Are market makers safe? - Aussie Stock Forums

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  1. #1

    Default Are market makers safe?

    I have been hearing some horror stories and information based on IG Markets being a market maker.

    Apparently with their market maker CFD's such as the FTSE 100 $1, there is a chance that IG is against you in some trades. I've also heard that when you profit, they lose and visa versa.

    Is this true? I thought there are supposed to be buyers/sellers that you are selling into, and when going short you are borrowing that amount from the broker.

    I don't think I like the idea of this and not being able to see volumes traded further confirms this - then again I could very well be wrong.

    I've looked on the forums regarding IG but have not found information regarding this - however there are things called DMA-CFD's where the broker does not profit or lose from your loss or profit.

    So what is the go with these OTC CFD's? I've just started learning them and this is coming across as little more than a bookmaker for markets...

  2. #2

    Default Re: Are market makers safe?

    Main problem I found with them is the occasional sudden "flash crash" that would occur from time to time and conveniently take out my stops thus handing my cash to the market maker.

    I'm talking about major indices here, not some junior mining stock, and a look at the underlying market revealed no such crash. And the extent of some of those movements would have been mainstream headline news if they had really occurred.

  3. #3

    Default Re: Are market makers safe?

    Fair enough.

    Would I be correct in saying that trading DMA CFD's would now have the broker profit on the losing end of a trade? I would rather sell into a buyer than gamble on the spread and take my prodits from the market maker. That is no different than betting against the house.

    IG do offer DMA CFD's and I have been trading some high profile stocks successfully. Once I saw the buying on the XAO and 200 I went long in MQG (ofcourse this is a demo) for the day. I understand that DMA (Direct Market Access) get sold into an actual buyer and the broker makes the money on the brokerage fees.

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