7  Best Market Maker Brokers in South Africa

How to compare Market Maker brokers

Some of the best known Forex brokers in the world are market makers. Still, even the biggest market makers have needed to adapt as ECN brokers started introducing better trading conditions and a wider product offering to traders. While some market makers have made this transition, others have not, and many poor market makers are still in business today. When comparing market maker brokers consider: 

Intervening Dealing desks: All brokers have dealing desks, they keep track of asset prices and who is buying and selling what assets. However, brokers can operate dealing desks in different ways. 

• A fully automated dealing desk will execute any trade requested of it by a client. This type of dealing desk is often called an NDD or non-intervention dealing desk.
• A dealing desk that is not fully automated allows for the broker’s intervention and creates a conflict of interest between the broker and their client. Suppose a broker can intervene when opening positions, manipulate already open positions, or close positions without your knowledge. In this case, brokers are never independent in the process and in extreme cases can participate in the trade to ensure your loss.

NDD market makers are responsible members of the community, but market makers who don’t have fully automated dealing desks can manipulate your trades for their financial gain.

Spreads: The spread is the difference between the buy and sell price of a forex pair, and it is how brokers earn their money. Markets makers include all trading fees in the spread, meaning traders are not charged any additional commission based on the volume traded. That said, the spread can vary greatly from 0.6 pips (EUR/USD) to 5.0 pips on market maker accounts, and the difference in these spreads will change your total cost of trading significantly. 

Market makers commonly offer fixed spreads, meaning they do not change with the liquidity available on the market. This fixed fee cost structure makes it easier for traders to calculate their cost of trading and the potential profit or loss in a trade. Additionally, due to the market maker business model, trades will not incur slippage, which is an additional complication with DMA brokers who rely on liquidity for trading becoming available.

Account regulation: Your broker should be regulated, as this is the only way to protect your trading capital. Many regulators exist worldwide, and some regulators have more credibility than others. Brokers often hold licences from multiple regulators but your trading account will be monitored by only one of these. 

• Look for your broker to have top tier international regulation from the FCA, ASIC or MAS. While this regulation will not always apply to your trading account, this regulation will give you an idea of the strength of the broker’s internal processes.
• Local regulation, like the FSCA, is a comfort because if your account is locally regulated, your home government will have oversight of your trading account and have the full right to enforce the regulations.

Education & research quality: Market maker brokers overall tend to have more funding for educational material, course creation, webinars and market analysts. If you are going to trade with a market maker, be sure you select one with a high education and research score – meaning more education resources and better and more frequent market analysis.

The Forex Market and Market Makers

To better understand how and why market makers operate the way they do, we need to understand how the Forex market works.

The vast majority of Forex trading takes place in the interbank market, trillions of dollars in currencies move between the major banks in this market on a daily basis (6.6 trillion USD per day is the 2019 estimate). It is in this space where the market is made; the prices set here, between the members of the interbank market, will be the basis for pricing in the lower volume sections of the Forex market, including the retail CFD market.

It is fair to say that the primary market makers in the Forex market are the members of this interbank market. They effectively set the rules for everyone else to play by – including market maker CFD brokers.

How do Market Makers Work?

Market makers form a bridge between the interbank market and retail forex traders. They buy up large positions from the interbank market, which they break up and sell in smaller sizes to retail clients. As market makers will be taking exposure to the risk associated with the trade (i.e. will be counterparty to the trade) they will also charge a mark-up fee on both the buy and sell prices.

The difference between the buy and sell prices is called the spread and is how market makers make most of their money. Think about it as the fee charged by the broker for creating the liquidity needed to make your trade. Most market makers will also hedge the trades they take on with a member of the interbank market, thus protecting themselves from losses – this is especially true in cases of large volume retail trades.

Market makers may also make alterations to the pricing on pair based on other factors:

• Current exposure – a broker’s risk management team may dictate changes in pricing if they believe they are holding too many trades in one direction on a pair
• The dealing desk’s views on future price movement – if the broker believes the GBP is overpriced against the USD, this will affect the pricing offered
• Volume – as mentioned above, market makers will protect themselves when taking large volume trades, so will often insist on wider spreads and less leverage in these cases.

Should I trade with a Market Maker?

Many traders are wary of working with market maker brokers, as they feel that there is an inherent conflict of interest in the business model. But well-regulated market makers will always offer a fair price. They cannot alter the pricing too much one way or the other before they open themselves up to arbitrage risk (the risk of traders making a profit by trading the discrepancies in pricing).

Furthermore, market makers in Europe, the UK, and Australia will have strict requirements placed on them by regulators committing them to ensure best execution of trades. Under this rule, it is illegal for market makers to skew trades to damage a client’s position.

If you are trading with a well-regulated market maker, the only real discussion to be had when considering trading through them or not is the style of broker you prefer. If you want tighter spreads and can afford commission on your trades, then an ECN broker may best – but for many retail Forex traders, this will be an unreasonable expense. It is also worth noting that many market maker brokers also offer very tight spreads and excellent all-round trading conditions.

