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 What is the main source of earnings for FOREX market makers?
 
 4/18/2007 8:19:58 AM
User is offlinefrancesco
66 posts
www.tescari.com




What is the main source of earnings for FOREX market makers?
The major source of earnings for market makers is the spread between the bid and the ask prices. Many Trading Platforms, for instance, maintain neutrailty regarding the direction of any or all deals made by its traders; it earns its income from the spread.
 4/19/2007 7:35:29 AM
User is offlineBrianTran
155 posts
5th




Re: What is the main source of earnings for FOREX market makers?
This is a very common practice for a long time. Just like what the specialists in NYSE do, while making market, they make the spread. On the retail level, the spread can be obscene. Imagine, once a day, a trader tries to trade for a 20 pip profit and the spread is 3 pip. If he wins all three he gets 60 pips - 18 pips (3pips x 3 trades x 2 round trip). So even if he wins all he still needs have a higher percentage of wins consistently to stay positive in gains.

Little by little, this is change. More and more brokers are moving toward commission-based earnings, letting the spread go naturally in the interbank markets. They don't artificially create the spread for the purpose of making the spread. So the commission-based brokers are giving a better service to their customers by allowing them to see the real rates in the forex market.
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