Country of Origin: USA
Regulated: Yes (NFA and CFTC in the US)
Accepts US Traders: Yes
Business Model: ECN ("EXN")
Minimum Trade Size: 1 Micro Lot (1000 units)
Trading Software Platforms: MetaTrader 4, MBT Desktop, MBT Mobile, cTrader, Ninja Trader, LightWave
Commissions/Spread Cost: Choose padded spreads STP-style with no commissions or ECN commissions: $2.50 per 100,000 Removed (Marketable orders), trader receives $0.50 per 100,000 Added (Limit orders filled)
Best Suited For: Frequent short-term traders and scalpers, Americans
Official website: mbtrading.com
The Forex business' roots were planted in dealers from the start. So it was no surprise when the first generation of retail Forex brokers came along and perverted that dealing business model into a bucket shop scheme similar to the brick and mortal bucket shops dealing in stocks ("bucketing orders" - ie. not passed on, effectively only winning when customers lose) a century earlier. During the backlash against the FX bucket shops, MB Trading was among the first brokers to jump on the ECN bandwagon early on and rode it since. None of that was all too surprising considering the general direction of the retail FX industry.
What did surprise us was: MB Trading had the guts to introduce the pay-for-liquidity ECN price model to Forex.
The term ECN, which confusingly stands simply for Electronic Communications Network, was already borrowed from the stock market, where electronic trading through neutral no-dealer-involved order matching systems had a head start in the tech boom of the 1990s.
See, at the dawning age of ECNs in the stock market, there were only a few electronic systems in the market - the oldest of which is the household name, NASDAQ. Then, one day, the Island (today's NASDAQ) and Archepelago (now owned by NYSE as NYSE Arca) ECN systems came along and attracted volume by revolutionizing the way commissions were charged to professional stock traders: Charge a fee to the trader who removes liquidity (the one who buys at the ask or sells at the bid, essentially any trade filled via a Market Order) and pay some of that fee back as an incentive rebate to the trader who posted that bid or offer in the first place for adding liquidity (any Limit Order that gets filled.) They only take the difference (between the remove fee and add rebate) as their ECN operators' profit.
Island and Arca practically replaced the traditional NYSE and NASDAQ and ushered in today's competitors like BATS and DirectEdge. It's a business model that gave birth to an entire generation of proprietary day traders who scalped the spread in stocks (by adding liquidity) all day long... and, eventually, a whole generation of HFT algorithms that took over most of the edge in doing so.
Years after the launch of MB Trading's "Pay for Limits" program, they remain the only retail Forex broker in the world that offers it. What this tells us is that the majority of traders in this market are either too uneducated about the effect a positive commission rebate has on an edge, especially for frequent traders... or that most have no idea how to use it with both an opening and closing trade. (Yes, you can close a losing trade by moving your Take Profit order nearby rather than letting it hit your Stop Loss. This is especially important for short term traders who enter and exit frequently, intraday.)
The lack of demand for the negative commissions in liquidity adding also means the majority of MB Trading's competitors have conveniently ignored this potentially revolutionary pricing model in the FX market.
Most of the industry seems conveniently oblivious to this pricing method - sort of the same way most retail stock brokerages are conveniently oblivious of Interactive Brokers' existence on their commission comparison pages. In any case, MB Trading continues to offer their pay for adding liquidity incentive as one of their two pricing options in Forex accounts - now branded as "EXN Limits." (The other offering being an OANDA-style widened spread over their price feed that they call "EXN Spread.")
Just as a matter of principle, we'd like to recommend MB Trading as the end-all and be-all of retail brokers simply for having the guts to introduce such a pro trader friendly pricing model on a retail scale. Unfortunately, it seems their trade servers aren't as stable as one would expect from such an established name even from within the state of California where they're located. It doesn't detract from their excellent tight spread price feed and commission cost structure, but it does warrant a small warning for hardcore scalpers.
Unfortunately, Canadians are among the customer base blocked out of MB Trading (thank your regulators for "protecting" you while a certain notorious bucketshop continues to advertise all over financial news channels.) For Americans, however, MB Trading is without a doubt one of the few decent Forex brokers left that's still regulated within the United States if you don't want to go offshore. Their pricing model is incentive enough for frequent traders to at least have them as one of your trading accounts.