How Brokers Find Their Customers
You can see the brokers ads everywhere, from the search engines to forums, personal blogs and trading related sites. Brokers spend so much money on advertising. According to the advertising manager of a trading related site, brokers advertise on trading related sites at any price.
Brokers always request to place their links or banners on our site too. They usually offer to pay a lot of money to do that, but we never agreed to place any ads on our site, specially when it comes to brokers because it is too hard to trust them.
In addition to advertising related purposes, brokers email and invite us to become their affiliate or introducing broker and refer our website followers to them. When you refer to their websites as a trader, you see nothing but the best and most fascinating offers like low spread, fast order execution, connecting to several liquidity providers and… . But if they email to invite you to become their introducing broker, you will find out that what they claim on their websites is not true.
For example, this is one the emails we have received from a broker recently:
There is nothing wrong with advertising or emailing the others and sending them a partnership offer. This is how things work over the Internet. You have to build a network to promote your business or product.
However, what made me write this post was the contradictions the above email has with what they are advertising on their website to attract people like you to open a live account with them.
What do you understand from the above email?
First, it says their affiliate program offers commission fees up to 80% of the spread.
It means if we become their affiliate and then refer you to them and you open a live account with them, then 80% of the spread you pay in your trades will be paid to us. For example, if you take a GBP/JPY long position and pay a 5 pips spread, we earn 4 pips.
Still there is nothing wrong with this, because it is their own business to compensate their affiliates in the way they want. However, there is a fact behind this offer:
- They are the one who determines the spread, not the market.
- They have to increase the spread to make more money.
Although they claim to be an ECN/STP broker on their website, the above email reveals that they are not, because they have full control over the spread, so that they can pay us 80% of it.
The other thing they are offering is that in addition to 80% of the spread, they pay a percentage from every deposit our referrals make. It means, if you open an account and deposit $10,000 in it as our referral, a percentage of it will be ours as your referrer. Let’s say they pay us 5% of your deposits, then we earn $500 from your $10,000 account. Now, if you load your account again, we will have another 5% while we are making 80% from the spread as well. (5% of your deposit was just an example by me to show you how it works. They pay a much bigger share from your deposits if we agree to become their affiliate.)
This is another reason that they are market maker. Because they can pay us a percentage from your deposits only when your entire money is in their own pocket. If they were a true ECN/STP, they couldn’t pay us any percentage from your deposits, because your money had to be deposited in the account they have with the liquidity providers, and it is the liquidity provider who has access to your money after this.
Now, if we become their affiliate and want to refer our website followers to them to open a live account, we have to hide the truth and pretend that we are referring our followers to a true ECN/STP broker. Our followers will never know that we have a share from the money they deposit in their trading account and also from the spread.
It will make millions of dollars for us, but from the money you lose, not the profit you make.
We receive so many emails like this from different brokers from all over the world. We are not trying to sabotage any business or company here. As you see we covered the company name and website address on the above email. We are just trying to open your eyes on some facts that most websites don’t tell you because they are also after making money out of your trades and losses. Unfortunately it is getting worse every day and it is becoming harder to trust the brokers and their affiliates or introducing brokers. Be careful!
Good luck 🙂