Forex Brokers: Course Quiz

Course quiz

1. When you buy EUR/USD through a retail broker, who is the other party to your trade?

   Another retail trader The European Central Bank Your broker
2. Under market execution, what happens if the price moves while your order is in transit?

   The order is rejected You receive a requote You are filled at the new price, which is slippage
3. A broker that keeps client trades on its own books profits when:

   Clients win Clients lose Volume falls
4. A raw account has a 0.2-pip spread and charges $3 per side per lot. What is the round-trip cost in pips on a standard lot of EUR/USD?

   0.2 pips 0.5 pips 0.8 pips
5. What is the main conflict of interest at a market maker?

   It earns commission on every trade It profits when unhedged clients lose It cannot offer leverage
6. How does an ECN broker typically earn?

   From client losses A fixed commission per lot on a raw spread From fixed spreads
7. A broker moves consistently profitable clients to its A-book. Why?

   To reward them Because their wins would otherwise be the broker's losses Regulators require it
8. What is a prime-of-prime firm?

   A regulator A firm that gives smaller brokers access to bank liquidity A type of trading platform
9. What does a regulator guarantee?

   That the broker offers the best prices That you will not lose money That the broker is accountable to rules with consequences for breaking them
10. A broker's website lists FCA, ASIC and CySEC licences. Your client agreement names a Seychelles company. Which protections apply to you?

    The FCA's All of them The Seychelles entity's
11. If a broker without segregation goes bankrupt, what happens to client deposits?

    They are returned in full Clients queue with other unsecured creditors The regulator pays them
12. Why can a stop loss fail to prevent a negative balance?

    Stops are ignored by brokers In a gap, the next available price can be far beyond the stop Stops only work during London hours
13. A UK broker fails owing you 30,000 pounds of segregated money that turns out to be missing. What does the FSCS do?

    Nothing; trading losses are not covered Pays up to 85,000 pounds, so the full 30,000 Pays 20,000 euros
14. A broker's only licence is from a small offshore centre. What protection does that give you?

    The same as an FCA licence Very little; you are relying on the broker's own conduct A compensation scheme
15. What should you compare first when choosing a broker?

    Leverage Bonuses Regulation and the entity you would join
16. Which spread figure is most useful for comparing brokers?

    The minimum spread advertised The average spread over a period The maximum spread
17. Which account type usually costs an active trader least?

    Standard Raw or ECN Cent
18. The licence number on a broker's site matches a firm on the FCA register, but the register lists a different website. What is this most likely?

    A harmless typo A clone firm using a real licence A new domain the regulator has not updated
19. A broker says you must pay a tax to the broker before your profits can be withdrawn. What is this?

    Normal practice A scam; taxes are paid to governments, not brokers A regulatory requirement
20. Which broker model has no counterparty conflict with its clients?

    Market maker B-book ECN
21. Which protection returns your cash balance if the broker fails?

    Negative balance protection Client money segregation A tight spread
22. Which regulator runs a compensation scheme paying up to 85,000 pounds?

    ASIC CySEC The FCA