Bloomberg Releases Fed's Secret Bank Data

Federal Reserve Bank

Bloomberg News has released spreadsheets showing daily borrowing totals for 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis. It’s the first time such data have been publicly available in this form.

To download a zip file of the spreadsheets, go to http://bit.ly/Bloomberg-Fed-Data.

For an explanation of the files, see the one labeled “1a Fed Data Roadmap.”

More at Bloomberg News.
 
   

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Posted on December 27, 2011 09:43 by Tom Herod
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Categories: Due Diligence | Huge Balls | Regulation
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Forex Economic Research Sources

Forex economic research

We have updated our Forex Economic Research links. This web page is especially important for new Forex traders because it lists international sources rich with economic data, news, and information that affect Forex trading every day.

Visit our Forex Economic Research links.
 
   

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Posted on August 4, 2011 12:10 by Tom Herod
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Categories: Announcements | Due Diligence | ForexTurtle
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The Psychology of Market Bubbles

Market Psychology

While the history of market bubbles begins with tulip speculation in 1630, scientists are just now beginning to understand what makes our psychology vulnerable to the boom and bust of market cycles.

"Read Montague, a neuroscientist now at Virginia Tech, argues that the urge to speculate is rooted in our mental software. In particular, bubbles seem to depend on a unique human talent called 'fictive learning,' which is the ability to learn from hypothetical scenarios and counterfactual questions."

Read it at The Frontal Cortex.

 
   

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Posted on June 20, 2011 09:56 by Tom Herod
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Categories: Due Diligence | Global Economy
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Primary Metrics for Selecting a Quality Forex Broker

How to decide which forex broker is the best for you

Do brokers really hunt stops? Will my broker trade against me? Will my broker give me really bad fills? These are common questions that new traders have when trying to decide on which broker to open an account with. Choosing a forex broker is a big decision, and in this article we are going to discuss key items to consider when deciding on a broker.

The Dealing Desk Myth

Have you ever heard someone say something like, “Don’t deal with Broker KYZ. They are a dealing desk; they will trade against you and take all your money.” Let’s be clear. Just because a broker does have a dealing desk does not mean that it is engaging in unethical behavior.

If you buy EUR/USD, who is selling it to you? That is a question you need to understand. If your broker has a dealing desk, that means they are dealing you the price that you receive. In other words, if you buy EUR/USD, they are the one selling it to you. This means that your broker is assuming the risk of the position. If you close out the position in profit, they are losing that money, and if you close out the position at a loss, they are making that money.

However, many brokers are now closing the dealing desk and simply passing order through to a liquidity provider. For example, if you buy EUR/USD, these brokers are not selling it to you. They are simply passing your order along to a liquidity provider, usually a commonly-known large investment bank, and they are simply making money on the spread. For example, they may be getting a 0.5 pip spread on EUR/USD. They mark that spread up to 1 pip and pass it on to you. In essence, they are earning 0.5 pips when you make a round turn execution.

Understanding how your broker operates concerning liquidity and dealing operations is important. Remember, however, that just because your broker has a dealing desk, it does not mean they are engaging in unethical broker trading behavior and should be avoided.

Tight Spreads

This is what everyone cares about. How tight are the spreads!!!?? Tight spreads are important, but they are only one part of the service a broker is providing. Be wary of brokers that offer much lower spreads than the competition. If the spreads are too good to be true, then they could be just that.

Spreads have tightened considerably over the last two years, and today most brokers are comparable on spreads. There are still some brokers that offer notoriously low spreads, and much of that is due to proprietary technology. They simply have a competitive technological advantage that allows them to offer those low spreads. Always check how your broker handles spreads during news announcements. Do they widen substantially, and if so will that affect your trading strategy?

Quality of Execution

Although spreads are important, quality of execution is even more important. Some brokers will offer tight spreads, but they may continually re-quote you new prices when you are trying to get in and out of positions. This can be very difficult to deal with as a trader because, generally, when you want to get in and out of a position, you want to do it quickly, not 30 seconds from now. Poor execution can make the advantage of tight spreads completely obsolete.

