Firstly, let’s address why brokers don’t like client scalping.
When broker process orders some are hedged and some are internalised and matched with other client orders.
This isn’t because (as some suggest) it’s all a massive conspiracy where the broker wants their clients to lose money like a bookie.
It is infact based on efficiency.
If a client is trading the FTSE at £10 per point that can be hedged directly on the exchange as a FTSE future is £10 per tick move for one lot.
However, if a client is trading £1 a point the broker can’t hedge it unless it takes on some risk and waits for other clients to fill up their FTSE order book.
I’ve worked at all sorts of brokers over the years and the one thing they want above all others is long-term relationships with their clients. It costs a broker a fortune in marketing to onboard a new customer so they want them to have an account for a long time.
So, if you have a big enough account and have an effective trading strategy then you need a broker that offers DMA on exchange like Saxo. This way you can work your orders inside the bid/offer spread and get a better execution than via a broker providing OTC quotes.
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Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously acting as multi asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2000.