The A-book AKA STP, ECN or DMA broker
The A-book AKA STP, ECN or DMA broker… This is all propaganda FOREX is a zero sum game there is always someone losing when you win and winning when you lose.
There are only 3 relevant criteria to consider when choosing a counter-party:
- Solvency- are my funds safe, does the broker have adequate capital reserves with proven risk management controls and procedures, are they regulated and subject to reporting requirements?
- Execution- does the broker fill me at the current fair price, has the broker been fined or suspected of unfair execution policies like a-symmetrical slippage, long or inconsistent hold times?
- Cost- what funding, maintenance or inactivity fees are there if any and what is my total cost of the transaction? spread + commissions + Swaps – rebates or cash back.
As long as I have favorable responses to the above criteria I don’t care which counter-party my broker offsets my transactions with. Client to Client, Client to Risk Book or Client to Liquidity Provider it’s all the same to me… I care that I will be able to withdraw my funds and get fair execution.
As a retail Forex trader you expect to limit your potential loss to the amount of money you have in your account, you don’t knowingly pledge additional collateral or expect that your other assets may be at risk if your brokers risk management policies fail.
The FXCM risk management systems may have performed within expected parameters, but the ‘Black Thursday’ event has proven this STP model is a vary poor risk management model for this industry. FXCM I know you have a tone of marketing dollars invested in promoting the agency model but as a shareholder I hope you revamp your risk management strategy.