@Trendswithbenefits unfortunately, you're not alone in having this misconception about market makers.
The reality is whenever you place a forex trade, there needs to be a market maker taking the other side since it's an over-the-counter (OTC) market. Furthermore, market making is not exclusive to forex. You can visit the websites of several of the biggest futures and stock exchanges in the world to read about how they rely on market makers to provide liquidity and quality pricing.
While we do not actively trade against our clients, it's true that as a market maker, we manage the risk on the other side of customer orders. It's also true that we have many tools at our disposal to do this, and that's a good thing for our clients.
We've automated every aspect of the trade process, with the goal of ensuring your trades are executed as fast as possible at the price you expect – or better. In 2016 we consistently executed 99.9% of trades on our FOREXTrader platforms in less than 1 second*, with an average execution speed of just 50 milliseconds, and over 66%* of limit orders received price improvement**. We have established a set of standards we use to measure execution quality for FOREX.com, and we publish execution statistics on a monthly basis.
*Execution speed represents the time it takes our execution engine to execute your trade once it has been received by the execution engine. This does not represent the time it take from when a customer clicks trade on the platform and when they receive their confirmation. **Execution Price statistics exclude instances where multiple limit orders were placed in the same account for the same instrument at the same price. ***Excludes trades that received non-standard order processing.
While that's true, it's also true that we operate in a highly regulated environment, with strong oversight into trading practices and execution. For example, as a US-regulated broker, FOREX.com provides the NFA with details of the transactions initiated by our retail forex customers, and must adopt and enforce procedures designed to ensure the integrity of trades and to ensure trades are executed at market on our various platforms. We are fully accountable for every execution – as a market maker, we don’t outsource that responsibility to a third party. If you ever have any questions or concerns post-trade, we'll address it directly.
For 2016, approximately 98% of our average daily retail segment trading volume was either naturally hedged (buyers of a currency pair being offset with sellers) or hedged by us with one of our liquidity providers. Therefore, the idea we are actively trading against our customers is inherently false.
We take customer satisfaction seriously. If a market maker undermined its clients' success would lose its clients. A key reason FOREX.com has grown to become one of the largest forex brokers in the US over the past 18 years is because our customers value the service we provide as their market maker.
FOREX.com and all other US-regulated brokers are required to calculate actual profitability stats each quarter and make them available to the public, our customers, and the CFTC and NFA. For the calendar quarter ending June 30, 2017, there were 34,911 active non-discretionary trading accounts of which 31% were profitable and 69% unprofitable. These percentages are in line with much of the industry.
Trading carries a high risk, but we believe FOREX.com being a market maker is the best way to reliably and transparently service our customers.