Can brokers mess with you?

[bcc9274]

I guess it's technically possible for a broker to change the price they are offering you based on your trades, but do they actually do it?

For example, let's say I have two accounts with a broker and open positions for the same pair in those accounts but in opposite directions.
I buy in one account and sell in another.

Can they artificially keep the price a bit lower in the account where I buy and a bit higher in the account where I sell?

I don't think they are required to quote the same rate to all their clients. So they can easily fix the price on per-account basis if they can't find a counter party (or another client) to match the trade.

Does anyone know if this actually happens?

 

[ns1000]

It depends where your broker is based. In the UK (and the EU) they're required to treat customers fairly, which would generally mean they have to offer all customers the same price and size. There's probably nothing to stop them doing this in the US, but realistically is a large, reputable broker going to do this? Firstly, if you can prove they're offering different prices at the same time according to your book, this isn't going to do their reputation any good. More to the point though, unless you're dealing in very large size, they won't even notice your trade going through, let alone monitor your account and second guess which direction you're going to trade in.

 

[minime69]

are we talking FX?

if so, your trade price is pipped to include the brokers commissions. most brokers offer all small client's the same rates if executed via a platform, but if you trade over the phone then they can quote you whatever they want.

 

[bcc9274]

OK, thanks. I just don't know the industry at all, that's why I was asking. It makes sense for them not to care about small amounts.

 

[raysor]

I guess it's technically possible for a broker to change the price they are offering you based on your trades, but do they actually do it?

For example, let's say I have two accounts with a broker and open positions for the same pair in those accounts but in opposite directions.
I buy in one account and sell in another.

Can they artificially keep the price a bit lower in the account where I buy and a bit higher in the account where I sell?

I don't think they are required to quote the same rate to all their clients. So they can easily fix the price on per-account basis if they can't find a counter party (or another client) to match the trade.

Does anyone know if this actually happens?

In the UK, at least, the price is the price. The problem is everything is moving, so what is "the price". Under the SFA rules the broker MUST get the client the best price. This must be the best price, taking into account "like for like" including settlement. The price for 50000 shares is likely to be different to 5000. The price for T+10 is likely to be different to T+3. Then you have the multilateral Trading platforms like CHi-x etc. Also the RPS (retail price systems).
However if you think you have got the "wrong" price your contract note should state the time of dealing to the second and any other conditions. Firstly bargains are randomly sampled in brokers offices for correct prices, and if not, why not. And all the trades are reported to the SE (marks) so there is a means of checking to see if your suspicions are warranted. I would suggest any reputable broking firm would not dare risk anything other than "best " price. Apart from that most brokers have a fair amount of professional pride in doing their best. And of course I am not guaranteeing that 100% brokers are kosher.
How often do you hear a client moaning "why did you pay 71p, I saw them at 70?". Broker "do you want me to cancel the trade?" client "why what are they?" Broker "75-7" Client "Oh, well..um..just thought i'd mention it"!

 

[gooseman]

he wouldn't i think he is asking if the broker can "arb" 2 clients but they get the spread anyway. daft question.

 

[G&C]

When I used to work at IG Markets their software allowed you to ammend the high/low the clients would see plus you could put a weighting on the prices Client A would see compared to Client B. This gave IG a head start should they need to hedge the position.

 

[raysor]

When I used to work at IG Markets their software allowed you to ammend the high/low the clients would see plus you could put a weighting on the prices Client A would see compared to Client B. This gave IG a head start should they need to hedge the position.

Not quite the same, although you could say all the MMs in any stock could all be giving different prices. But I think we are talking about (stock)brokers giving mkt prices and trading at mkt prices.

 

[bcc9274]

Why would you want to do this (just curious?)

I'm not talking about opening two accounts. What if there are two separate accounts owned by two different people that place orders of opposite direction at the same time, will their prices vary (aside from the spread)...

That was the question.

I'm just doing scalping. Started scalping two days ago in a micro account instead of a demo. So I wanted to know if it's likely they would do what I described.

But I guess not.

 

[ns1000]

In the EU any sort of trick like this would be against the FSA rules (treating customers fairly). Any shop caught doing it would be open to fines or being shut down. It's simply not worth it for the vast majority of accounts

 

[chilltrader]

Dont you know?!! = "The broker is your b1tch"

 

[rags2riches]

Dont you know?!! = "The broker is your b1tch"

"Does your phone do this?" **slam**

 

[bcc9274]

In the EU any sort of trick like this would be against the FSA rules (treating customers fairly).

I'm in the states, and here there aren't any laws that state you must offer the same price to all customers. Aside from the discrimination laws, there is nothing preventing a company from asking me and you different prices for the same exact item at the same time. As long as it's not based on race, religion, etc. you can do that.

But a funny thing is a lot of consumers think the opposite.

I do this at my "day job" all the time. In my business, it's called split testing

I do it for other reasons, but the outcome is the same: different people get different prices.