How We Score Market Maker Brokers

When we consider which market maker brokers are suitable for recommendation, we always look at the same factors. Each of these factors has the potential to radically alter your trading experience, and it is especially important for new traders to have trading conditions good enough to learn without being wiped out.

Regulation

Regulators ensure that market makers host a fair and transparent trading environment, all the while conducting strict auditing oversight and ensuring client fund protection. Brokers that are regulated by more than one major regulator are considered more trustworthy.

The major regulators are:

• United Kingdom – Financial Conduct Authority (FCA)
• Continental Europe – Cyprus Securities and Exchange Commission (CySEC)
• Australia –Australian Securities and Investments Commission (ASIC)

These international regulators are respected for their commitment to consumer protection, strong oversight and swift enforcement of sanctions on fraudulent brokers. They also all publish warning lists of unauthorised firms, so it is worth checking these before signing up with a broker. The FSCA in South Africa is also seen as an excellent regulator, if not in quite the same class as those listed above. 

All market makers regulated by one or more of these regulators will be a fair and secure firm to do business with.

Trading Conditions

It is important to choose a market maker with the trading conditions that will support your trading strategy. Think about how much leverage you want to have available; keeping it low (100:1 or less) is a good idea if you are still learning how to trade. Also, consider what account currencies are supported by the broker and what currency pairs you want to trade, you do not want to be spending a fortune in conversion fees.

Other trading conditions to consider will be how tight the spreads are on the currency pairs you will want to trade, and what other assets are available that you may want to trade. Most Forex brokers will also offer CFD trading on commodities (such as oil, gas, etc.), precious metals (gold, silver, etc.), indices (FTSE, DAX, NYSE) and cryptocurrencies.

Account Types

Consider the different account types on offer at your broker, most market makers offer swap-free Islamic accounts, and all will offer demo accounts to practice with – the best demo accounts are unlimited and exactly simulate the real market.

Other popular account types are copy trading and social trading accounts. These will allow you to copy successful traders, who will then take a cut of your profits. A similar idea is the PAMM (Percentage Allocation Money Management) account, which is a pooled money operation, where the members of the money pool can choose what proportion of their account they want to allocate to a certain trader.

Trading Platforms

It is important to carefully choose a trading platform and find a broker that supports that platform. MetaTrader 4 (MT4) is a safe choice as it’s the industry standard and there is a multitude of online tutorials, though it is gradually being replaced with MetaTrader 5 – which has a more modern look and feel and has many features missing from MT4.

Market makers will not offer cTrader, as this is an ECN-only platform, but many will have their own in-house platforms, most of which are designed with new traders in mind so are easy to learn and have a more intuitive layout.

Broker Fees

We always check for additional broker fees that may be charged and so should you.

Market makers generally make their money from the spread, but some will also charge additional fees to further boost their profits. The most common charge is withdrawal fees, and it is good practice to always ask your broker if and how much they charge for withdrawing from your account. Generally, withdrawals fees are cheaper or non-existent when using online payment systems (such as Skrill) are used for funding your account.

We always highlight any extra fees charged by brokers in our reviews and will penalise brokers with extortionate fees.

Customer Service

Customer service is in your native language is important and many brokers offer full support in multiple languages. The best customer service will be available by live chat, email, messaging apps and over the phone. Many brokers will also offer a call-back service, so you do not have to make expensive international calls.

Good market makers offer customers support 24 hours a day, Monday-Friday and a rare few will also offer weekend service. If you are new to Forex trading you will want a broker with responsive technical support and customer support representatives with an in-depth knowledge of their products and platforms.

Education and Research

Forex education is especially important for beginner traders, many of the larger market maker brokers offer excellent structured Forex courses for beginners and a few will also have courses covering more advanced topics, like strategies and indicators. If you want to be a successful Forex trader you will never stop learning, so having a broker with excellent educational resources will essential.

Alongside educational support, a good broker will also have an in-house research team offering insightful market analysis on a daily, if not hourly, basis. Some market makers will leave market analysis to third-party companies such as Trading Central or TradingView – while these applications are both very useful, we find that brokers with their own analysis teams often provide better market research ideas and more useful information for new traders.

Which is the best market maker broker?

Avatrade is the best market maker broker. It is well-regulated, offers a wide range of financial instruments for trading, has a low minimum deposit, and offers tight spreads with no commissions.

Final Word

Market makers are often unfairly blacklisted by many members of the Forex CFD trading community; the truth is that well-regulated market makers are an essential part of the Forex market. By committing themselves to be counterparty to any trade they provide much-needed stability, both in terms of liquidity and in terms of market function.

With the current regulations in place, it is also impossible for market makers to work against their clients – even if they wanted to ruin their reputation and open themselves up to arbitrage in this fashion.

It is worth noting that while well-regulated market makers are trusted members of the Forex market and essential for its function, there are many unregulated (or very poorly regulated) market makers that do not behave as ethically. Therefore, it is critical that you always trade with a market maker you trust – one that has a good track record and has oversight from a major regulator.