A market broker

A brokered market involves agents or intermediaries in purchase and sale transactions to facilitate price discovery and transacting the execution.

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The use of brokers as intermediaries between buyers and sellers aids market efficiency by fostering liquidity, reducing bid-ask spreads and boosting transaction volumes. Also, it's important to note that brokers are not acting from their inventory. They are simple middlemen consummating a transaction between a buyer and a seller.

Brokered market

What is a brokered market?

A brokered market involves agents or intermediaries in purchase and sale transactions to facilitate price discovery and transacting the execution.

Brokered markets often exist in areas of the economy where there is a certain level of expertise required to complete a transaction. In cases where members of the general public do not possess the necessary knowledge to facilitate transactions on their own, brokers, or agents/intermediaries, will be used. Brokered markets include all exchanges where listed instruments are traded, as well as markets for non-listed assets such as real estate.

Understanding a brokered market

Brokered markets are the norm for most transactions, which can span the range from an investor selling 100 shares of a blue chip stock or a billionaire who wishes to buy a factory in a foreign country. In the former case, either the investor may sell his or her shares through a broker at a full-service brokerage, or online through a discount brokerage; a brokered market is used in either case, since the trade will be executed on a stock exchange. In the latter case, the broker would most likely be a specialist with in-depth knowledge of the country and the assets for sale therein.

Example of a brokered market

Let's say a couple is looking to purchase their first home. They end up deciding on an area that is up and coming and fits within their budget. The couple will seek out and hire a real estate agent that is familiar with the area. The agent will learn about the desires of the couple for the home purchase, and then set about lining up showings of available homes.

Once the couple decide on the place they want to purchase, they will submit an offer to their agent, which the agent will in turn show the offer to the seller's agent. If both sides agree to the price and terms, the transaction is made. The real estate agents brokered the trade and will receive a commission for their effort.

Top10 best forex market maker brokers 2021 list

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Are you looking for the best forex market maker brokers of 2021? We can help you to find out which of these to open your trading account with.

Here’s the list you are looking for.

Since a broker market maker style artificially creates a market (for you to trade in), in many cases the broker themselves are the counterpart of your order. We believe that one of the most important characteristics for a good market maker broker is transparency.

In this regard then, we believe that the best choices can be made by choosing from some of the most famous and reputable forex brokers. These are brokers that, more than others, have a lot to lose in the event of incorrect or unclear behaviour.

That, and your positive trading experience, are the reasons behind our choices.

Discover now our top 10 of the best market maker brokers for forex of 2021.

Best forex market makers brokers of 2021

Here’s our list of market maker forex brokers.

1. Avatrade

Avatrade was founded and currently has its headquarters in dublin, ireland. Avatrade specializes in forex trading but, like all brokers now, and not just market makers, it also offers a wide range of cfds. Through the well-regulated avatrade, you can also benefit from the choice of having fixed spreads. This is something that only a few top forex brokers tend to offer.

Trading with the broker takes place through MT4, MT5, and webtrader with the fixed spread mentioned starting at 1.3 pips on forex markets. There are also a number of account types available to appeal to every type of trader. Their availability will vary based on your region but a spread betting account and an options trading account are typically available. The avatrade minimum deposit of just $100 across the board also helps to ensure that forex trading with this broker remains accessible and within budget for all.

2. Forex.Com

Forex.Com is part of the great american holding company gain capital, a leading provider of online trading services, listed on the NYSE since 2010. Forex.Com, for all intents and purposes, is the trade name of gain capital UK.

They are a global presence around the world as far as forex brokers go with regulatory oversight in place within the US, australia, europe, and singapore that encompasses some of the most trusted bodies in the sector like cysec, and ASIC. As a trader you can look forward to trading with competitive spreads starting from 0.8 pips on a wide range of markets with fixed spreads only offered on commodities. Trading also takes place on the familiar and trustworthy MT4, MT5, and webtrader platforms. The minimum deposit for trading starts from $50 and you can choose between a standard, commission-based, or DMA account type depending on your needs.

3. IG markets

A famous british broker, based in london, IG markets can boast of being active since 1974, initially as a spread betting broker. In the following years IG markets has expanded in market maker forex trading and CFD trading. They now offer a huge variety in terms of trading instruments with more than 16,000 cfds available. Most of these are as shares in top global companies. There are also more than 90 forex pairs available.

