When the ECN liquidity suppliers stopped quoting them, the stoploss orders in place would not trigger also? Will the orders don't trigger in MM models also in the exact same situation?Originally Posted by ;
When the ECN liquidity suppliers stopped quoting them, the stoploss orders in place would not trigger also? Will the orders don't trigger in MM models also in the exact same situation?Originally Posted by ;
The MM version that is bucketshop is the very best for the MM not for your client.
MM cancel trades internally and just go to LP if their internal offset overflows.
In a situation like yesterdays, they are easily able to affirm margin calls WHERE THEY WIN!!
While egorizing all (or many ) take profits as a NO FILL!!
So where they win ( clients margin calls and prevent losses) and in which they lose ( take profits ) are treated differently to their own benefit.
The stops never got hit since there wasn't any to hit.Originally Posted by ;
The'broker' (since they are not really a broker but a dealer - however I digress...) never hedged your transaction on the interbank bank market in order that they never had some stops on the interbank market.
So if a MM client (any I've read some terrible stories)'d 50K on your acct and ended up with -#250k then the MM will owe nothing to some liquidity counter celebrations (cos they never placed the trade) and you're going to owe them 250k... now they could preach the no zero policy stuff and you are now grateful for loosing only 50K as long as the overall numbers of winners on the day could be consumed by these wiped out accts not only does the MM live to see another day but they might have profited from the entire debacle...
make sense?
Correct an ECN is not counterparty to your position (only they have to be as you don't have credit lines with the next tier down but ignore this ) they don't have you because of counterparty risk so when those accounts are negative they are forced to cover them to their liquidity providers (or be insolvent if they can not ) because folks are not topping up there accts like all good citizens should be doing in this situation:-|Originally Posted by ;
So in essence those men who got reckless, and shorted the eurchf peg, and other crosses with high leverage, are liable for others potentially losing money? - I agree.Originally Posted by ;
Type of. With the ECN brokers when you take a trade the brokers accept comission and move it on to the market, I am not entirely certain how they do this, but they don't act as counterparty. So as a broker they approach their liquidity supplier including all the orders on their books, for eurchf, that is 94% extended short = net eurchf that the broker is subjected to. Because any reduction is the clients this is fine, and the broker only collects the commission. However, if your brokers liquidity suppliers aren't quoting they don't have access to the interbank, and consequently, if their clients accounts losses exceed the maximum value of the account, the broker suddenly owes it's liquidity provider the gap.Originally Posted by ;
When an order arrives to a MM broker, they provide counterparty to the position, if you want to buy eurchf, they'll sell it to youpersonally, and hedge away excess risk. So with a MM, when 89 percent of clients are net long, the broker is 89% internet short and some of this will be hedge by placing shorts in the actual market. When the peg broke the MM brokers would have short positions equivalent in size to the net long of their clients, meaning that they don't have to fret about stops being struck.
I am not 100% sure on all this, but this is my opinion on the circumstance.
MMs are likely not the best option for scalers but that doesn't automatically mean that they are safe for swing long-tern traders either since they are taking the other side of the transaction, if a MM broker ends up with a lot of winning traders then they could still go bankrupt as the cash won from losing traders may not have the ability to pay the cash they'd owe to winning traders.Originally Posted by ;
Great excuse!Originally Posted by ;
Yes, even a MM broker might wind up with a profit, considerable amount of it at that but if he had a lot winning traders then he might be running into losses too, so there is always that risk too. In summary, we are doomedOriginally Posted by ;
EDIT: On second thoughts, might be the ideal model is a hybrid one where the broker trades contrary to the losing traders is smart enough to quickly comprehend hedge the transactions of successful traders, in which situation, even during a rare occasion like yesterday, he will have enough accumulated profit over the years (cash won from losing traders) which he will have the ability to pay the losses.
That is what the MM already do.Originally Posted by ;
They have two novels.
One publication with all the shedding traders which they act as counterparty to, hedging only when maximum risk for that publication is breached.
And yet another publication called marked risk including the winning traders which they hedge immediately, they only collect commission from these men since they're winners.
In order to separate the customers, the winners in the winners, the brokers clearly closely monitor all of traders performance.
That's right. That's what smart ones do those would be the most suitable choice for the traders but not every MM is good at doing this well. And, is it really that simple for us to see the smart MMs? These days most brokers prefer to throw around words such as NDD ECN so it obscures things. The point being that because of what happened yesterday, traders should not blindly think that any MM is much better than an ECN as it feels like that's exactly what a fantastic number of recent articles on these forums have been insinuating.Originally Posted by ;
I believed that the ECNs where better also, shows what I know.Originally Posted by ;