A number of Australian Foreign Exchange brokers use a trading platform known as Meta Trader 4. The companies that I know that use it include:
http://www.forextrading.com.au/
http://www.gomarketsaus.com/
http://www.axistrader.com.au/
http://www.forexfs.com/
.
These are the links to what appear to be fraud inducing software, produced supposably by Boston Technologies and MetaQuotes, and available for any metatrader based broker:
http://alansforexblog.com/wp-content/uploads/2008/04/metaquotesvirtualdealer2.jpg
http://alansforexblog.com/wp-content/uploads/2008/04/metaquotesvirtualdealer1.jpg
http://alansforexblog.com/wp-content/uploads/2008/04/dealer.PNG
So the complaint is about the use of dealer / broker software that has been developed and can be employed by meta trader offering brokers. To understand my exact complaint I think I need to explain how forex brokers profit and what slippage is.
Market Maker Broker Profitability
Market Maker Brokers such as those at top generally have 2 ways of making money. One is spreads which is fair and legitmate, the other is hedging against a traders losing positions, which is also fair. Consequently the broker / dealer makes money when the traders have a loss. However, because they only place traders trades and draw execution of trades from within their own funds and not the general market place, a market maker broker has an interest in gaining money out of losing clients to increase the pool of funds. Hence there are advantages for some brokers in having a number of their clients in losing positions. Hence there is a natural conflict of interest between the broker and trader. Hence the software identified below I believe gives the broker an illegitimate ‘house advantage’.
What is slippage?
Slippage is the change in price at the immediate point of entry or exit from a trade, and hence a different price is offered or forced upon the trader. However, slippage in its true form, should at times work in favour of the trader and at other times work against the trader.
The Fraudulent Software and Its Potential Use.
But what is not fair is when dealers / brokers deliberately uses software such as Virtual Dealer Plugin 3.16 by Boston Technologies in conjunction with MetaQuotes, which deliberately and willfully slows down execution of trades in Meta Trader 4 platform to turn possible profitable trades to be less profitable or make them a loss. This software prevents this and eliminates potential profits to the trader.
Slippage at the point of entry into a trade can allow the broker / dealer to make more money and the trader less if there was no real slippage there. This software supposably allows this to occur. It can also hide the real trade entry point so that if the trade happened to move in the traders favour for entry the broker gets the additional income.
Slippage at point of exit can reduce the actual ability for exiting a trade, and therefore make a trade less profitable for the client. It can also hide the real exit point and allow for profit to be taken by the broker instead of the client.
The fact that Virtual Dealer Plugin 3.16 can also be targeted at traders who trade below a certain lot amount as is seen in the screen shot is appaulling. This is particularly bad because a trading company / broker / dealer can target users who are likely to be new to the market and have little money to trade with and maybe do not know the dirty tricks that some brokers get up to.
Virtual Dealer Plugin and any other similar programmes should be made illegal as it is deliberately aimed at taking money from traders making those that are profitable less profitable, and those that are struggling broke.
Many metatrader users have noticed an increase in slippage may occur with some brokers if they show themselves to be profitable in the first months of trading. This occurs even during highly liquid times in the market. And because brokers can benefit out of some of the clientelle going bust through hedging techniques, I believe that ASIC need to step in.
Millions of dollars of fines to owners and managers of companies that employ these tactics are needed. Because a few slippages a day for thousands of traders each day adds up to a real lot of money.
I tried to communicate in non-accusational manner with metaquotes, and was banned without any communication from their forums and had my post deleted within 6 hours. Many other traders have reported this as happening to. The former link of my request for information is
http://www.metatrader4.com/forum/13219
if that helps with tracing anything.
We must prevent this to stop the illegal practices within the unregulated foreign exchange industry, or any other trading industry.