IT’S A MATTER OF PERSPECTIVE
When brokers move from using MetaQuotes MT4 Dealing desk to a straight through processing (STP) model, the first question we often get is, “What’s the difference between Net based reporting used by the prime broker and the ticket based reporting used by MT4?” Quite simply, the difference is in the way the P&L of tickets are realized. In MT4 the P&L of the ticket is not realized until it’s closed. However with Net Based reporting the broker realizes a profit when a ticket opens in MT4 and again when it closes due to markups, commissions etc. If you were trading from just one MT4 account with no markups or hedged trades, both systems would display the same equity, balance and free margin. However when you introduce hedged trades, multiple accounts, multiple deposit currencies etc., it becomes more complicated to reconcile. For example, if one trader buys 1 Lot of EUR/USD and another sells 1 Lot EUR/USD, the broker would have realized a profit on both tickets and there would be no open tickets at the Liquidity Provider, but MT4 would still show two open tickets with unrealized P&L. Remember the broker is passing on the risk to the trader and is purely making It’s profit through markups and commissions. Now the issue becomes how to manage the exposure risk between both reporting systems. There are several methods from automatically pulling the data from the systems or as simple as running the reports and exporting the data to excel. Check back next week for further insight into how to balance the exposure between both systems.