If the broker claims that you are trading prices directly sourced from their liquidity providers, can they provide you with EVIDENCE?
Retail forex and CFD trading platforms should be able to clearly explain how it determines their prices, including:
They should set the pricing and spreads via price competition from multiple liquidity providers (LPs).
But that’s not all.
Ask your broker how often they review their price providers.
Brokers should be comparing the pricing provided by their liquidity providers against external price sources, both in real-time for actual prices and at least on a weekly basis for average prices.
This helps to ensure that there aren’t significant deviations from the “market prices” in the pricing quoted to customers.
In cases where the price is outside acceptable predetermined parameters, the broker should have systems in place where it is alerted immediately so it can investigate and take immediate action.
Make sure to ask what these “acceptable predetermined parameters” are.
Lastly, the forex broker should be able to provide you a written policy clearly explaining its price methodology, on how it opens and closes CFDs (or rolling spot FX contracts) honestly and fairly.
The policy should also cover any circumstances under which its prices will deviate from its stated pricing methodology.
If the broker can’t provide you their pricing methodology, look for one who can.
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