The spread on trading with IG markets also remains highly competitive with a starting point of just 0.6pips. Beyond the traditionally available markets, IG also offers vanilla options and barriers for trading. Barriers are low-risk leveraged instruments. In all, there is something to suit new and experienced traders here. You can fund your account with a $300 minimum deposit and DMA and CFD account types are available. All trading goes through the MT4 platform.

Metatrader 4

MT4 is rightfully considered the best trading platform among amateurs and professionals.

30 indicators available

Supports 9 time frames

Beginner friendly

Single thread strategy tester

Locking option

It offers a perfect combination of convenience and functionality. MT4 is the industry’s standard for online trading.

* macos catalina and newer versions are not compatible with the metatrader trading platform. Traders who have already upgraded their systems are advised to use one of the following options:

Add metatrader web

Use virtualization software: parallels or wine

Install windows on mac as a second OS

Download metatrader 4 to enjoy trading opportunities:

Webtrader
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Macos
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MT4 multiterminal is an MT4 feature, which allows you to use several accounts at the same time with no need to re-login.

This feature was designed specifically for traders who use several accounts, and for investment managers who manage multiple investment accounts.

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Registered by the financial services authority (FSA) of saint vincent and the grenadines, registration no. 22567 IBC 2015. Amarkets is a member of the financial commission, an independent external dispute resolution (EDR) organization. Besides dispute resolution services, the financial commission protects traders' interests, providing an insurance for up to €20,000 per case.

Risk warning: trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss of some or all of your investment. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. Please note that amarkets does not provide services to citizens and residents in the following countries.

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Dealer market

What is a dealer market?

A dealer market is a financial market mechanism wherein multiple dealers post prices at which they will buy or sell a specific security or instrument. In a dealer market, a dealer – who is designated as a “market maker” – provides liquidity and transparency by electronically displaying the prices at which it is willing to make a market in a security, indicating both the price at which it will buy the security (the “bid” price) and the price at which it will sell the security (the “offer” price). Bonds and foreign exchanges trade primarily in dealer markets, while stock trading on the nasdaq is a prime example of an equity dealer market.

Key takeaways

A dealer market is a transparent financial market mechanism in which multiple dealers post the prices they are willing to buy or sell a specific security.

Bonds and foreign exchanges trade primarily in dealer markets, while stock exchanges like the nasdaq operate as equity dealer markets.

Notably, dealer markets stake the capital of a dealer to provide liquidity to investors and remove the middle man, the broker, from transactions.

How dealer markets work

A market maker in a dealer market stakes his or her own capital to provide liquidity to investors. The primary mode of risk control for the market maker is, therefore, the use of the bid-ask spread, which represents a tangible cost to investors.

For example, if dealer A has ample inventory of wisewidget co. Stock – which is quoted in the market by other market makers at $10 / $10.05 – and wishes to offload some of its holdings, it can post its bid-ask quote as $9.98 / $10.03. Rational investors looking to buy wisewidget co. Would then take dealer A’s offer price of $10.03 since it is 2 cents cheaper than the $10.05 price at which it is offered by other market makers. Conversely, investors looking to sell wisewidget co. Stock would have little incentive to “hit the bid” of $9.98 posted by dealer A, since it is 2 cents less than the $10 price that other dealers are willing to pay for the stock.

A dealer market differs from an auction market primarily in this multiple market maker aspect. In an auction market, a single specialist in a centralized location (think of the trading floor on the new york stock exchange, for instance) facilitates trading and liquidity by matching buyers and sellers for a specific security.

Market order definition

What is a market order?

A market order is a request by an investor – usually made through a broker or brokerage service – to buy or sell a security at the best available price in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade and provides the most likely method of getting in or out of a trade quickly. For many large-cap liquid stocks, market orders fill nearly instantaneously.

Market order

The basics of market orders

A market order is considered the most basic of all orders. It is meant to be executed as quickly as possible at the current asking price for a security. That is why certain brokerages include trading applications with a buy/sell button. Hitting this button generally executes a market order. In most cases, market orders incur the lowest commissions of any order type, as they require very little work from either a broker.

Key takeaways

A market order is a request by an investor to buy or sell a security.

It is well-suited for high volume securities such as large-cap stocks, futures or etfs.

A trader will execute a market order when he or she is willing to buy at the asking price or sell at the bid price.

When to use a market order

Market orders are well-suited for securities that are traded in very high volumes such as large-cap stocks, futures or etfs. For example, market orders for the E-mini S&P or a stock such as microsoft tend to fill very rapidly without issue.

It’s a different story for stocks with low floats and/or very little average daily volume. Because these stocks are thinly traded, the bid-ask spreads tend to be wide. As a result, market orders sometimes get filled slowly for these securities, and often at unexpected prices that lead to meaningful trading costs.

