Brokers often adopt the risk-in-house model to execute trades within their ecosystem using market data from the provider. Although this approach is cost-effective and reliable, it has several drawbacks.
This model creates a conflict of interest between brokers and traders, as brokers profit from trader losses. As traders become more efficient, the company’s expenses increase, forcing brokers to raise commissions and reduce compatibility, making them less appealing to existing and potential clients.
To balance these processes, brokers must continually attract new clients, which increases operational risks.
Furthermore, brokers may lack transparency in the pricing process, resulting in unfavorable rates for the client.
