[qf303rjr3]

If you own $1 billion of equities on swap, you can guarantee that your broker has actually bought the equities (or something close to them) as a hedge. There is no way that your broker has an unhedged $1 billion equity swap with you. They collect a spread on the swap transaction of a few basis points, which is hopefully less than the cost to hedge the swap. They don't want to take the risk of the position moving against them by more than a few basis points (typically the equity market moves hundreds of basis points per day) so they almost always hedge.

The Japanese FX broker, on the other hand, has the odds so firmly stacked in their favour that they have no need to actually do any FX trading (though I expect that they do some). If the margin is high enough, the statistical fluctuations don't matter that much. That's the difference between a brokerage and a bucket shop.

[lz400]

What do we mean with "odds so firmly stacked in their favor" here? You seem to imply spreads so large they eat all the volatility? Is that all?