French intern makes 10 M GBP thinking he was on demo...

[Millionaire]

Hey genius, if the orders never go out of the brokerage, how the fuck did the guy trade real money?

Bucket shops are common in FX, this would be the first time i heard of one in exchange traded futures.
That google review of the guy having trouble getting his money out is a dead give away this Broker could be a bucket shop. Now this could be a red herring and they could be legit. But no legit broker would let you buy 5 Billion notional in SIF contracts with just 23K in your account. Most likely this french guy was placed in the 'B book' where they bucket trades and don't even bother to check margin as that would just slow the time taken for the trader to blow up his account. LOL

What is a Bucket Shop?
A bucket shop is a illegitimate broker masquerading as a legit market participant that rarely if ever sends out to a real market. Instead, they hold their trades internally (in a ‘bucket’) hoping that their client will lose. Being regulated in a respected and developed jurisdiction does not automatically exempt a broker from the title of bucket shop if it can be proven that the broker does any two or more of the following consistently:

1. Trades against their clients best interests (e.g. asymmetric slippage, confusing dealing prices, unreasonable last look times, ignores/re-quotes/cancels deals without a specific reason),
2. Hardly matches or intends to send/offset the majority of their unmatched volume to a real market (wholesaler / ECN / exchange / etc.),
3. Profits directly from client losses,
4. Cannot fully process withdrawal requests within one business day.

http://www.abundancetradinggroup.com/what-is-a-book-vs-b-book-in-forex-trading/

 

[JSOP]

Fixed my previous post to quote Piccolo instead of you.

I agree this broker looks very dodgy, probably the broker never even sent the 'real' account orders to the exchange, they most probably bucket all the trades hoping the account eventually blows up and they get to keep all or most of the initial deposit.
If true there is no chance they could ever pay out the 11 million as it doesn't even exist and neither did the initial $1million loss.

If the broker internalized the trades and was the counterparty to all the trades, then it's even worse for the broker; it shows that the broker without doubt knows that the platform that the trader trades on is real trading and not demo because the broker has even entered into contracts overtly with the trader by being the counterparty obviously also with the full expectation that the trader would be responsible for any losses. So if the broker fully expected the trader to be responsible for all the losses then likewise the broker would be fully responsible for its own losses now that the trader has profited against the broker especially that the broker is now contractually obligated to realize the $12 million profit that the trader has gained because it has set itself out to be also the clearing firm and has "cleared" the trades that the trader did by being the counterparty. Before it was still a matter of judgement whether the profit the trader gained would count as genuine profit or fictitious profit since the trader just signed up for a demo system but if the broker traded against the trader, then it's 100% genuine profit that the trader gained because the broker just acted as the real trading platform and it now owes the trader $12 million.

And not only that, the broker would be in gross violation of FCA regulations on at least the following counts:

1) They committed fraud and misrepresentations by acting as a clearing firm when they only have a license as a broker when they acted as the counterparty to the trader's trades. To act as a clearing firm, you would have to have lot higher capital and register as such with FSA.

2) Since I believe 2015, FSA has banned outright trading against clients in all securities. The fact that this broker traded againsted their client is a serious violation of this FSA ruling. It's not going to be just fined by FSA, it's going to be banned from FSA from carrying out its business as a broker; its license is going to be immediately suspended.

So if the broker really internalized the trades, this trader is not only entitled to all the profit confiscated by the broker but the broker itself is going to be in big trouble with the FSA. This broker is incompetent and careless but at least it's not stupid enough to be trading against the trader, I hope.

 

[JSOP]

Bucket shops are common in FX, this would be the first time i heard of one in exchange traded futures.
That google review of the guy having trouble getting his money out is a dead give away this Broker could be a bucket shop. Now this could be a red herring and they could be legit. But no legit broker would let you buy 5 Billion notional in SIF contracts with just 23K in your account. Most likely this french guy was placed in the 'B book' where they bucket trades and don't even bother to check margin as that would just slow the time taken for the trader to blow up his account. LOL

What is a Bucket Shop?
A bucket shop is a illegitimate broker masquerading as a legit market participant that rarely if ever sends out to a real market. Instead, they hold their trades internally (in a ‘bucket’) hoping that their client will lose. Being regulated in a respected and developed jurisdiction does not automatically exempt a broker from the title of bucket shop if it can be proven that the broker does any two or more of the following consistently:

