We have constantly talking about trades and traders many times; I like to start a topic which describes the role of Forex Broker…
I feel Forex broker is a firm or an individual that works as the intermediary between the buyer and seller.
What do you think? Do they act much?
That’s exactly what a forex broker is. If you look up “broker” in the dictionary that’s probably the first definition. 
That being said, the majority of retail forex brokers don’t actually do this because they are market makers. So their role would be… uh, making markets I guess (and making profits, of course).
Sometimes your broker becomes your breaker.:D:D:D:D
To let you go broke? Just kidding. 
There’s a reason it’s often said “your broker will make you broker.” For some reason we all imagine a broker as some fatherly overseer that will do his utmost to protect our interests; we all know better, but still we do it. It’s so naive.
Market makers as such provide liquidity to the retail market (e.g. us). Often times they immediately take the opposite position of the trade you execute to facilitate this process. They need you to trade to make money on the spread. The more often you trade the more they make. Unfortunately, it doesn’t stop there. Suggest you look into the broker’s role before getting involved. Investigate their stop hunting, requotes, etc. If you want a real eye opener open the same currency pair on two different brokers side-by-side and just watch how different things are.
It’s ABSOLUTELY UNBELIEVABLE!!
For three weeks, we’ve been debating how to stop these imbeciles from stealing chunks of text from the web and pasting them in as “forum posts”.
We’ve been begging and pleading with the mods to stop them from doing it.
We’ve been pointing out the damage it can do to the forum.
We’ve been having private correspondence with the admin about it.
We’ve debated it in public, in the “feedback” section.
AND EVEN NOW HE’S STILL DOING IT!!!
Stolen from here: What Does A Forex Broker Do? | Lucror Foreign Exchange
This should be the role of a real broker however unfortunately this is not the case with most of them. The majority are market makers which have a major conflict of interest with their clients and are trading against them. Many traders have been scammed this way and lost all of their money. Since most bucket shops do not even have real regulations, the cause is basically lost. That is why I always advise people to carefully review the brokers’ Terms and Conditions especially the text with a small shrift, check and compare the offered services and conditions.
Hi @sebastiano
Your points highlight why it’s a good idea to trade with a well-regulated forex broker. Regulation by a reputable financial authority goes a long way to addressing a lot of the concerns you raised.
For example, the CFTC and NFA set the requirements a broker must meet in order to offer forex trading to US residents. Though not an exhaustive list, this membership application will give you an idea of some of those requirements: Compliance Requirements for Retail Foreign Exchange Dealer (RFED) Applicants | NFA
Particularly noteworthy are the requirements for financial transparency and trade execution accountability. Below is a quote from the CFTC site:
The final forex rules put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital and other business conduct and operational standards. Specifically, the regulations require the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs), a new category of registrant. Persons who solicit orders, exercise discretionary trading authority or operate pools with respect to retail forex also will be required to register, either as introducing brokers, commodity trading advisors, commodity pool operators (as appropriate) or as associated persons of such entities. “Otherwise regulated” entities, such as financial institutions and SEC-registered brokers or dealers, remain able to serve as counterparties in such transactions under the oversight of their primary regulators.
The final rules include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs are required to maintain net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts will be subject to a security deposit requirement to be set by the National Futures Association within limits provided by the Commission. All retail forex counterparties and intermediaries are required to distribute forex-specific risk disclosure statements to customers and comply with comprehensive recordkeeping and reporting requirements.
That’s why it’s important not to blame market makers for the problems caused by bad brokers. Not all market makers are bad. Not all bad brokers are market makers.
If your forex broker is not a market maker, then it must offset your trades with another firm that is a market maker. That’s because market makers provide a vital function, not only in forex, but in many financial markets, including the major futures and stock 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.
Full disclosure: FOREX.com is a market maker, but that’s not why we defend this model. Rather, we are a market maker, because we believe market making is the best way to provide our clients with reliable pricing 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 anyone who has questions about us specifically is welcome to send us a private message or post in our discussion thread in the Broker Support section of BabyPips.
In order to trade with the Forex market we need a intermediary who gives us the access with to trade in the market and is linked to Liquidity Providers .
There are to types of Broker:
1. Market Makers
2.Pure ECN brokers
Market Makers Provide you Fixed Spreads and act as Liquidity providers on there own. Whereas,
Pure ECN brokers Provide Variable Spreads and link Trader directly to Liquidity Providers.
Thank you, Forex.com for the detailed reply. I understand your point of view and am not saying that all the bad brokers are market makers however statistics shows that the majority of the issues with trades, blown accounts and scamimg strategies are unfortunately coming from this type of brokers. Of course it strictly depends on the policy and the ethics of the broker towards its clients however I am not eager to trust MM. For me personally, trading with an ECN broker which will link you directly with the Liquidity Providers will be the better option for now. Like I said, this is my opinion only.
To what statistics are you referring? The data on small or unregulated/lightly-regulated brokers are limited compared to what’s available for large and well-regulated brokers.
That’s why we said your points highlight the importance of trading with a well-regulated forex broker. Regulation by a reputable financial authority goes a long way to addressing a lot of the concerns you raised, because even if a broker tells you they are not a market maker themselves, they must still offset your orders with a market maker.
For sure Forex Broker plays an important role. I prefer Pure ECN brokers over Market makers. As I don’t like any hindrance from broker’s end as far as spreads and other trading conditions are concerned. On the other hand market makers try to earn from your strategy by acting .smart, which I don’t like. So for me a Forex Broker who offers direct market spreads and market conditions, with fastest execution speed is the one of my choice.
Even if your broker is not a market maker themselves, they must still offset your orders with a market maker. That’s because market makers perform a vital function, not only in forex, but in stock and futures markets as mentioned in our previous post: What is the Role of Forex Broker?
Since market makers perform a valuable service used by retail traders and retail ECN brokers alike, rather than trying to avoid market makers altogether, it would be more useful to identify the reputable ones. For example, forex brokers regulated in the US are required to adhere to strict rules governing their finances and trade execution: CFTC Approved Brokers
The utmost best broker will of course be a broker that does both
This way the broker always has great profit and is therefore able to present superior trading conditions.
In case I would start a broker, that would be my system and I would not be afraid to tell the world how my business is making money. lol, I’d not answer single clients in wich categorie I put them 
hi all,
In my opinion broker plays a vital role when it comes to forex trading ,it is necessary to select a reliable broker which whom one can go forward with trading and the broker who charge the least commission with best market conditions.
Hey Markmuffin. This is great since I’d just covered forex brokers about an hour ago in the education section of the website. The purpose of the broker to my knowledge, is somewhat of “liason” between retail traders and the groups way above us such as the big banks and whatnot. The great thing is that there’s so much competition going on behind the scenes that we get very competitive(great) prices. There are also different types of brokers such as ECN, market makers, STP(which I believe often fall under ECN, but I could be wrong(check the education area, it’s fairly easy to find).