Brokers take client pricing for granted. Marketing and sales teams push companies to be competitive, leading to the replication of the spreads that are then displayed to clients. As the majority of the market follows the B-Book model, the retail forex and contracts for differences (CFDs) industry rarely pays close attention to the prices it offers to clients compared to the actual market rates.
When markets are volatile, and most clients lose, the spreads are not as relevant. In such scenarios, trading volumes are high, and brokers try to cut down on competition with thin spreads. These thin spreads create a race to the bottom with spreads and affiliate rebates, among other things.
However, when markets are more range-bound, the thin spreads can lead to disastrous consequences. These devastating consequences have been seen in the past 12 months. Gold is the most glaring example of this.
Brokers take client pricing for granted. Marketing and sales teams push companies to be competitive, leading to the replication of the spreads that are then displayed to clients. As the majority of the market follows the B-Book model, the retail forex and contracts for differences (CFDs) industry rarely pays close attention to the prices it offers to clients compared to the actual market rates.
When markets are volatile, and most clients lose, the spreads are not as relevant. In such scenarios, trading volumes are high, and brokers try to cut down on competition with thin spreads. These thin spreads create a race to the bottom with spreads and affiliate rebates, among other things.
However, when markets are more range-bound, the thin spreads can lead to disastrous consequences. These devastating consequences have been seen in the past 12 months. Gold is the most glaring example of this.