How brokers are screwing online traders!

Dear traders I have been trading for the past 1 year and would like to share with all of you my personal experience which I am sure all of you have experienced yourself but very few have correlated its relationship with the brokers themselves. I have experience in software architecture as I went through a diploma in software engineering course, so I was able to instantly grasp exactly what these people are doing to manipulate traders.

I began my trading with a very prominent brokerage firm that assigns relationship managers to clients and the commodities dealer is also the relationship manager for the commodities section in their office in my town. I made my preference clear to them that I was interested in an online account but they registered me firstly as an offline client and I was expected to go to their office and make calls for the dealer to fill in at their calling room. I went there for some time and observed how the calling and order filling procedure works. I am sure that all of you are aware that for each call and trade directly with the dealer the broker charges you 20 rupees extra per trade. The dealer seemed disappointed that I was more interested in online trading from my own terminal rather than placing calls through him, but I did not place much importance to that. I began online trading in commodities and noted that the trading software would experience frequent disruptions in the middle of trading. I called the dealer up and he said this was either an internet issue or software problem. I assured him that my internet was working fine and he reinstalled my software. I did not think much of it and continued with my trading but continued noticing frequent cutting off of the software in the middle of trading due to which I had to log out and relog in very frequently. Then I came across some startling facts about the broking field from an inside source. It should be noted that dealers have performance targets set for them daily for taking so many calls every day and they are paid incentives for call trading. The more call trades he fills in at the dealer terminal the more incentive he gets.

NOW COMES THE MOST BELOW THE BELT HITTING FACT. The broker is connecting the online trading software to individual online traders via VPN (virtual private network) protocol connections. Each dealer terminal has the option to disconnect individual online connections just by disconnecting the VPN connection to that particular online terminal. In simple terms there will be a VPN checkbox next to your trading ID in the dealer terminal. If the dealer unchecks that box your trading software gets disrupted. On days when there are less call traders in the office, to make up his performance target the dealer targets online traders by frequently disconnecting their VPN connections in the middle of trades with the hope of generating call trading by which he makes extra money for the broker and gets paid incentives for it. For commodities traders even a minor disruption in the middle of trading during peak movement time can result in loss and many will panic and do phone trading giving exit positions in advance to the dealer.

This broking firm also deals in insurance and I had refused an insurance plan that this relationship manager/dealer had solicited me to take. So I was also likely experiencing a grudge reaction from this guy via the frequent disconnections. Be very careful not to give a cause for grudge to dealers because they can make trading hell for you by disconnecting your terminal at crucial moments of trading.

When this reality hit me I immediately confronted the dealer and exited from this broking firm and then started trading with another prominent broker. After a few weeks of trading the very same pattern of terminal getting cutoff at crucial times of trading started repeating itself. I then realized that this phenomenon is not just restricted to one broking firm but is a systemic problem with all brokers. Brokers are encouraging dealers to engage in malpractice by giving them the tools in each dealer terminal to disconnect online terminals at will and paying these guys incentives for generating call trades through these disruptions. This time I not just confronted the dealer but contacted the manager, narrated the similarity between my previous and current experience and finally managed to lodge an official complaint with the head office. There was a prompt reply from the head office but they refuse to acknowledge that their dealers would resort to malpractices. I pointed out to them that most, if not all, traders are unaware of how the dealer terminals can be manipulated by unscrupulous dealers, and that I became aware of this fact only because I have inside information from the broking field.

I am making this post in this prominent forum so that each and every trader is aware that if you are facing disruption of your trading terminal even when your internet connection is working perfectly well then your dealer likely is playing a part in it. The brokers are giving god like power over traders to the dealers and since there is no shortage of sadists in our country there are always people (dealers) who would enjoy causing loss, pain and emotional distress to other people and in this case traders are being cut up and bled without them even knowing.

The only solution I see that would give peace of mind to traders is if brokers upgrade their software to log each VPN disconnection by dealers with the software requiring a written accounting from the dealer for the reasons behind each disconnection. Until and unless the brokers do that there will always be suspicion of dealers cheating the traders when disruption occurs.

I think this issue needs regulatory intervention from the authorities such as SEBI and FMC.

Best Regards

Hello,

What u said is exactly correct....and i totally agree with u....i don't know why ECN like facilty is not available for indian retail traders.

Regards,

Please mention both the broker's name for which you had this issue.

So that it will help the fellow traders to recognize the face of so called good broker house. If some of the traders will cancel their a/c then at least they will come to understand and will realize their fault.:thumb:

I had created a thread first in the investor general discussion thread; then later saw the investor grievence thread so posted my view here too. I have requested the moderators to delete one of these threads so that double posting can be avoided. Thanks.

I am copy pasting my view here that I have posted in the other thread.


Hi traders and brothers:

@rajguru - I am new here and first made a post here in this section and later saw the investor grievence thread and realized that it would also be an ideal location for all traders to get exposure to the way dealer terminals can be misused by unscrupulous people. I am not posting this for fun friend but I believe it is my duty to spread awareness among fellow traders of what all is possible at a dealer terminal because we must be aware of every aspect of the trading cycle right from trading knowledge to garner profits onwards to how the other end of the chain, i.e., the brokers and dealers do their work.

@ashu1234 - rest assured that my brokers, past and present, are very prominent, right at the top of the chain. All a trader needs to confirm whether money is taken from him/her for call trading is make a call to his/her broker and confirm it. As of now until I posted this thread they were charging extra for call trading and providing incentives to dealers for generating call trading, and they would inform about extra charge to the trader right when he/she activated his/her account with the broker. The single main problem brother is that as of now brokers are allowing dealers to play god over traders by giving them tools in their terminal to manipulate traders. If a sadistic person, and we do not have any shortage of such people in India, gets into a position as a dealer, it opens up endless opportunities for such people to play out their fantasies by creating huge hardship for traders. So if traders are aware of this problem brokers might even remove such manipulative tools in dealer terminals, so this is also one of the purposes of my posting this data here, so that brokers realize that traders are aware of this and upgrade their software to eradicate the potential for misuse of dealer terminals.

@bunny - it would hit brokers very hard and deflate their integrity which is the foundation of their standing in the financial industry, so it would be a fantasy to expect any brokers to confirm this, but there are always exceptions, i.e., Mr. Edward Snowden who exposed the tyranny of the NSA in the USA. Perhaps there are individuals out there who will come out.

@Jahan: Bro I think that all traders should join hands and petition SEBI and FMC on this.

@bpr - Bro rest assured that when dealers in 2 of the prominent broking houses in the country are doing this, then this is a problem affecting all of them. Like I said dealers as of now are being given power of god over traders with the kind of tools for manipulation they are having in their terminals with no restrictions placed on them on how to use them, which is the main issue that is bothering me.

Regards