These days it is almost a standard market procedure that FX brokers pass on parts of their income to FX service providers in order to obtain access to their customer base.
Service providers with a solid customer base take advantage of this, as this allows them e.g. to negotiate special conditions on behalf of their clients. Some companies offer free market information or trading signals while others repay their clients a substantial part of the commissions received.
Typically the rebate will be quoted in pips for each traded lot and will be calculated accordingly. For example, if every day 0.4 lots EUR/USD are traded, this will result in 8.4 lots for 21 trading days per month. A rebate of 0.25 pips equals USD 2.5 per lot which will result in a payment of USD 21.00. The calculator here adjoined can be used for an estimate of the payments to be expected.
In any case, it should be avoided to select brokers solely based on the available rebate. On the contrary, if the broker's rebate is very high compared with other brokers, e.g. more than e.g. 0.4 pips or $4 per round-turn lot, this may indicate a hard sell approach which a broker with a satisfied customer base simply won't need.
The classic rebate rate varies depending on the provider, the broker and partially also on the currency pair being traded and ranges in general from 60% to 80%. Usually, brokers invoice on a monthly basis and the rebate provider pays usually by the 15th day of the following month. Payment is done by cheque, bank transfer or also through PayPal.
The registration is usually straightforward and broadly automated; the registration process of new accounts will usually be finished within a few hours. A selection of rebate providers is listed below:
Especially with new providers there is always the risk that the rebate is not paid in time or not paid at all. Therefore, direct commission discounts or rebates that are paid by the broker should be taken into consideration.
In this case, special conditions are applied either in form of a reduction of the ECN trading commission or in form of a direct repayment of a portion of the commission directly into the clients trading account by the broker at the end of each month. It is therefore not necessary any longer to involve a third party, accounts just need to be opened by using a special link.
For the time being, Forexgermany offers such special trading conditions for the following brokers:
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