1. Trades against their clients best interests (e.g. asymmetric slippage, confusing dealing prices, unreasonable last look times, ignores/re-quotes/cancels deals without a specific reason),
2. Hardly matches or intends to send/offset the majority of their unmatched volume to a real market (wholesaler / ECN / exchange / etc.),
3. Profits directly from client losses,
4. Cannot fully process withdrawal requests within one business day.

http://www.abundancetradinggroup.com/what-is-a-book-vs-b-book-in-forex-trading/

Bucket shop is no longer allowed under FSA which is what the broker is regulated by.

 

[manonfire]

This is complete bullshit. They have no clearing relationship with the cme. This is all conjecture or a bucket shop.

 

[zdreg]

Trader builds $5 billion position after realizing he wasn't using test program, but brokerage says he can't keep his profit

• Harouna Traore, a day trader in France, thought he was using a demonstration version of British brokerage firm Valbury Capital's platform.
• He opened an account with about 20,000 euros, or $23,000, after using the demo during an educational course in Paris.
• Traore racked up a loss of more than $1 million before he realized the trades were real and, instead of quitting, he kept trading for a profit of 10 million euros, or $11.6 million.

Michael Sheetz | @thesheetztweetz
Published 19 Hours Ago Updated 18 Hours AgoCNBC.com

Martin Leissl | Bloomberg | Getty Images
A financial trader monitors data as a television shows euro currency banknotes at the Frankfurt Stock Exchange in Germany.
He thought he was practicing — but the trades and the millions of dollars of windfall were real.

Harouna Traore, who was taking a class in Paris to become a day trader, used a demonstration version of British brokerage firm Valbury Capital's platform to learn how to trade equity futures last summer, according to the Financial Times. He opened an account at Valbury with about 20,000 euros, or $23,000.

A short time later, he was at home practicing on what he thought was the demo, racking up more than 1 billion euros of orders in U.S. and European stock futures, and losing more than 1 million euros. Then, Traore came to the shocking realization that the trades were live.


"I could only think of my family," Traore, married with two children, told the FT. "I was stressed."

But instead of stopping, he continued to trade, according to the FT's report, building up a $5 billion position in U.S. stock futures and turning his loss into a profit of about 10 million euro, or $11.6 million.

Traore called Valbury a few days later to explain the situation. In response to his skillful turnaround, the firm declared Traore was in breach of his contract and that his holdings were both void and canceled, the FT reported.

Traore has sued Valbury for the $11.6 million, declaring the firm was negligent and had breached his contract.

Valbury, owned by a Indonesia-based financial services company, denies doing anything wrong. The FT reported the firm is expected to argue that Traore was a financial services professional, not a consumer, and that the case should not be heard in French court, where Traore would likely receive much greater protection.

Traore admits he "tried to embellish" his experience on his application to open an account on the site, according to the FT.
This could well be a make or break case for Valbury, as the firm brought in about $10 million of revenue in 2016, according to the most recently filed public documents. Valbury's revenue declined 15 percent year-over-year from 2015, the FT reported.

Read the full rep

"This could well be a make or break case for Valbury, as the firm brought in about $10 million of revenue in 2016, according to the most recently filed public documents"

basically they are trying to steal the profits from the trader and enrich themselves.

 

[zdreg]

