What are the Right Questions to Ask Before Trading?


B. Intitutions, Brokers or Affiliate IBs to do & not do business with

To know which of the institutions and or brokers duly authorized, verified registration and accredited members with the appropriate governing regulatory agencies including exchanges that they deal with both Foreign and local. Broker companies that would serve client's best interest on funds held is just one of the most important criteria to ask and looked into carefully.
 
 b1. What are the company policies on transparency,regulatory compliances & procedures does the institution meets?
 
 Having the proper licenses and appropriate reporting procedures should always be updated and followed making certain that companies are singled out to be compliant and in good standing particularly when institutions are exchange and clearing members in their respective fields.

 * An excellent example is a company that deals with multiple instruments or financial products to trade such as Foreign Exchange, Stock equities & Indices, CFDs, Commodity & Financial futures, just to name a few. Forex Dealers that are actual registered members that meets Regulatory deposit - maintaining requirements while at the same time are authorized and provides clearing services that guarantees full settlement of transactions are duly fulfilled. As always this is where compnaies and institutions offer these products to their client base are made transparent. There is always a need to verify companies / broker/ dealers if they meet or are licensed as a market maker with a net capital requirement to be maintained. Other companies who could not meet such US requirements in 2009 had to move their business outside of the US jurisdiction. However, other regulatory agencies in other countries still has to check and verify the companies OTC and online transactions. Check FINRA - RULES & REGULATIONS ON MARKET MAKERS.
 
 * The types of broker licenses that are either guaranteed or non-guaranteed as these companies should be able to provide the transparency as to the type of contract agreements that they are authorized to do so. Such as an Omnibus trading agreement with affiliates, foreign and local  companies that offers trading in the global international markets including the 3 major US, Asia and European markets.as an introducing brokers, or a white label brand which utilizes the trading platforms of a duly registered exchange member. This is because registered brokers and companies nowadays simply offers single trading accounts for most of the global products traded.

Note: Foreign Institutions and companies not duly registered in the US exchanges and outside the jurisdiction of the US Regulatory commission like the CFTC are not authorized to accept US investors to trade due to part and partial of the "Arbitration" requirements in the event of legal compromises arising from questionable trading activity. 

Reference: How Big is the Trading Volume of Retail FX?  And what it means for investors trading experience. 

                   General Information & Frequently Asked Questions *


b2. No such 'Conflicts of Interest' should exist between company propriatary trading and overall clients trading  activities.

Transparency on operational procedures and foreign affiliations as required by each investor to know; and not on a need to know basis. Investors privilege for regular and high networth account holders that may or maynot affect trading activities is likewise an issue to be discussed openly.

b3. On brokers and / or Affiliates / Introducing Brokers / fund traders / managers who offers their services to openly manage to trade in behalf of their clients needs to be a real authority and has the legal representations to do. Be cautious of information or marketing statements such as 'having interbank signals or sentiments available in their trading as an advantage'. Just a ploy for newbies to join and trade with often found in newer websites with NO TRANSPARENCY. No Interbanks or any bank representative / FX dealers will provide or sell to brokers at a premium level to their trading clients such information especially during actual trading sessions. This would be a clear violation of insider trading regulations and code of conduct. Be real careful!  

 

 C. On Actual Trading

 1. Stocks , Indices & Foreign Exchange Trading
       For Main-Street Investors:

What options are open to expand trading oppurtunities not available in the local stock markets. Example: Having access to higher liquidity and volume in the global market.

    2. What would prevent brokers to trade internationally with clients funds as proprietary trading accounts? Example: (Names Omitted) A US Stock, Futures & Forex brokers / a prominent member of an exchange that fund accounts had been deposited in another segregated account in US government treasuries & securities that had access to funds provided as "trading credit facilities" to trade the markets.  An obvious red flag, which the CFTC have discovered and filed the necessary charges. That company is now closed. What is the assurance that this won't happen again? That is why, transparency and due diligence is a must know and not a need to know basis.

    3. Confirmation of Oder flows: For US & Foreign based trading instruments / Counter-party trading confirmation for Transparency, Regulatory Reporting & Submission Requirement for Online transactions from both foreign counter-party and institutions with existing registered business location / address in the country where these companies operate.

Confirmation and keeping track through an "Electronic Communications Network" or ECN and the "Straight Through Process" or STP that goes through each counter-party banks where all orders are cleared by the authorized / registered clearing member of the exchange. Otherwise, such trade orders placed must be confirmed /verifiable; if NOT then it may just be fitered out of the system. A must know!

 4. On Price Qoutes / Online Trading / Dealing

Knowing how your price dealing is done either on equities and or Foreign Currency Trading could affect your trading. A MUST read information sharing.

Every Investor/traders need to know & be aware of trading practices online FX trading price dealing and accuracy of broker/dealers/market-makers and other institutions. Although, this is a known fact among more experienced traders. Strategists do have the trading solutions for such practices ONLY when certain strategies can be properly applied. This is what MegaTrade101 emphasizes on for all self-directed investors and traders alike.

In Reference to the FXView resource information: http://thefxview.com/2014/01/04/what-is-asymmetric-slippage/

 

FYI - Retail Trading Platforms does not neccessarily have the same number of qualified liquidity providers compared with trading through the real Interbank markets. As the Thomson-Reuters dealing 3000 (FX) system or an EBS, Bloomberg, Currenex Terminal Trading systems are an example applied in Interbank FX markets has the transparency, price accuracy and lowest latency (just to name a few features) of knowing exactly name of qualified banks & other qualified liquidity providers participanting in the process. 

As to what bid and asking prices are being quoted, marked in the market on the exact time and date executed across the major global markets in real time. There are other equally professional systems not listed here that are used on the Interbank market. And not what most brokers would say that trading in line with big banks is something one should really think about.