Lets do a simple math.
Lets say a bucket shop broker who has about 100 active clients where in every client is trading approx 10 lots per day (20 lots buy + sell). To me that sounds like a small shope who is on the verge of not being able to survive.
Now lets say this bucket shop is trying to compete with larger brokers and gives a very low commission just like our top brokers. Lets assume commission is $2 per lot ($4 round trip)
SO, with just these 100 small traders, trading over 20 trading days in a month the broker will make
Average Number of Lots Per day * 2 * Number of clients * Number of days in a month
SO your maths will be
10 * 2 * 2 * 100 * 20 ===> $ 80,000 per month
So effectively a very small bucket shop will make approx $80,000 USD per month with just 100 active clients paying $2 per lot per side trading just 10 lots per day
Assuming the bucket shop becomes technically good and starts to charge a premium commission of $5 per lot instead of $2. Everything else remaining the same, the theoretical profit of this bucket shop is now $200,000 per month.
Well, to me that sounds like a lot of money to keep running a bucket shop.
Now, assuming that this broker only wants to make money from his clients losses.
Average balance required to trade 10 lots per day will be (very very conservatively) $5000.
So if all the clients loose money the broker will make $500,000. But if he runs a A book he will make $200,000 per month.
I see it as a no-brainer, why smaller bucket shops will not follow a pure A book as that will be a longer term winning proposition. Unless we are talking about shady and crooked brokers who kill their clients will slippages and order rejections techniques.
My suggestion, instead of following consiparacy theories. We should rather focus on quality brokers who have a track record of execution, speed and withdrawals.
There is no gurantee that your "Regulated" broker will not go bankrupt. Think Lehman, Man Financial, MF GLobal etc etc etc etc etc.... What did the investors get back from them ? So... why do we pay a premium to deal with them ?
Yes it is true that invetors get lower leverage, higher spreads, higher commissions rates, lower (or NO) client support because essentially daddy CFTC wants us to deal with monopolistic economy where their lobby is happier than their citizens.