Not to pick on you personally (in fact, we posted a similar response to someone else on this forum recently), but your comments reveal some misconceptions about the forex market we would like to address.
It’s important to understand that if a particular retail forex broker tells you they are not a market maker themselves, that only means they must offset your trades with another firm that is a market maker. That’s because market makers perform a vital service, not only in forex, but in many financial markets, including major stock and futures exchanges.
Consider what the world’s largest stock exchange says about how their market model works:
The cornerstone of the NYSE market model is the Designated Market Maker (DMM). DMMs have obligations to maintain fair and orderly markets for their assigned securities. They operate both manually and electronically to facilitate price discovery during market opens, closes and during periods of trading imbalances or instability. This high touch approach is crucial for offering the best prices, dampening volatility, adding liquidity and enhancing value.
DMMs apply their market experience and judgment of dynamic trading conditions, macroeconomic news and industry-specific intelligence, to inform their decisions. A valuable resource for our listed company community, DMMs offer insights, while making capital commitments, maintaining market integrity, and supporting price discovery.
In the following post, we discuss the three methods retail forex brokers can use to offset your trades in greater detail: Who is the counterparty in an exchange?
Full disclosure: FOREX.com is a market maker, but that’s not why we defend this model. (In fact, for institutional traders, our parent company, GAIN Capital, offers ECN solutions through the GTX marketplace.) Rather, we are a market maker for retail forex traders, because we believe market making is the best way to provide our retail clients with reliable pricing at retail trade sizes while effectively managing our own risk. We are fully accountable for every execution and don’t outsource that responsibility to a third party. It’s not our intention to make this discussion about ourselves, but we wanted to address the misconceptions some people have about market makers and the vital role they play in financial markets whether you trade forex, stocks or commodities.