Market order slippage

Any time a trader seeks to execute a market order, this means the trader is willing to buy at the asking price or sell at the bid price. Thus, the person executing a market order is immediately giving up the bid-ask spread.

For this reason, it’s sometimes a good idea to look closely at the bid-ask spread before placing a market order – especially for thinly traded securities. Failure to do so may result in very high costs. This is doubly important for individuals who trade frequently or anyone utilizing an automated trading system.

Market order versus limit order

Market orders are the most basic buy and sell trades. Limit orders, on the other hand, allow investors to have more control over the bid or sell price. This is done by setting an acceptable maximum acceptable purchase price amount or an acceptable minimum acceptable sales price.

Limit orders are good for trading securities that are trading thinly, are highly volatile or have wider bid-ask spreads.

Real world example of a market order

Say the bid-ask prices for shares of excellent industries are $18.50 and $20, respectively, with 100 shares available at the ask. If a trader places a market order to buy 500 shares, the first 100 will execute at $20.

The next 400, however, fill at the best asking price for sellers of the next 400 shares. If the stock is very thinly traded, the next 400 shares might be executed at $22 or more. This is precisely why it’s a good idea to use limit orders for these types of securities.

The trade-off is that market orders fill at a price dictated by the market as opposed to limit or stop orders, which provide traders more control. Using market orders can sometimes lead to unintended, and in some cases, significant costs.

Make a market

What is make a market?

Make a market is an action whereby a dealer stands by ready, willing, and able to buy or sell a particular security at the quoted bid and ask price. Being able to make a market allows the brokerage to fill customer orders out of the brokerage inventory, which is faster and easier than filling orders from other brokerages or investors.

Key takeaways

To make a market means to be willing to trade the securities of a specific group of companies to broker-dealer firms that are members of a particular exchange.

Market makers display buy and sell quotes for a guaranteed number of shares, take orders from buyers, and then sell shares from their inventory to complete the order.

Firms that make markets have to hold on to large volumes of securities at all times so that they can always satisfy investor demand, quickly, and at competitive prices.

Being a market maker requires a higher risk tolerance than a conventional brokerage, because of needing to hold large amounts of a security at any given time.

Understanding make a market

Market makers are the ones that make markets. Market makers are "market participants" or member firms of an exchange. They buy and sell securities at prices displayed in an exchange’s trading system for their own accounts—called principal trades—and for customer accounts—called agency trades. Market makers can enter and adjust quotes to buy or sell, enter, and execute orders, and clear those orders.

Market makers exist under rules created by stock exchanges approved by a securities regulator. In the U.S., the securities and exchange commission (SEC) is the main regulator of the exchanges. Market maker rights and responsibilities vary by exchange and the market within an exchange such as equities or options.

Market makers make money via the spread on each security they cover—namely, the difference between the bid and ask price; they also typically charge investors fees to use their services.

How a market maker works

In order to make a market, a brokerage firm must be willing to hold a disproportionately large amount of a given security so it can satisfy a high volume of market orders in a matter of seconds at competitive prices. In contrast to a conventional brokerage, being a market maker requires a higher risk tolerance because of the high amounts of a given security that a market maker must hold.

Market makers promote market efficiency by keeping markets liquid. To ensure impartiality for their clients, brokerage houses that function as market makers are legally required to separate their market-making activities from their brokerage sales operations.

Market makers smoothe out the process of trading by making it easier for investors and traders to buy and sell securities; no market makers could mean not enough transactions and not enough trading going on to keep the process fluid.

Market makers facilitate liquidity

If investors are selling, market makers are obligated to keep buying, and vice versa. They are supposed to take the opposite side of whatever trades are being conducted at any given point in time. As such, market makers satisfy the market demand for securities and facilitate their circulation. The NASDAQ, for example, relies on market makers within its network to ensure efficient trading.

Market makers profit through the market maker spread, not from whether a security goes up or down. They are supposed to buy or sell securities according to what kind of trades are being placed, not according to whether they think prices will go up or down.

A market broker

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Metatrader 4

MT4 is rightfully considered the best trading platform among amateurs and professionals.

30 indicators available

Supports 9 time frames

Beginner friendly

Single thread strategy tester

Locking option

It offers a perfect combination of convenience and functionality. MT4 is the industry’s standard for online trading.

