A few months I signed up for an account at an online CFD broker (market maker) called Plus500. It’s a big solvent company listed on the london stock exchange (as far as I remember). I didn’t really know the difference between a Market Maker and an ECN broker.
I traded a while with this broker, but I often had the idea that something was wrong. The prices of the instruments (stocks, currencies etc) were not always the same as the original market price. I understand that market maker brokers make a small adjustment on the prices for the CFD’s, but that should not be more than a few pips. I use Tradingview.com for my technical analysis and one time I saw a huge difference due to which I lost the trade, while it should be a winner.
“The trading you conduct on the Trading Platform is not conducted on an Exchange. We act as a counterparty in Transactions conducted on the Trading Platform and, therefore, act as the buyer when you offer to sell an Instrument and the seller when you offer to buy an Instrument. The prices we offer on the Trading Platform might not be the best prices available and we may offer different prices to different users. “
So they are telling us that they are allowed and able to offer different prices to different users. As they know their clients margin and stop loss levels, they could adjust the price in such way that you would lose the trade (however I’m not saying they actually do so). And when you lose the trade, they win it, as they act as the buyer when we sell and act as a seller when we offer to buy.
How is it possible that they are allowed to do this? Do you think they really take advance of their advantage to kick you out of a trade so that they win your money?
I had contacted their customer services to request explanation and a compensation (I thought there was a mistake in their system, couldn’t believe that they are actually alowed to create different markets for different clients). They told me that they make a ‘‘small’’ adjustment on the price. I think there is no limit by law to the adjustment they are allowed to make, because once there was a difference of more than 200 pips! I created a website to inform people with the experience I had with Plus500 (plus500reviewed.com). Here you can read my full story, I would like to hear your opinions on this.