The Forex Market is still an active market in spite of the Global Financial Crisis and the Recession. As usual, most of the forex traders would discuss among themselves about the poor fundamental news and the impact of those news on the related currency pairs. Busy with daily trading activities some Forex Traders may not realize there are more and more forex scams surfacing in the forex market. Some of these scams are not publicized and the Forex Brokers get away with it unscratched.
Forex Scams
Recently, there was a forex scam that attracted a lot of attention because the Introducing Broker reported it in his forum, the Forexindo and also to Forex Peace Army.
The modus operandi of the widely reported forex scam incident was as follows:
Some of Forexindo traders are scammed by a casino-like bucketshop forex broker. First they tried to cheat by not executing the order, and then refuse to pay rebate to the IB, also they fired IB and client without notice and logical reason.
Notes: IB* is Introducing Broker
Sacking of Introducing Brokers
First and foremost, let’s define the word Introducing Brokers. The definition by the Free Dictionary is as follows:
Introducing broker (IB). An introducing broker is a broker-dealer that contracts with a clearing firm to handle the execution and settlement of orders that the introducing firm receives from its clients or its own trading desk to buy and sell securities.
The clearing firm, not the introducing broker, receives payments and securities from the clients and handles record-keeping. The introducing broker, who earns a commission on the transaction, typically pays a fee for each trade and interest on margin loans the clearing firms make to the clients it introduces.
Introducing Brokers / Affiliates of Forex Brokers are paid commissions out of the spread earned by the Forex Brokers and the primary function of these Introducing Brokers is to service their clients and to assist them in all matters related to forex trading.
Forex Brokers are not spared by the recession and unfortunately, Forex Brokers have not been included in the bailout beneficiary list. They are equally affected and in order to survive Forex Brokers are technically executing retrenchment exercise. They could not retrench their Dealers because the Dealers is a very important marketing staff and the income generating group of the Brokerage.
The best target of the costs reduction exercise is the Introducing Brokers and Affiliates. The services of Introducing Brokers and Affiliates can easily be terminated within a short notice period and the saving by sacking them could amount to hundreds of thousand dollars per month.
No interference by Introducing Brokers
Normally, Forex Traders, who are clients of Introducing Brokers / Affiliates, would ask the assistance of the Introducing Brokers to solve their transaction problems with the Forex Brokers. Without the Introducing Brokers / Affiliates, Forex Brokers with bad intentions could easily ignore complaints from their clients. Thus, by sacking the Introducing Brokers, Forex Brokers can continue to scam their clients and some of these scams will go unnoticed.
Unscrupulous Forex Brokers could achieve their determination to survive through the recession by costs cutting measures in sacking their Introducing Brokers and by scamming their clients.
