With everything that is going on with Robinhood and other equity brokers, it leaves me wondering if forex brokers are selling retail investment data to institutional investors. Specifically, the overseas brokers that allow US clients.
I would be upset if I am paying a spread, a commission and they are selling my info to someone who has the ability to ruin my position by having asymmetric information.
Stop me if this doesn’t matter for forex because it is harder to manipulate.
PS: First post and I’m glad to be here. Hello everyone.
Since U.S. equities are traded on an exchange, order execution works differently than than the FX market which is a decentralized OTC market.
For example, if you want to buy $GME, your order (in most cases) is routed by your broker to another trading venue. This could be to the actual exchange, dark pools, ECNs, and other ATSs (alternative trading systems).
For retail traders, their order is most often directly routed to an electronic market maker like Citadel, Virtu, Two Sigma, etc. These trades are matched before they reach the exchange, often on a principal basis.
More than one-third of trading volume is actually handled off-exchange nowadays.
Regarding retail FX orders, your order is not routed anywhere. Your broker simply takes the opposite side of your trade and becomes your counterparty.
So if you’re worried about someone having asymmetric information, it’s already happening. Your retail FX broker can see the order flow from all of its customers. What a broker decides to do with that information differs from broker to broker. And it’s something one should ask their broker about.
Thank you for informing me about SSI for FXCM. I did not consider making a demo account with FXCM but I will now due to the SSI being proprietary. Seems interesting enough to mess with.
Ahh, that makes a lot of sense. And now that you mention it I remember reading about that in the Educations of Babypips. They alluded to the fact that some people think that forex brokers are evil because of this and they want you to lose. But win, lose or draw brokers make money on the spread or from commission. So they want you to keep coming back to make trades.
I believe it makes sense now and thanks for reminding me.
Perhaps you will be disappointed even more learning that there is even greater opportunity for manipulation in FX space because there you trade with a dealer not an exchange and he can fill your orders at any conditions because he provides liquidity to you. Regarding Robinhood front-running max what they earn from retail flow is spread and sometimes some short-term moves in case a big orders hits the market.