MB Trading offers forex traders negative commissions
Most retail spot forex accounts offer zero commissions. Sounds great, but its not really doing the trader any favors. Forex brokers typically take the other side of the trade and make their money by fixing a hefty spread — often 3 to 6 pips. A five pip spread, depending on the pip value of the trade, might cost a trader $50 dollars or more. Zero commission forex trades have a huge amount of slippage.
That’s why I have always preferred a forex broker that places my trades on an ECN and charges a small commission. For years I have used MB Trading (among others). MB Trading has much smaller spreads, and charges a $2.95 commission.
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A few weeks ago, MB Trading added a new twist. Trades that took liquidity — in other words any market order, or immediately-fillable limit order — still are charged the $2.95 commission. But if you add liquidity, then MB Trading will pay you $1.95 per 100k traded. You are not going to get rich off of it. A heavy day of trading might get you negative rebates of $40-50. And for those of you ready to whip out your MetaTrader and start running scalp-oriented expert advisor (EA) “robots,” good luck. I’m sure I’m not the only one who thought of running a high volume computer trading model aimed at breaking even on the trades and racking up the commission rebates (similar to the rake-back programs many pokerbots are optimized for). But after trading the markets manually for a few weeks, I don’t think the liquidity is there yet for that kind of model to work.
Still, over the course of a trading year the small rebates will add up, especially with the leverage forex permits. More importantly, the liquidity incentives add a dynamism that permit you to move in and out of the popular currency pairs in most markets without giving up a spread. That is not the case with many forex brokers, for which limit orders are not a practical option.
Right now MB Trading is an outlier. I expect another trader-oriented shop to follow suit, perhaps either TradeStation Forex or InteractiveBrokers. Its getting better for retail forex traders. Stay tuned.