Does Global Prime profit from client losses?
No. Unlike the majority of Forex and CFD providers, we do not profit from client trading losses, nor do we run a B-book. Global Prime is an ‘A-book’ broker, which means we hedge all market risk and therefore don’t stand to gain from client losses.
We utilise the ‘A-book net’ dealing model for small Forex and Metals trades that are below our prime broker minimum in order to reduce minimum ticket fees. It is possible for Global Prime to make a profit on these small forex and metals trades, when a client has made a loss, but only in specific scenarios. These scenarios are incidental and the exception rather than the aim of the A-book net model.
Examples when this can occur are:
- If we accept an order from a client and then hedge that trade at a better price
- If a client opens and closes a small trade, in quick succession, before we hedge it, and this trade closes in a loss.
It is incorrect to say we profit from client losses for several reasons, namely:
- In the case of scenario 1, if there is a loss then it is only over a specific time horizon, i.e. it is an open trade and an unrealised loss, and they could close the trade in a profit.
- In the case of scenario 2, since all market risk is hedged by Global Prime, we do not, in the aggregate, stand to gain or lose from market movements, and our profit is not contingent on clients losses or clients losing.
- We do not profile, classify, or segregate clients into different books or make hedge execution decisions based on client profitability or trading behaviours. This simply means that we are not taking measures to monetize the process by skewing the odds in our favour, i.e. batch hedging of small trades is a fee preventing/cost reducing exercise and is not designed as a profit center.
Spread earnings on CFDs
Index and Commodity CFD products are ‘synthetic index/market tracking derivatives’.
- Unlike Forex and Metals which are traded via a ‘prime broker’, Indices and Commodity CFDs have no central counterparty through which trades are given up and cleared. Because of this, all trades generally go to a single liquidity provider on a per product basis. This means these products are not ECN.
- Global Prime has measures in place (covered on the best execution page) to ensure the prices we receive from our CFD liquidity providers are consistent with other providers, and that our spreads are among the best in the market.
- Global Prime uses ‘non-bank market makers’ and other brokers to price and execute Index and Commodity CFD trades. Global Prime earns a percentage of the spread after hedging costs from these trading counterparties. These counterparties do not run a B-book for Global Prime.