What a broker does and does not do

The functions the firm performs 

The word broker is borrowed from a business in which a broker is an intermediary: someone who arranges a transaction between two other parties and charges for arranging it. A retail CFD firm does some of that, but the borrowed word describes the arrangement poorly, because the firm is itself one of the two parties. Five functions are worth separating, since they are performed by different parts of a firm and supervised under different rules.

• Pricing. The firm takes quotes from the wholesale institutions it deals with, its liquidity providers, and builds from them the two-way price a client sees. That displayed price is the firm's own quote, derived from wholesale prices rather than identical to them, and the difference between the two is where the spread on the instrument sits. Which sources a firm uses, and how it builds a quote from them, is a matter for the firm.
• Execution. An instruction has to become a fill at a specific price and time, and that price is the price the contract is written at. What happens in between is the firm's decision: matching the instruction against opposing interest on its own book, dealing with a liquidity provider, or holding the exposure itself.
• Writing the contract. The firm is the second party to it. Nothing is routed onto an exchange and matched with another retail client, as established earlier in this module, so the position exists only between those two names.
• Position keeping. While a contract is open the firm calculates what it is worth, what margin is required against it, what financing has accrued overnight, and what adjustment a corporate action in the underlying calls for. It also applies the close-out arrangement written into the account terms.
• Client money, records and reporting. The firm holds deposits and processes withdrawals, reconciles the money it holds against what it owes, issues statements and confirmations, retains order records, and reports to its regulator on a schedule the regulator sets.

One thing is absent from that list, and its absence is the subject of the last two sections. Nothing in it involves deciding what to trade, when, or in what size. Those decisions sit outside the firm's role by design, and usually outside its permission as well.

The counterparty, not the messenger 

That the broker is the counterparty was established when the contract was. What was left open there is what the firm then does with the exposure, because the firm's position is the mirror image of the client's until it does something about it.

The first thing that happens is netting. A firm with a large client book holds many positions in the same instrument pointing in opposite directions, and those offset one another with no external transaction at all. What is left is the firm's residual exposure, and it has two options: pass the residual to a liquidity provider under a second contract to which the client is not a party, or keep it. Firms choose differently by instrument and by market condition, and keeping a residual is not in itself irregular.

It is also the origin of the argument this module raised earlier and did not settle. A firm holding the other side of a position gains when that position loses, and one tradition holds that no disclosure removes a conflict of that shape. Firms answer that netting leaves the book rarely one-directional, and that execution and client money are supervised precisely because the conflict is structural and known. Neither answer disposes of the other. What a reader can check is narrower and more useful: a licensed firm has to identify its conflicts, manage them, and disclose those it cannot manage, so its conflicts policy and its execution policy are documents that exist and can be read.

What a licensed firm is required to do 

Authorisation is the first requirement and the one everything else hangs from. A firm may not carry on this business without permission from the regulator of the jurisdiction it operates in, and the permission is specific rather than general: it names the activities the firm may perform and the products it may perform them on. A firm authorised to execute orders is not thereby authorised to advise on them or to manage money, which is why the last section exists.

Attached to the permission is a standing set of obligations. Capital has to be held against the firm's own risks at a level the regulator sets. Client money has to be held apart from the firm's money, in accounts identified as client accounts, and reconciled on a regular cycle. Orders have to be executed under a published policy, an obligation conventionally called best execution, which does not mean the best available price anywhere and never has: it means the firm has defined the factors it weighs, price, cost, speed, likelihood of completion and size among them, and can show that it followed its own definition. Costs have to be disclosed before they are incurred, order records kept and produced on request, and complaints handled through a defined procedure with defined time limits. Marketing is itself regulated: risk warnings are mandatory rather than decorative, and a claim a firm cannot evidence is prohibited whether or not anyone relied on it.

Segregation is worth one worked example, because it is the obligation most often described in adjectives when it is really an arithmetic that either reconciles or does not.

For YAL specifically, one wording is approved and it carries no number: Yal Group Inc. is duly incorporated and registered in Saint Lucia under company registration number 2026-00484. Client funds are held in segregated accounts, and trading is on MetaTrader 5, which are third party platforms rather than software the firm wrote. The regulated entity is Yal Group Inc., the licence number is 2026-00484, and the registered address is Ground Floor, Sotheby Building, Rodney Village, Rodney Bay, Gros-Islet, Saint Lucia The regulatory detail sits on the regulation page, the execution arrangements on the execution section of the pricing page, and the longer treatment in the guide to SCA regulation.

What a licensed firm is not permitted to do 

The prohibitions are the more instructive half, because each one is the written form of something that went wrong somewhere before it was written down.

• Use client money as working capital. Segregated money is not available to fund the firm's operations, its salaries or its own trading, and the separation holds whether or not the firm is solvent.
• Guarantee an outcome, or present a leveraged product as though loss were unlikely. A firm may not promise a return, quote a success rate for a method, or format a risk warning so that it is missed.
• Deal for a client without an instruction. Trading at the firm's discretion is a separate regulated activity with its own permission and its own signed agreement, and a firm holding neither may not do it, however sensible the trade would have looked afterwards.
• Make a personal recommendation without the permission for it. Advising is its own activity with its own assessment obligations, and it is the subject of the next section.
• Pay or accept inducements that conflict with a client's interest, or reward staff in a way that rewards outcomes bad for clients.
• Onboard a client without checking identity and, for a complex product, without assessing whether the client appears to understand it. The questions asked at account opening are a regulatory requirement rather than a formality.

Why the firm cannot say what to trade 

Execution only is a legal status rather than a description of service quality. It means the firm receives an instruction and carries it out, and that the instrument, the direction and the size were chosen without a recommendation from the firm. Everything the firm publishes has to be readable in that light, which is why an execution only firm describes what an instrument is and how a cost is calculated, and stops before the sentence that would tell somebody what to do with either.

The line is drawn by a definition, not by tone. A communication becomes a personal recommendation when it presents a specific transaction in a specific instrument as suitable for a particular person, or when it rests on that person's circumstances. Factual information stays on the other side of the line: what an instrument references, what hours it quotes, what a contract costs. So does general education addressed to nobody in particular, and so does third party research passed on unchanged and identified as such. What crosses is the same content narrowed to one reader, and narrowing it does not require the word recommend. An instrument, a direction and a person is enough.

Two assessments follow from that distinction and are routinely confused. An appropriateness assessment asks whether a client appears to understand a complex product, and a firm offering CFDs on an execution only basis is generally required to make it at onboarding. A suitability assessment asks whether a course of action is right for a particular person given their circumstances, objectives and capacity for loss, and it is required of a firm that advises. Performing the first is not performing the second.

Underneath the rule sits a reason of substance. A recommendation requires knowledge a broker does not hold: what else a person owns, what they owe, what the money is for and what a loss would cost them. Nothing collected at account opening supplies that. And a firm that writes the contract has an interest in what the contract is, so advice from that party would be worth less than advice from one without the interest. Advice of that kind is the business of an independently licensed adviser.

One consequence is worth stating plainly, because it is the thing most often assumed to be otherwise. An execution only firm does not monitor open positions on a client's behalf. It can see every position on its book, and that visibility creates no obligation to intervene, to warn, or to form a view. Automatic close-out at the level set in the account terms is a mechanical rule that stops the arrangement running into an unpaid debt. It is not supervision of anybody's trading.