here is original report in FT

A trainee day trader in France is suing a British brokerage for an amount comparable to almost its entire annual revenue after it seized the €10m profit he made using what he initially thought was a demonstration version of its platform. Harouna Traoré opened a €20,000 account at Valbury Capital, a UK-based brokerage, last summer after using a dummy version of its platform to learn how to trade equity futures as a retail investor on a trading course in Paris. A couple of weeks later, he was practising trading at home on what he believed to be the demo version — placing €1bn of orders for European and US equity futures — before realising that it was the live platform and he had run up a loss of more than €1m. He continued trading, eventually building up a $5bn position in US equity futures and turning the loss into a profit of more than €10m. “I could only think of my family,” said Mr Traoré, who is married with two children. “I was stressed.” After he called Valbury a few days later to explain what had happened, the brokerage told him he had breached his contract and his positions were “void and cancelled”. In January, he filed a writ of summons in the Pontoise district court, north of Paris, claiming breach of contract and negligence by the British brokerage and calling for it to pay him the €10m he says it owes him. Valbury, which is owned by the eponymous Indonesian financial services group, denies any wrongdoing and is preparing to file its initial submission next week. It is expected to argue that Mr Traoré is not a consumer, but a financial services professional, so the case should not be heard in France, where he would benefit from greater consumer protection. Robert Falkner, partner at Reed Smith, the law firm representing Valbury, said: “We are familiar with the spurious allegations made by the French arcade trader Mr Traoré (a seasoned market risk analyst formerly employed by Reuters) which are strongly denied as wholly without merit and will be vigorously contested.” “This matter is now before the courts so that we consider it inappropriate to comment further,” said Mr Falkner, adding that Valbury had kept its regulators at the UK Financial Conduct Authority “fully informed”. Valbury is expected to point out that Mr Traoré said in his application to open an account that he had traded futures and options frequently. Mr Traoré admitted that he had “tried to embellish my trading experience and professional qualifications at the time, as I thought my application might otherwise not go through as easily”. According to the court filing by Mr Traoré, which has been seen by the Financial Times, Valbury told him that it had treated the trades he carried out as a “manifest error” because he had thought he was using its demo platform and had not intended to place real orders. The brokerage also told him that he had breached his trading limits. Mr Traoré’s lawyers at Linklaters said in the filing that the 41-year-old had no prior experience of financial markets and previously worked at Thomson Reuters, selling performance analysis software to investors, before being made redundant last year. Therefore, they said, he should be considered a consumer and the case should be heard in France. His lawyers also said Mr Traoré should have been prevented from trading such large amounts by preset trading limits that could have been imposed by Valbury. They disputed Valbury’s suggestion that his orders were a “manifest error” — the definition usually given to fat-finger trading mistakes — because most of the profits were only made once he realised he was trading on the live platform. The stakes are high for Valbury, which made £9.88m of revenue in the year to December 2016 down from £11.7m the previous year. It reported its third consecutive annual loss of £455,405 in 2016 — its last set of publicly filed accounts. Mark Hanney, chief executive of Valbury, has previously worked at several other trading firms and spent five years as financial director of Refco Trading Services Ltd, the UK arm of the collapsed US brokerage. Mr Hanney declined to comment. The FCA declined to comment.

 

[zdreg]

to me it seems to be possible greed on both sides. the trader should have given up part of the profit and Valbury should have been happy to make a few million. it could have been win win for both sides. it sounds like a marriage gone awry and the assets insteads of being divided might disappear in lawyer fees, before it's over. plus of course there is the airing of dirty laundry in public which will not enhance the future prospects of either party.

 

[comagnum]

The story makes no sense at all. The noob blew up 50 times over, and now claims his blown up acct is worth a billion. How can this noob be taken seriously after he mistook live trading for demo & says his trades are basicaly dart throws. Besides he says he lied on his broker application which he will regret in court.

No way on earth that noob will walk away with a dime. His broker in so many words said he was a lunatic, which is proabably the case. The news coverage is pure sensationalism, tabloid like reporting void of any fact checking or critical thinking. You have to suspend logic & common sense to buy into this nonsense.

 

[Pekelo]

The story makes no sense at all.

I agree. First, what kind of brokerage lets you go into the red by a million when your account size is only 25K s,all?

Second, when he was down a million, shouldn't some kind of red flag come on? At that point when he realized it was real money, the trader was stealing access and it is called embezzlement. And had he stayed in the red, would he like to own the debt too? What if he had blown it into a 10 million loss? He would want to weasel himself out of that for sure.

The money should be given to charity because both sides are stupid AND irresponsible. (kind of criminal too)

 

[Millionaire]

How can this noob be taken seriously after he mistook live trading for demo & says his trades are basicaly dart throws. .

Probably because the 'live' platform was identical to the demo platform but with a few GUI changes to remove the 'demo' wording.
I bet he got super good fills on his 35,000 contracts.
No risk flags went off at the brokerage because no one cared as the 'trades' weren't real anyway.
The only thing real was his 23K deposit. I wonder how long it took him to get that money back?