Market Maker Broker

### The conflict, stated plainly The broker quotes both sides, fills you from its own book, and may never hedge the position. If it does not hedge, your loss is its revenue, one for one. That is not villainy, it is arithmetic. Market making is a legitimate and very old function, and somebody has to be the counterparty when no one else is at your price. The problem is the stack: the same firm sets the price, holds your stop, and profits when the stop is hit. ### It has actually been proven, once, on the record In February 2017 the CFTC fined Forex Capital Markets (FXCM), its parent and two founding partners **$7 million**, and they agreed to withdraw from CFTC registration and never seek to register again. The finding was not that FXCM made markets. It was that FXCM told retail customers its "No Dealing Desk" platform had *no conflicts of interest* while concealing an undisclosed interest in the market maker that consistently won the largest share of its trading volume and took positions opposite its customers. The order found that market maker rebated roughly 70% of its revenue to FXCM, about $77 million between 2010 and 2014, and that FXCM made false statements to the NFA to conceal its role in creating the firm. Conduct ran from 4 September 2009 through at least 2014 ([CFTC release 7528-17](https://www.cftc.gov/PressRoom/PressReleases/7528-17)). The fraud was not being a market maker. It was claiming not to be one. ### Why regulated market makers are still generally fine Not because they are kind. Because tier-1 regulators closed most of the routes the conflict could travel down. - Leverage caps: ESMA limits retail CFDs to 30:1 on major currency pairs, stepping down by volatility to 2:1 on cryptocurrencies. The FCA's limits run on the same 30:1 to 2:1 scale, and ASIC's order does the same. - A margin close-out rule at 50% of the required margin, applied per account. - Negative balance protection, so the account cannot go below zero. - A standardised risk warning that must state **the percentage of that firm's own retail accounts that lose money**. It is on their website by law. Go and read your broker's. - In the UK, FSCS cover up to £85,000 per eligible person per firm if the firm fails ([fscs.org.uk](https://www.fscs.org.uk/what-we-cover/investments/)). - In the US, the CFTC requires your retail forex counterparty to register as an FCM or RFED and to hold net capital of $20 million plus 5% of any liabilities to retail forex customers above $10 million. These are not cosmetic. ASIC reported that in the first six months of its CFD product intervention order, aggregate net losses across retail client accounts fell 91%, from an average of $372 million to $33 million per quarter, negative balance occurrences fell 88%, and margin close-outs fell 87% ([ASIC 22-082MR](https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-082mr-asic-s-cfd-product-intervention-order-extended-for-five-years/)). ### Offshore is a different product wearing the same logo What you give up offshore is not the branding, it is the enforcement. No compensation scheme. No ombudsman. No regulator auditing the price feed that the broker itself generates. When your stop gets taken out on a wick nobody else printed, the entity you complain to is the entity that printed it. That is what "stop hunted" actually means, and it is a fact about where the firm is licensed, not a conspiracy theory. ### The detail almost nobody checks Find the regulator and licence number, then look it up on that regulator's own public register rather than trusting the footer. Then check **which legal entity your account is opened under**, because the entity named in your client agreement is the one the protections attach to, not the group brand on the homepage.