In lower-end forex shops, you're simply authorizing your broker to calculate how much money you would have won or lost had the trade actually occurred and debit/credit your account accordingly. No foreign currencies change hands and no financial instruments are implicated.
These are called "bucket shops" and they're so slimy that Bitcoin exchange operators feel obligated to describe that they're not like them.
Wow. The more things change, the more they stay the same.
More than a century ago, Jesse Livermore[1] made and lost several fortunes trading stocks via bucket shops. Not unlike what happens to current day card counters, the bucket shops banned Livermore. Bucket shops (at least for stocks) have long been illegal in the USA.
What exactly is slimy about it? It's all based on a published exchange rate, right?
The original bucket shops were only slimy because they could have real traders at the exchange manipulating the price to wipe out customers in the bucket shop. (as far as I know)
In lower-end forex shops, you're simply authorizing your broker to calculate how much money you would have won or lost had the trade actually occurred and debit/credit your account accordingly. No foreign currencies change hands and no financial instruments are implicated.
These are called "bucket shops" and they're so slimy that Bitcoin exchange operators feel obligated to describe that they're not like them.