Hiya,
A broker aproched to me to advertise their platform and they indicated that, they have fixed spread for majors and I wondering these market makers by offering a fixed spread, can be useful to trade with them or not? As a true ECN/STP can’t do this fixed spread matter, can I getting less margin shortage issues by using a MM broker who offering a fixed spread?
Is it make sense what I mean? Did you got the point?
Thnx
Well, it all depends on risk management from the broker. Spread is direct gauge of risk since the problem for LP is pick the spread which is ATTRACTIVE for traders and prompt them to enter a trade and thus generate volume (profit) for market maker and WIDE enough to protect LP from being on the wrong side of a market during high volatility. Think about this as a shop which buys and sells phones. When the demand for phones is stable, the shop can narrow the price difference between buying and selling iPhone X to generate volume of sales what brings it profit. But during demand instability the vice versa will happen.
To the point: Fixed spread that the broker widens spreads to the point where historically volatility (risk swings) on average kept the broker profit safe. It can very though depends on risk management I mentioned above since the measure of risk can be different for brokers. But for your in average fixed spread will be no better than floating spread simple because the fixed spread as a result of calculations protects the profit of the broker first and then can mean any advantage for you.
I am not sure if you should trust them. First of all do some research about this broker. It’s not about just for the fixed spread. Basically I don’t find the MM brokers very reliable because most of the time, they have conflict of interest with their clients. Is this fixed spread applicable only for the majors?
If you are interested, make sure to read carefully their T&C including the small print and to check their regulations. Or you could try to open a demo account and test the services.