The cruelty of the foreign exchange market is not as simple as winning or losing. In fact, in China, the foreign exchange traded by a large number of investors is a virtual foreign exchange market. Today, I will chat with investors in simple and easy-to-understand vernacular.
Hierarchical classification of the foreign exchange market:
Clearing banks: Banks are the top layer of the foreign exchange market, out of reach of ordinary people and institutions, even the foreign exchange brokers that the public has seen/heard in various media.
Liquidity providers: Liquidity providers are also called LPs. LPs get market liquidity quotes from quote banks and provide them to anyone who needs them. It is a bridge between banks and foreign exchange brokers, which cannot be crossed by brokers. Taking a well-known low-cost platform as an example, the platform has connected with 5 LPs, namely LMAX, CFH, etc. Most foreign exchange brokers often only connect with 1-2 LPs.
Forex brokers: Get quotations from LPs, get certain regulations, and start developing the retail market.
Taking Chinese investors as an example, most of them open accounts with retail foreign exchange brokers. There are two profit models for retail foreign exchange brokers:
One is A Book, that is, A warehouse, the order is thrown to LP, but there is a cost for selling the order.
The cost of selling orders: bare point (the bare point of LP comes from the quotation bank) + liquidation cost (take 16 sides per million as an example) + bridge cost (take 2 sides per million as an example) + background operation and maintenance and server costs
The second is the B Book, that is, the B warehouse, where the broker himself and the client bet against each other (the platform advertises it as hedging, but it is actually a bet against each other).
Since most of the foreign exchange brokers seen in China (the top-ranked platforms of various foreign exchange media) are opened by Chinese people, Chinese people know Chinese people best and know Chinese people best. Greed for cheap is some of the characteristics of some investors. In order to expand profits, brokers naturally use B positions to bet against customers, so that the operating costs of brokers are also the lowest. After all, selling position A requires cost, and the key is that customers are not willing to accept the cost of selling orders. So that major brokers use ultra-low costs to attract customers. In other words, the cost of selling orders in the market is transparent, and all orders that are lower than the cost of selling orders are B positions, which is the betting mode.
Essentially speaking, the interests of retail foreign exchange brokers and investors are opposed. When investors make money, it means that brokers lose money. Brokers only make money when clients lose money. In order to achieve this goal, brokers need a large number of retail investors. As long as the customer base is large enough, brokers must make a steady profit. After all, for high-risk foreign exchange transactions, most retail foreign exchange investors lose money. .
When a customer makes money in a retail foreign exchange brokerage, it’s okay to earn less and earn more. The usual methods used by brokers are: malicious manipulation in the background, tampering with data, order violations, and in short, no payment. What's more, they directly dumped the blame on LP, saying that the money was stuck in liquidation. Simple is ridiculous, the truth is:
1. The broker's risk control sees that the customer has made money, and maliciously changes the data in the middle of the night, or installs a plug-in to engage the customer;
2. The violation of the order is an excuse made up for not wanting to withdraw money from the customer;
3. LP is a bridge between banks and brokers, and is responsible for order matching and transactions. There is no so-called "violative transaction order". real market;
4. As the parent of foreign exchange brokers, LP provides liquidity quotations and clearing services for the market. It is never possible to freeze customer funds. All funds are in the clearing bank, and it is impossible for LP to freeze. The so-called liquidation and freezing of money is just an excuse for the market maker platform not to want to withdraw money from customers.
For retail brokers, selling orders not only means rising costs, but the key is that customers do not accept the cost of selling orders. Most customers are used to the low-cost transactions of market makers. It is true that Chinese people understand Chinese people better. trained by the market. The bosses of the major well-known foreign exchange brokers are almost all Chinese (including Taiwan, several of them are Taiwanese bosses), and the proportion of young people born in the 90s is high (is it a bit unexpected).
The B warehouse model of brokers is also called market making. It is estimated that some people will ask, market makers are allowed by regulation, and FCA also has a market maker license. This is a naked concept of stealing, the truth is:
a) Is your account opened under FCA supervision? It's just a trick to sell dog meat;
b) Did your money go into a regulated segregated account?
c) Do you meet the qualifications for qualified investors who bet against market makers?
d) Are you willing to accept the rules specified by the market maker? Do not sell orders, do not do any liquidation, do not protect investors, have restrictions on trading rules, etc.
e) Some people will say that market makers have bought insurance for customers, and this insurance can be purchased by individuals. You can try to study the legal provisions, and it does not protect investors. Even Australia's regulation expressly stipulates that non-Australian residents are not protected. Do you still count on an insurance policy for bluffers on the street?
So how should investors enter the real foreign exchange market? There are the following ways:
1. The amount of funds is large enough, with a minimum of 50 million US dollars. Open a bank account directly with any clearing bank in the world (it is a clearing bank, not an investment bank, such as Rui Xun is not a clearing bank), and the clearing bank where the client is located and the LP is located. The clearing bank (LMAX's clearing bank Barclays Bank as an example) directly conducts inter-bank clearing transactions;
2. Directly trade in LP. For example, LMAX's matchmaker is directly connected to the quotation bank. Customers can also open an independent segregated account in LMAX's clearing bank to complete the clearing transaction. Only the interests of LPs are consistent with those of investors, and there is no conflict. (Many people mistakenly believe that individual customers cannot directly come to LP transactions. This is brainwashed by market makers. LP is fair and transparent to institutional and individual customers)
3. Negotiate with retail foreign exchange brokers and ask them to sell orders. The premise is that customers need to accept the cost of selling orders and let brokers earn handling fees. This is difficult to do.
The benefits of trading in liquidity provider LP, take LMAX as an example:
1. The interests of the client are consistent and there is no conflict;
2. The funds are absolutely safe, and there is no phenomenon of freezing or inability to withdraw funds;
3. There are no violations of trading orders, such as trading/push orders prohibited by market makers, arbitrage, and high-frequency second orders. Not only will they not reject them, but they will like them very much. Because customers create volume;
4. There will be no net deposit requirements for agents. The essence of market makers requiring net deposits is to eat customers;
5. Like stocks/futures, there is a clear and transparent market depth, and the inter-bank quotations from the first to the twentieth floors are clearly displayed to customers;
6. An excellent trading environment, which is mainly reflected in the performance of the matchmaker connected to the bank.
Add
