The $100 Billion Forex Hustle via FT

With the backdrop of the planned FXCM IPO tomorrow and pending Gain Capital IPO – we ran into a good article from the ft.com/alphaville blog pointed out by Barry Ritholz on the Big Picture Blog today, mirroring what we’ve been saying for years – that retail Forex trading is a scam. (they use slightly more polite language – a hustle)

The $100bn FX hustle – click here to read

With these big Forex houses going public, we get a glimpse into what a cash cow retail forex trading is;  and how they make their money.  In essence, they sell their product to you at a retail price, and buy it at a wholesale price – booking the difference. Now, there is nothing wrong with that, per se. After all, that is how the Walmart’s of the world make their money. (the FX houses have none of the risk of inventory or the like, however- as they simultanesouly buy at wholesale and sell at retail, and only when their is someone to buy their product)

The problem as far as we’re concerned, is that this is illegal in the futures industry. We can’t sell you a Corn futures contract at an inflated price, then simultaneously buy the same contract at the exchange for less – booking the difference. We would be arrested for fraud. But it is ok in forex??  (somehow that just doesn’t seem right)

Anyway, the article is worth a read. The $100bn FX hustle by Paul Murphy – click here to read

One comment

  1. The majority of our revenue is derived from our activities as a market-maker to our retail customers, where we act as the counter party to our customers’ trades.i appreciate on this phase and the post was so impressive .thank u…………..
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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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