Educational Services

If you are a new trader, you may want a broker that caters to new traders. Some brokers will offer ongoing educational services such as webinars and workshops to help new traders learn the basics of trading the foreign exchange market. Other brokers will have very poor customer service and expect traders to be able to learn how to use the platform and its features without much support.

Risk Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
 
   

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Posted on April 19, 2011 17:13 by Tom Herod
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Forex Brokers Can't Be That Stupid, But Some Think You Are!

forex regulated vs licensed

The difference between being "regulated", "licensed", and "something else..."

Yesterday, I was entering a new (unidentified) company in our Forex brokers database. Their website was professionally designed and the company offered commission-freetrading on more than 100 currency pairs with spreads as low as 0.5 pips on the MetaTrader4 platform.

VERY NICE!

They have seven (7) offices with very impressive addresses around the world in cities like Vienna, London, New York, Chicago, Mumbai, Moscow, and Saint Petersburg.

IMPRESSIVE!

You can open an account with them for as little as $200 USD and even get a special-purpose personal loan for up to 200% of your deposit amount.

UH-OH, RED FLAG!

Did I read that right? A special purpose loan? I know about trading on margin but I've never heard of getting a personal loan from a broker to trade Forex. Maybe they just used unusual phrasing to describe margin trading. I had to check into this a little further.

I decided to investigate their regulatory status and they listed the ICC. I googled "ICC" and found the ICCInternet Chess Club, ICC IllinoisCentral College, ICC InternationalCricket Council, and finally the ICC International Chamber of Commerce. Oh! Heavens to murgatroid! The company's only certification of their legitimacy was registration with the International Chamber of Commerce.

RED FLAG #2!

Well, that was very laudable for the company to voluntarily register with the International Chamber of Commerce. The ICC "is the voice of world business championing the globaleconomy as a force for economic growth, job creation and prosperity", but the ICC is NOT a regulatory authority and provides no trader protection.

I had to dig a little deeper so I called their New York office. No answer. I thought it might have been a little late in the day so I called their Chicago office. After six rings I got a recording with a British accent requesting that I leave a message.

I HAD ENOUGH!

There are many international Forex companies adept at giving the appearance of being a professional brokerage with all the trappings of financial success including registration with a sanctioned regulatory authority. However, while the named body may be completely authentic, it might not be a "regulatory" agency with a public or governmental mandate for financial oversight. A true regulator is responsible for overseeing the behavior, services and products of a company in the financial services sector and has the power to fine, enforce punitive actions or even stop a firm from trading by removing its license.

Being licensed is different from being registered with a regulatory authority. While a Forex broker's license might provide you some degree of comfort, you still have little or no protection compared to trading with a properly regulated firm. A license can be obtained if a firm meets the criteria for operation and agrees to follow a code of conduct.  In the UK, for example, the body that grants licenses is HM Revenue& Customs, while the regulatory body is the Financial Services Authority (FSA). In the U.S. their counterparts are the National FuturesAssociation (NFA) and Commodity FuturesTrading Commission (CFTC).

A licensing body doesn't perform the same administrative functions as a regulator, nor does it have the same enforcement powers. Failure to comply with licensing rules or operating code could result in a license being revoked and stopping the firm from trading. But a licensing body has little or no power to arbitrate a dispute you might have with your broker.

A regulatory authority, however, can not only investigate and take action in a broker-trader dispute, but can even intervene when trading practices need to be changed; even if those practices are not deemed illegal, just not in the best interest of the trader. A regulator can protect a trader against poor practices which, while not in violation of any license code, may still be deemed as otherwise unfair.

With such wide diversity in regulatory oversight between regulatory authorities around the world, it is incumbent upon anyone considering trading Forex to check the agency with which their chosen broker is registered. If you are trading with a broker in a country where the company is not registered, you are NOT protected. Take a look at how GAIN Capital protects itself and its traders by employinga regulatory umbrella where they do business. This is why we are changing our company profiles to include the broker's regulatory registration data.

Make sure to check our list of International Regulatory Authorities to verify with which agency your broker should be registered.

By the way, I will still probably put that company, with its seven websites, into my database because that's what I do. I make the information available and I don't pass judgment. That's your job, but please be diligent.
 
   

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Posted on April 13, 2011 09:34 by Tom Herod
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Categories: Due Diligence | Regulation
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