* macos catalina and newer versions are not compatible with the metatrader trading platform. Traders who have already upgraded their systems are advised to use one of the following options:

Add metatrader web

Use virtualization software: parallels or wine

Install windows on mac as a second OS

Download metatrader 4 to enjoy trading opportunities:

Webtrader
run in browser

Windows
download

Macos
download

Iphone/ipad
download

Android
download

MT4 multiterminal is an MT4 feature, which allows you to use several accounts at the same time with no need to re-login.

This feature was designed specifically for traders who use several accounts, and for investment managers who manage multiple investment accounts.

Deposit funds using any of the available payment methods

English

Deutsch

Español

Português

Türkçe

Bahasa indonesia

Bahasa melayu

Français

Italiano

Українська

Русский

فارسی

العربية‎

Қазақ тілі

हिन्दी

ไทย

中文 (中国)

한국어

Tiếng việt

Here you will find information on how we use and store cookies.
By continuing to browse this website, you agree to our cookie policy.

Market maker brokers: is it bad or illegal to be a market maker?

One of the luckscout followers, asked me a question that made me write this post. As we always talk against market maker brokers, most traders think it is too bad to be a market maker and it can be even illegal. They wonder if market maker brokers are really bad why there are still too many of them and why it is not illegal to be a market maker.

Before I tell you whether it is bad to be a market maker or not, first I have to explain what a market maker is.

What is a market maker?

There are some complicated definitions over the internet for this. But I am going to make it as simple as possible.

I am a market maker if you buy and sell currencies with me. To do that you have to contact me and ask for the prices and fees. For example you want to pay swiss franc and buy $1000 USD. I tell you that I charge you 900 CHF to give you $1000 USD. You agree and pay me 900 CHF and get your $1000 USD. I hold your 900 CHF until someone else comes and pays another currency to buy CHF from me.

Who is the market here?

I am the market, because you deal with me, not anybody else. So I am the market maker here, because the market is me. I give you the price, I buy from you or sell to you.

Why am I doing this?

I do it for profit. First of all, I charge you a service fee or commission whenever you buy or sell. Second, I make profit from the difference of the bid and ask price (buy and sell prices) which is the spread. Above all, the price I offer you is determined by me. Although it can be too close to the real market price, but it is different because I am free to offer you my own price. Just refer to few different banks in your city and ask for the USD price. Although their prices are so close to each other, but they are different and are not the same. Also the spread they charge you is different.

If the value of the currencies that I hold goes up, I will make a lot of profit, and visa versa. Therefore, I like the value of the currencies that I receive from you to go up, and the value of the currencies that I sell to you to go down. If the opposite happens, I lose money. In the above example, I took 900 CHF from you and gave you $1000 USD. If you come back the next day to give me your $1000 USD and receive your 900 CHF back while the values are changed and $1000 USD costs 800 CHF, then 100 CHF will be my profit because if you give me your $1000 USD I will give you 800 CHF only.

So getting different currencies from people and holding them can be profitable or risky for me.

Is it bad to be a market maker?

Absolutely not. I am offering a service that you need. We are both benefited from this service. I make profit and you get the currency you want. Also if you think the prices I offer or the fees I charge are not fair enough, you can refer to another market maker or dealer. It is your own choice. However, as I have too many competitors, I have to offer competitive prices and fees to attract more customers.

This is exactly what market maker brokers do, with this difference that they offer their service online and you can deal with them through a software which is called trading platform.

It is not bad by itself to be a market maker. It is a service that people need. However, when a market maker tries to cheat its clients to make more profit or prevent them from making profit, it becomes a bad market maker. Sometimes they do this only because they want to make more money (greed). Sometimes they do it because they are afraid of losing money (fear).

Online market maker brokers can deal with thousands of traders through the internet. As over 95% of the traders lose on their own, market maker brokers make profit automatically without having to cheat their clients. However, sometimes they get greedy and make some tricks that cause their clients to lose faster and easier (e.G. Stop loss hunting). Sometimes some other clients make a reasonable amount of profit which is the broker’s loss, so that brokers have to cheat the other clients to become able to pay for the profit the other clients have made.

These actions make the clients unhappy.

Online market maker brokers cheat because they don’t know how to manage and balance between the clients losses and gains. They only make money through the clients losses and this makes them vulnerable to possible big losses when the other clients make profit.

Strong liquidity providers are also market maker, but they don’t cheat their clients. The reason is that liquidity providing is not the only source of income they have. They make money through too many other services they offer. They also participate in too many different investments. The money that floods in their company through liquidity providing for retail traders will not be just hold by them. They use it to offer the other services to the other clients like loans and mortgages, or participating in different investment opportunities. So they make money with the traders money. Therefore, they don’t care even if some traders make profit, because they have already used the money to make profit through the other ways. And of course they also make money when the other traders lose money.

