Yes but also execution-credits...(I have to admite I forgot the Options...{probably because I do not trade these markets}). Look I will not defend these modification-fees at all {I hate them as well}, they are enforced by some EXCHANGES (not IB) to protect/prevent them from excessive (read automated) modification-activity (chasing markets without executions, and auto-spreaders)...And are not intended to discourage normal-trading (the execution-credits should fully compensate the mod-fees).
Thanks Hoi. It is quite clear now. Your explanation about the journey of all limit orders are quite eye-opening. So, in steady (non-volatile) market times if we choice market order instead of limit order (accept slippage if market moves) at any cost we get filled. Right ? If so, I think it is finished. IB and other ECN type brokers on forex will lead the market in next few years. Do you believe is there any surviving chance for bucketshops which is the first question of this thread ? My conclusion is, after reading your brochure and thought about order mechanism, : NO. There is no room left for bucketshops. They must go into ECN type model not as broker, but as market maker. Do you agree with that ?
Well I would not recommend any use of Market-Orders (but that's my opinion)..if you want to have more chance to get filled, and have a fair price then use a Limit-order a few ticks above the market (then YOU control the slippage...not the counterparty). About bucketshops: they will exist as long as there is no government-controlled-regulator, who prevents shady practices. There will always be newbies who are attracted to 200:1 Leverage and micro-accounts, and have no clou that they trade against a Dealer who has other goals than to give him the best-price.
I don't know..I've not studied law (did you?)... The Forex-ECN's made by the Brokers, are not regulated as well, but the budgets you hold with them are {at least, in case of the IB-ECN the budgets are in the Futures-Account and protected (SIPC and Lloydâs of London)}. And the fact the ECN's revenue is not from trading against you, but from commissions, there are no "ingredients" to become fraudulent....
I just thought you were saying ECN is better regulated than Bucketshops, but what you saying above is true and I agree with that. Although my personal opinion is that if the broker wants to screw the customer they can in either case.
Still an important question remain unanswered or answered by unrealistic or unpractical manner. How can bucketshops survive while players (traders-clients whatever you want to name it) are consistent winners insted of chronic losers (or gamblers)? Possible unrealistic or unpractical answers * They profit or hedge by using just spreads It is almost impossible by using internal communication between trader's open positions. * They are offset positions by better spreads in different broker or bank It is not too practical with small lot sizes. However, there are many fair brokers using this method by accumulating small lot sizes into bigger one. In this matter, an excellent dealing team required and of course software must be error-free. ----------- So, what is the possible scenarios for consistent winners on their bucketshop accounts ? I mean, what will bucketshops react to consistent long-term winners ? Do they cancel winner's accounts ? I dont think so. If they do not cancel winner's accounts why we call them as bucketshops ? Generally, bucketshops use dirty tricks in order to wash out consistent winners. If they fail by using these dirty tricks, then they gently show the exit door to the consistent winner. Another important point to remember: Bucketshops are always big boys. So, ECN model brokerage contains more dangers in my opinion. Just think what if big boys (MM's JPMC, Bear Stearns) know your stop loss level on your ECN model brokerage account ? What if big boys and ECN model brokers are the same company and know all stop loss points on the open positions ? They can simply manipulate the markets and wash out all fools. It is my two cents.