I am under the impression that brokers provide only trading platforms and are rewarded by the spreads in the trades of their �customers�. After reading of the experiences of some traders with brokers, it looks like they (the brokers) took positions on the other side of their customers� trades. They (the brokers) then have a vested interest in the traders losing trades. IMO this is unethical at best and criminal at worst. They then slow the data feeds and use all kinds of underhand methods to ensure that they win and their customers lose a trade.
Should brokers be allowed to trade? I do not think so, but then again who can stop them?
Non-ECN Brokers must trade, one way or the other. They are always on the other side of every position made. That’s automatically a trade. Now since there are a lot of such trades, it’s all being aggregated. If there’s an imbalance then the broker has a positional exposure. They can leave it or they can offset it in the market. If they do the latter, they are trading again.
You are, of course, concerned with them having that directional exposure. If that bothers you, trade through an ECN broker and pay the commission.
I posted the below somewhere else. But it may help you too. It basically states what rhodytrader said.
“Brokers don’t take our individual pidly orders to market. They use their liquidity for our orders and their computer matches the overall big picture of all client orders and hedges against that in the market. Then they can in theory make money from the spread by itself after their spread is paid. Shady speculative brokers may let some orders stay not hedged in the market for hopes that those orders are losers and then they keep your loss.”
So bucketshops have to trade. Not necessarily because they want you to lose, but they have to protect their imbalanced exposure.
If fear keeps you out of this game, the same fear will keep you from being successful in this game.