that in this market, the larger the platform, the more the number of bets with customers will be, and the smaller the platform, the smaller it will be. It is simply because the platform is small. less money.

Going back to what we mentioned at the beginning, the foreign exchange market is a "zero-sum game", so no matter where your order is eventually "thrown", there is actually no difference in essence, because this market is like this, The higher-level opponents are the lower-level opponents. Even if your order is directly thrown to the banks of the top market makers, it is just that you are making opponents with these banks. In fact, you don’t need to pay too much attention to whether a platform is an STP license or an mm license, because most of the platforms that can be seen in the market now have positions A and B. Position A is for throwing to the market, and position B is for gambling of. Instead of being obsessed with the license issue of a platform, we should look at whether the platform is formally supervised, whether it has a high reputation, what is the reputation, what is the trading environment, what is the transaction cost and other practical issues.

Let’s share it here first today. If there are Huiyou who don’t know how to choose a platform, you can leave a message below, and I will write another article dedicated to teaching you how to choose a platform. If this article is useful to you, please don’t be stingy with your praise, move your fingers, give me a “five-star praise”, and thank you everyone!