Hi, How do currency futures work to the advantage of the broker? On forex, the brokers make a spread on the interest each way, so they gain alot. Does this infer that currency futures are better value for the trader or am I missing something here? Thanks for any help.
Sure. The commission seems very tiny compared to the interest bill that forex brokers take. Like say they take 0.5% interest, 0.25% each way, then on 100k contract over a year, thats $500. $500 is alot of futures commissions
If you're not trading thru an ECN broker like Interactive Brokers, MB Trading, Dukascopy, etc, then you're better off trading FX futures. Alot of other fx spot brokers interfere with your order execution so it'll be difficult at times to make a profit on a trade. The downside to fx futures is the lower leverage available to you. Plus with fx futures you typically have to open an acct with no less than $2000.00-$5000.00 With FX spot broker like MB Trading, for example, you get the benefits of no order interference from your broker, very good spreads, and up to 100:1 leverage. Interactive Brokers is very good too, 50:1 max levg I believe. Note: the new financial regulation bill is capping max retail fx spot leverage at 75:1 from what i was told by an industry insider with connections to the CFTC. Will take effect next year If I'm not mistaken.
50-1 on major currency pairs and 20-1 for all others. The final rules will go into effect on Oct. 18 as proscribed by the Dodd-Frank Act.
another benefit to trading forex is not having to worry about your account going debut, as could happen in futures. That might be a nice feature for a newer trader.