what you mean with "bad fit"? I worked for many years at sell-side banks on the trading side and was aware that this practice exists on the equity execution floor. They look at all clients on a monthly basis and "speak" to those clients the bank loses money on. I have from the first time I heard of such behavior already raised my eyebrows (I worked most of the time on the rates side hence this behavior did not affect me). Closing client accounts or otherwise "discouraging" certain counterparties from trading with the bank is in my book irresponsible and should be banned by regulators. When I started out as market maker on the rates derivatives OTC side I knew there were more intelligent clients than others. But I always used that information to my advantage. Sure I would quote wider if a pricing request was in large size or when it did not "suit" my book. But I would never turn away a client because they make money vs the bank. I could simply not afford it. They would have made a call to upper management of the bank and certainly would have had their way. You could argue that they had negotiation power because they may have brought in business in other areas. But even if they did not I would have still quoted to them.
But here is the problem: The above all pertains to OTC trading, meaning, I would be on the other side on each and every of their trades. However, an FCM is never on the other side of the trade. They simply provide market access to listed markets. Hence there should be no fear of onboarding smart and profitable clients. It is outright stupid to discourage those who make money from trading with the firm. Either an FCM has their risk procedures in place or not. This particular FCM seems to really have issues with their own internal system else they would not discourage others from trading through them. As long as exchange rules are adhered to there should be nothing an FCM has to fear.
I strongly object to the notion that an FCM can close client accounts merely on the basis of not liking the "style" or "approach" of a client. It is like Microsoft or Sony asking all clients on which they lost money on the first batch of video game consoles to return their consoles and stop doing business with them. Either you are in the game and are open to business or not. But for a pure pass-through agent to close accounts because they don't like the style is a ridiculous behavior. An FCM can of course spell out in its contract that they are not in the business of penny stocks or certain other derivatives. Sure, but their internal risk checks should support that model and it should be clearly spelled out to the client. After that I see zero rational to kick clients off the platform who adhere to the rules and regulations.
FCMs are anyway a dinosaur and leftover of antiquated American ways of trading listed derivatives. I have no idea why they still exist. Makes zero sense. They exist nowhere else in the world. A client signs up with a broker or prime broker and thats it. Each broker specifies in details which products they offer and which not. Simple as that.
In that I would strongly discourage anyone from using an FCM that exhibits the behavior as described by the OP. Let them change their attitude or go out of business. Simple as that. Clients have leverage, too. It is only when gullible and stupid customers eat shit when black sheep can exist in this industry.
But here is the problem: The above all pertains to OTC trading, meaning, I would be on the other side on each and every of their trades. However, an FCM is never on the other side of the trade. They simply provide market access to listed markets. Hence there should be no fear of onboarding smart and profitable clients. It is outright stupid to discourage those who make money from trading with the firm. Either an FCM has their risk procedures in place or not. This particular FCM seems to really have issues with their own internal system else they would not discourage others from trading through them. As long as exchange rules are adhered to there should be nothing an FCM has to fear.
I strongly object to the notion that an FCM can close client accounts merely on the basis of not liking the "style" or "approach" of a client. It is like Microsoft or Sony asking all clients on which they lost money on the first batch of video game consoles to return their consoles and stop doing business with them. Either you are in the game and are open to business or not. But for a pure pass-through agent to close accounts because they don't like the style is a ridiculous behavior. An FCM can of course spell out in its contract that they are not in the business of penny stocks or certain other derivatives. Sure, but their internal risk checks should support that model and it should be clearly spelled out to the client. After that I see zero rational to kick clients off the platform who adhere to the rules and regulations.
FCMs are anyway a dinosaur and leftover of antiquated American ways of trading listed derivatives. I have no idea why they still exist. Makes zero sense. They exist nowhere else in the world. A client signs up with a broker or prime broker and thats it. Each broker specifies in details which products they offer and which not. Simple as that.
In that I would strongly discourage anyone from using an FCM that exhibits the behavior as described by the OP. Let them change their attitude or go out of business. Simple as that. Clients have leverage, too. It is only when gullible and stupid customers eat shit when black sheep can exist in this industry.
. No FCMs, brokers, routing and other nonsense.
