FCA to change license requirements for STP forex brokers
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Thread: FCA to change license requirements for STP forex brokers

  1. #1
    UK's Financial Conduct Authority (FCA) is considering forcing the straight-through processing (STP) https://www.forexbrokerz.com/news/FC...s–media
    Seemingly, FCA has sent a letter into a range of its own charges to inform them of prospective changes to the regulatory environment. According to the record, the watchdog is planning to induce the STP brokers to upgrade their licenses in order to ensure better negative balance protection from losses for their clients in case of extreme market volatility.
    The main changes will be in regard to the capital requirements for the brokers and they would probably be raised in order to have the ability to cover a large negative balance. Currently there are different funding requirements for the FCA-regulated brokers, based on their own trading volume and amount of clients, but less than GBP 1 million.

  2. #2
    IMHO its not really great. As from now even STP, ECN and so forth type brokers will become market makers to provide negative balance protection. If this condition will come to effect - you basically will be trading against you broker. Otherwise broker will not have the ability to provide negative balance protection.
    But that shows how real retail FX market works. Most of these ECN, STP etc on brokers are pure MM, just all of this crap wrapped up in nice ECN package.

  3. #3
    Quote Originally Posted by ;
    IMHO its not very great. As from today STP, ECN and so forth type brokers will become market makers to provide negative balance protection. When this requirement will come to effect - you basically will probably soon be trading against you broker. Otherwise broker will not have the ability to provide negative balance protection. But that shows real retail FX market works. Most of these ECN, STP and so on brokers are MM, just this crap wrapped up in ECN package that was nice.
    Not really. In comparison with all the forthcoming ESMA leverage restrictions brokers are in a far risk. Without keeping the transactions therefor they easily can take the ECN model.

  4. #4
    This is a problem. Because of reduced leverage - decreased volume. Reduced volume - reduced income. ECN model will be less profitable following new regulations will be set up.
    And broker need to act as market makers to ensure negative balance security. With ECN business design - broker passes all trades to counterparty taking miniature small cut on commissions, however has to guarantee negative equilibrium protection in black swan occasion. SO they exposing themselves to very tiny profits and very huge losses.
    IMHO these ECN, STP type brokers carrying some risk on their own novels anyway to increase profit margins. Only now they will take even more risks as they are basically forced to do this.

  5. #5
    I can only repeat my argumentation. Your premises are incorrect imho. Exactly your purpose of having a sizable risk passing the transactions to liquidity providers is way smaller by having nearly not mentionable leverages of under 30. It is nothing else than the measure they're already employing occasionally during risk events today.
    On the contrary their commission aren't small at all. Don't underestimate the massive amount of transactions which makes the cake here.

    Even nowadays there are already plenty of EU ECN brokers offering negative equilibrium protection and blowing off the bucket stores in this basket you still have trusted ones left here.

    B-booking is maybe a comfortable way on the very first look, however you won't build a sizable professional client base using this model.

  6. #6
    I'm still very curious about the way the broker can assure a negative equilibrium security in case of a flash crash or black swan event, unless of course they are a market maker.

  7. #7
    Quote Originally Posted by ;
    I can only repeat my argumentation. Your premises are incorrect imho. Exactly your point of getting a sizable risk passing the trades to liquidity providers is way smaller by having nearly not mentionable leverages of under 30. It's nothing besides the measure they are already employing sometimes during risk events now. On the contrary their commission are not small in any way. Do not underestimate the massive amount of trades which makes the cake here. Even today there are already plenty of EU ECN brokers offering negative equilibrium protection and ignoring...
    Most retail brokers do not have professional clients.
    Incidentally, sending each transaction to the liquidity provider isn't even possible because most liquidity providers just take orders larger then 1 lot or 10 lots.
    Banks often require no less than 100 lots.

    Most retail ECN brokers keep all trades in home (there are a few exceptions), and then market their exposure by using their liquidity providers to stay market neutral.
    I understand just 2 authentic ECN brokers which are readily available to retail clients.

    It's all from the legal records, only thing is most people won't ever read them correctly.

  8. #8
    There's no need for this kind of general conversation. I'm mindful of the situation. Still my argumentation is legitimate as I said that even ignoring all the scammers and fictitious claimers you have reliable ones abandoned. Furthermore professional identifies retailers making money on a normal basis, but do not necessarily need to 50-100k funds to enter the authentic professional place (futures for example). Just as a word to filter all of the newby gamblers losing their money within some month.

    Random pick:

    https://www.jfdbrokers.com/en/post-trade-transparency

    Quote Originally Posted by ;
    quote most liquidity suppliers only take orders larger then 1 lot or 10 lots. Banks often require no less than 100 lots.
    Where's the origin of your numbers? I disagree as lotsizes beginning from 0.1 lot are sufficient based on my own knowledge.

  9. #9
    Quote Originally Posted by ;
    There is no demand for this sort of general discussion. I am aware of the circumstance. Nevertheless my argumentation is valid as I stated that even ignoring all the scammers and fictitious claimers you've got trusted ones left. Additionally professional identifies retailers earning money on a normal basis, but do not necessarily need to 50-100k capital to enter the real professional place (futures for example). Just as a word to filter all of the newby gamblers losing their cash within a few month. Random pick: https://www.jfdbrokers.com/en/post-trade-transparency...
    I am not familiar with JFD Brokers and I am not going to see all their legal documents but it's possible that they belong on the brief list of legit brokers, I see they've LMAX as their liquidity supplier, which could explain how they could find a counterparty for smaller trades.

    I have been out of Foreign Exchange and into stocks for a moment, therefore I am not conscious of every broker out there.
    The brokers I was talking about above are many discussed brokers like Pepperstone, IC Markets, Fx Pro, Tickmill,. .

    Minimum size those assets providers and banks accept is also (mostly) to be found in their legal documents.

  10. #10
    Quote Originally Posted by ;
    There is no need for this sort of general discussion. I am mindful of the situation. Still my argumentation is legitimate as I said that even ignoring all the scammers and fictitious claimers you have reliable ones left. Additionally professional identifies retailers earning money on a regular basis, but do not necessarily have to 50-100k funds to go into the authentic professional area (futures for example). As a term to filter all the newby gamblers dropping their money within a few month. Random selection: https://www.jfdbrokers.com/en/post-trade-transparency...
    there's a big difference between retail and professional clients, making money on a regular basis is far not enough to be regarded as a professional trader.
    Every broker has a lot of legal documents on their website, in there you can find all you need to understand, also when you'll be treated as a professional trader.

    https://www.jfdbrokers.com/documents...Appendix_2.pdf

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