1, malicious competition
Under the vicious competition, because there is no relevant regulatory body in China to supervise and supervise, many brokers have the problem that it is difficult for investors to pay after launching high donation activities. Originally, the gift-giving activity was only to attract customers to invest in foreign exchange. Unexpectedly, once customers go in, it is difficult to get out. Some brokers often use high gifts to attract customers. After the customer came in, he enjoyed the gift discount, but the money was either restricted or delayed.
2, eat into the broker cost.
High foreign exchange donation activities will also increase the cost burden of brokers. According to statistics, the number of accounts opened on the trading platform of only one small foreign exchange broker exceeds 1 000. Suppose a customer opens an account with a deposit of $ 10000 and can get a high gift of $5,000, then the broker will have to pay a cost of $5 million. Although a small part of the high gifts are not allowed for customers to withdraw cash, such a high expenditure needs the full financial strength of the brokerage platform to support it.
Brokers certainly don't want to do business at a loss. In order to continue to maintain high bonuses, some brokers will use the market maker model to gamble with customers, even though brokers themselves claim that there is no trader model (STP/ECN model). Because in the market maker mode, the loss of customers can be used to make up for the high donation expenses.
3. Dividend arbitrage
Dividend arbitrage is the most serious one, because investors will open two accounts at the same time, one is short and the other is long, until one of them bursts. Suppose you give $5,000 to each account, and this $5,000 will enlarge the income difference between the two accounts. In addition, investors can give money arbitrage through different brokerage platforms, which is more secret.
In the long run, it is extremely unfavorable for brokers, because it will eventually lead to more speculators arbitrage and the profit space of brokers will be further eroded. At the same time, it is also a disaster for investors. After discovering the crazy arbitrage of dividends, brokers will start various restrictions to restrict investors from withdrawing cash normally. Although the arbitrage behavior of speculators can be stopped in time, it is extremely unfair to investors who trade normally. Tiehui incident is a typical case, and the storm has not stopped until now.
Therefore, when choosing a brokerage firm, investors should always be alert to the gift-giving activities of the brokerage firm, realize that the higher the proportion of gifts, the greater the risk, and carefully read the relevant rules of the activities to avoid stepping into the pit of gift-giving activities.