Are there safeguards to protect retail forex traders against forex dealers' conflicts of interest?

External question — Personal Finance Stack Exchange Author: Flux Original post: https://money.stackexchange.com/questions/130653 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have noticed that firms catering to retail forex trading are essentially dealers with a captive audience: their clients. These forex dealers get to set any price they want because they are the only dealer available to their clients. When retail traders want to sell at a high price, the forex dealer wants to buy from them at a low price. When retail traders want to buy at a low price, the forex dealer wants to sell to them at a high price. Retail traders rely on forex dealers to get the best price, but the best price for the forex trader is a bad price for the forex dealer. I am not familiar with the forex market, but it seems that the situation looks grim for the forex trader. They are always trading against a single dealer who gets to control the price, who gets to see all limit orders and stop orders, and who benefits when their clients do not get the best price. This looks terribly rigged. Am I correct in my grim assessment of the retail forex trading? Are there safeguards similar to those of the stock market to protect the retail forex trader? (If answers are country-specific, please answer about the US.)

External answer — Personal Finance Stack Exchange Author: invertedOwlCoding Original post: https://money.stackexchange.com/a/151746 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. EDIT. I must be missing my glasses, NO idea how I found a post ages ago. If reply is not needed, I will delete it. Yes, that is how it is, dealers are after all brokers and this is the retail market. Retail best defense has always been education. Please do however, bear in mind, this is the market access into forex market WITH leverage, and what used to be a very big boys area. (ie, you would need a pretty big account in order to trade. Now people could "trade" with pretty much $100 or so) First cut will be the spread you pay (marked up of course, after what the broker paid for it) and second, depending on the sort of account you are in, you get the commission. At some times, there is also slippage and post trade mark up... In times of market volatility, spreads are naturally widen but that is mostly reflective of the markets and underlying liquidity providers (LP). Here is the interesting part, when spreads widen, it MAY not be your broker widening you, but the underlying LP doing so. Most retail dealers(brokerage) works on A - B book strategy and this will also be reflective of the spread and charges. (for more information please google..) So most of the retail orders will be matched off by itself anyway(mostly the orders are too small to send out as they might be costly, or they would prefer to aggregate them, etc etc), making it a very profitable business as good statistic of retail accounts go to '0' quite quick(without ever seeing the market) due to the nature risk of the business. I find the entire concept of trading very similar to gambling but is glorified as "trading". But it is what is is, just another business to some. Long story short, yes that is the price paid for market access into the forex markets. Not all markets are the same and some are higher value than others, ie NDFs which is amazing how much a retail trader can get his or her hands on these days..

External answer — Personal Finance Stack Exchange Author: Karen Brewer Original post: https://money.stackexchange.com/a/165905 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. You're right, the accessibility of leverage and micro accounts has opened up what used to be an institutional space to just about anyone with $100 and an internet connection. The comparison to gambling is blunt but not far off for many retail traders who jump in without a plan or proper education. That line — “Retail best defense has always been education” is key.