Scams

SCAM = SWINDLE
Swindle = committed a crime against other patrimony through falsifications and cheats for taking advantage.
We can think of three levels of swindle:

1° Level: a rough scam (rude swindle)
It’s a level of crime less refined, which exploits the incompetence of the traders, their inexperience and their incredulity. The swindle is about:

a) disappeared web site.
It doesn’t come out as a society or as a introducing broker or broker.
It needs to pay attention to the web site without warranty.
b) Broker not regular (for example not registered to the American CTCF or NFA) operate as if they were authorized, while they aren’t.
The worst thing is they take money from personal account and when the finance controls, it stops everything and the money is usually freezed, so we can’t find money and broker.
c) Other illegal activity for gaining money.

2° Level: a slight scam (fine swindle)
This is a crime hard to discover because of the shortage of definite information for the identification.
The trader is the victim of the unfair broker if they:

a) hatch some prices.

b) Hatch some orders.
This kind of swindle is less clear than previous, but equally criminal.
There is some platforms which allow the broker to hatch the dates easily, and consequently the order entry is less entrusted.
Some famous platforms in the net are used by the forex scams, that is by the unfair broker, who betray the costumers (about every people who use a dealing desk): this matter has to create some worries.
The best broker for the forex don’t have a dealing desk but a ECN. They don’t interfere between the trader and the pool of liquidity, but they put them through and the exchanges are automatic.
This means taking part in a market, where we make trading against the broker, differently in the dealing desk.
The “ECN” (Electronic Currency Network) are a banking circuit where the proposal of sale and purchase are made by the furnisher of liquidity allowed to do the market; the trader’ s access is so allowed by the counter-parties furnisher of liquidity.
The broker with ECN have real spread interbank, so 1 pip, but also an half pip or sometimes bid and ask are equally just only for short times.
They don’t earn from the spread, but they apply an order on every trade.
The commission changes from 0,2 to 0,5 for trade, so on the round-turn the greatest total cost is 1 pip of spread + 1 pip of commission = 2 pip : less than any broker with dealing desk, who often have other hidden costs.
Nevertheless the cost of the spread in ECN can be annulled by using limit-order : in ECN, differently of dealing desk, we can insert orders with limit of price inside the spread!
Moreover, during the news, the spread don’t become larger, except few seconds in the case of higher volatility.
Sometimes during important news, the spread is negative for some seconds!
That is because not all partings in ECN conform they offers with the same speed.
In the ECN the banks take part in competitions for gaining orders, while in dealing desk are used by broker of their own interests for having the other side of the costumer’s orders.
An alternative way is betray the futures in currencies to CME, with all advantages of a regular market and warranty of transparency of prices very higher than the forex spot.
Nevertheless the liquidity isn’t often very high, except for the main pairs, but sometimes also for some of them.
The definitive solution should come from the project CME-Reuters, that they have agreed each other for making a forex spot market on the Globex (the electronic platform of CME).
Consequently the trading in the classic ECN shows to the trader retail a deep book, different levels of proposal in purchase and sale with free and various prices.
According to the sale rule, the prices in the terminal should move according to the canons of the better offer in purchase and sale, shown in this book or in other financial tools as the futures and the shares.
The classic and simultaneous of proposals of bid and ask, are so characteristic of a proposal price through dealer, a first sign of something which doesn’t correspond to a free feed.
In a system like ECN the prices (and so the spread), change according to the rule of the better proposal of purchase and sale offers from the counter-parties, the proposal book seems to the books of the regular tools (futures, shares, etc.).

c)the small distance of the price in the inclusion of the orders.
A different technical consideration is about the function of the small distance from the price to the orders insertion.
Many brokers limit the introduction of the orders limit and stop to a small distance from the last price defeated in platform.
In a free and open market, the trader should be able to insert the own orders in freedom and so also to be at the top in the proposal of purchase or of sale without limitation.
Many limitations seem to be also existing.
The limitation in the distance is the sign that the broker needs to some pip of “freedom” for covered the order of the trader in the reference market.

d) structural difficulty introduction orders.
The last but not least seems to be the structural difficulty about the insertion of the order.
According to the same rule, an order inserts in a market could be executed in different prices because it could go to hit various proposal and so return an execution to different prices of market.
This aspect can be explained with an example: we can think about a situation of market where is a price in letter (ask-sale) of 1.4455 with 7 lots.
The best second offer of sale is to the price of 1.4456 with 5 lots.
We imagine an order of purchase inserting for a value of 10 lots.
How much should the broker give back to us?
Which prices of loaded are the executed controlled to?
It seems that different server are not able to compare the various prices of the counter-parties because the orders are tried by the “dealer” component.
At the same time, this can’t also break the orders.
So we have to only execute the order for 10 lots to price of 1.4455.
Consequently the remained 3 lots must to be task by the dealer (making this the true ECN falls) or they have to compel the platform to work in FOX modality (fill or Kill) and in this case refuse the order because the quantity overcomes the value of the offered lots.
At the best, those limitations don’t take the execution so transparent and clear, and make several doubts about what happens to the tried orders through those systems.
The above-written considerations are the natural resulting of personal deductions, but in reality nobody becomes acquainted to get to know what has really happened to the order made after having received from the broker.
But in ECN, where normally the broker applies “commissions of negotiation” over the spread, they put a serious bond about the utility of them, sometimes resulting more expensive (spreads + commissions) than the trading to the fixed spreads could be.
Asking to the broker, who offers these kind of products, answers to the doubts is very useful.
3°Level: a bit of scam (something about the swindle).
We can insert to this level the whole situations with limitations and conditionings, which can us work without freedom of intervention in Forex market with alternate results.

e) conditionings.
Often the positivity or less of the our operations is bound to this kind of conditionings which have to taken in consideration for our way of doing in the Forex (scalping, etc.)

Conclusion about the scam.
Because the ECN are considered the best by the professional Semplice: that you see is that is happening in that moment in the market.
Maybe the market maker broker isn’t there for swindling nobody; probably it works so; perhaps somebody has a server slower than other; and somebody is really a swindler, but usually these people resist few time, especially if they are regulated (FSA,NSA).
With this we want to suggest to become aware of who is the best for us.
The choice is different and subjective.
Leverage, not leverage, slippage, transparency, protected deposits, warranty about the bud get that it doesn’t become negative because the account will in this case close; the options and the differencies are many: we have only to choose.