This is how a strong liquidity provider can manage and balance between the losses and gains and remains profitable almost all the time and keep on offering its service. This is what market maker brokers don’t do, don’t know how to do, or are not big enough to do. That is why they have to balance through cheating the clients.

If you make money while trading with a strong liquidity provider, they not only don’t cheat you to make that you lose, but also they appreciate your business because when you take a position, your money will be added to their treasury, and so they can use it instantly to offer the other services or invest with the other companies. They have too many specialists who manage these affairs for them. But most retail market maker brokers cannot afford to do that.

So, it is neither bad nor illegal to be a market maker. It is bad and illegal when a market maker cheats its clients.

Learn more about market maker and ECN/STP brokers:

Market maker brokers hate me

Your forex broker has a very important role in your success. If you don’t choose a proper broker, you will be in trouble. There are two kinds of brokers:

Unfortunately most traders know nothing about these two kinds of brokers.

When you open an account with a market maker broker, your trades (positions) will not leave the broker’s computers. I mean a market maker broker does not transfer your orders to anywhere out of the brokerage computers and servers. For example when you buy EUR against USD, you are doing it inside the brokerage, and the forex world knows nothing about your position. In fact, you are trading with the broker, not in the forex world. If EUR goes up against USD, the broker has to pay your profit. If EUR goes down against USD and you close your position, the money that is deducted from your account will be in the broker’s pocket.

In other words, trading through a market maker broker is like demo trading. Your orders will not go anywhere, and there is no real order with the real currency market. You just see some numbers that go up and down on your computer screen, and it is the broker at the other side which is waiting for you to lose. Of course in demo trading your don’t risk your real money, but in live trading with a market maker broker, you risk your money. Therefore, trading through a market maker broker is a demo trading that risks your real money.

What problems trading with a market maker broker will have?

In most cases you will have no problems as long as you are not profitable and you lose money. You will have problems, if you make profit. Making profit takes your account on the broker’s radar screen. A market maker broker doesn’t want you to win, because they don’t want to pay your profit. Your profit is their loss. With some market maker brokers, even when you are not profitable yet and you lose money, they try to make you lose more. They do it through different methods. They know how to do it. I don’t want to talk about these methods in this article. I have seen some articles about it on luckscout:

Sometimes they can not stop you from making profit and the profits will be added to your account, but you will have problems when you want to withdraw your money. They either make some excuses not to allow you to withdraw, or they simply don’t send your money.

The last thing they do with a profitable trader is that they ask him to withdraw his whole money and close his account. If you ask about the reason, they won’t give you any answer. Or they give you a ridiculous answer. By the way, you have to close your account and go, because you make money and this is what they don’t like. You are a troublesome client for them.

What are the ECN/STP brokers?

They are the brokers that route your orders into the forex international market. Their platforms are connected to the big international banks, known as “liquidity providers”. Many of the good ECN/STP brokers are connected to several liquidity providers at the same time, and when you want to take a position they route your order to the liquidity provider that is offering the best price at that moment. This will even lower the probability of any trick and cheating by the liquidity providers, because your orders will be distributed among several liquidity providers, and so they will not have the chance to know “you” as a profitable trader.

So if you want to open a real account, do it with a good ECN/STP broker whose platform is connected to several good and strong liquidity providers.

Also note that some brokers claim to be ECN/STP, but in fact they are not connected to the good and strong liquidity providers. They are connected to another market maker broker. It means they route your orders to a market maker broker. They are ECN/STP electronically and technically (because they transfer the orders out of their own brokerage and computers), but they are market maker brokers in reality, because they transfer the orders to a market maker forex broker. The worst thing happens when both of these brokers belong to the same company.

Solution

As I mentioned about, the best solution for the retail broker is working with a true and real ECN/STP broker that routes your orders to the real liquidity providers. However, there is a better solution which is trading through a bank account. The problem is, as the bank don’t offer leveraged accounts, you have to have a reasonably big trading bank account to make reasonable profit.

If you can’t open such a bank account now, you can raise the money through trading the small accounts with true and real ECN/STP brokers for now, until you become able to open a trading bank account. To do that, you have to have a proper trading and living strategy: trading strategies don’t work if you don’t choose the right living strategy

so, let's see, what we have: A brokered market involves agents or intermediaries in purchase and sale transactions to facilitate price discovery and transacting the execution. At a market broker