When they see the money moving to other countries with protection -- there's nothing more compelling than voting with your feet.
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FXCM Is Buying RefcoFX - Deal is Done - Funds are safe
- Thread starter Trader/God
- Start date
When they see the money moving to other countries with protection -- there's nothing more compelling than voting with your feet.
But how do you see that working?
The FX broker is worried the cust blows up and doesnt pay up, the cust is worried the broker blows up due to the brokers probs or another cust prob.
Maybe they can simply move your money to your own a/c at the same bank the money is held with at the end of the day if you're flat. Its a tough question to solve. Maybe over-leveraging has intrinsic risks some folks dont perceive.
The FX broker is worried the cust blows up and doesnt pay up, the cust is worried the broker blows up due to the brokers probs or another cust prob.
Maybe they can simply move your money to your own a/c at the same bank the money is held with at the end of the day if you're flat. Its a tough question to solve. Maybe over-leveraging has intrinsic risks some folks dont perceive.
true but other than in the case of (rare) week-end gaps and some other exceptional occurences such as on NFP Aug 2004, the risk of a custie acct blowing up before the broker has had a chance to liquidate it is almost non-existent on the Forex (thats if the dealers are not dozing off when the market's suddenly picking up of course...).Quote from tomcole:
But how do you see that working?
The FX broker is worried the cust blows up and doesnt pay up,
agree that all things being equal, increasing the leverage increases the probability that a custie acct blow-up can't be avoided by the broker (despite all the auto-liquidate, guaranteed this, guaranteed that etc features). however the broker is no more at risk from segregating the cust acct. its just a funding issue (cost), and less 'flexibility' for the broker, shld they go bankrupt for whatever reason.the cust is worried the broker blows up due to the brokers probs or another cust prob.
Maybe they can simply move your money to your own a/c at the same bank the money is held with at the end of the day if you're flat. Its a tough question to solve. Maybe over-leveraging has intrinsic risks some folks dont perceive.
now in practical terms my limited experience is it can be done either by 1) segregating 100% of the customer monies and effecting a daily sweep based on COB's daily P&L, 2) segregating say 70-80% only of the average available (unused) margin and effecting ad hoc sweeps (based on variable margin limits etc for instance). as a customer i much prefer 1) but unsurprisingly my broker wld prefer me to accept 2), will entails opening 2 accts (1 seg, 1 non-seg) and implementing a cross-margining agreement... hassle...
Interesting view - but arent you still at risk from the broker blowing up or a lien being placed on the firm?
If it was me, I'd try to see if they could sweep the money into some sort of T-bill, or some T-bill equivalent product where your credit risk shifts out of the firm and into something you're more comfortable with. Maybe having some sort of t-bill in a custody a/c where the funds are clearly marked as segregated and no co-mingling can occur.
I think the issue you raise is not going away and will have to be resolved before these FX rock&rollers can truly get back in the game!
Personally, I would never accept some sort of broker imposed cross-margining, as that implies a cross-default agreement, its simply too much hassle for the return, especially if you're personally guaranteeing something.
If it was me, I'd try to see if they could sweep the money into some sort of T-bill, or some T-bill equivalent product where your credit risk shifts out of the firm and into something you're more comfortable with. Maybe having some sort of t-bill in a custody a/c where the funds are clearly marked as segregated and no co-mingling can occur.
I think the issue you raise is not going away and will have to be resolved before these FX rock&rollers can truly get back in the game!
Personally, I would never accept some sort of broker imposed cross-margining, as that implies a cross-default agreement, its simply too much hassle for the return, especially if you're personally guaranteeing something.
they are a UK broker, don't think they wld entertain the T-Bond solution but yeah, i'd like that!
now, if they simply segregate the monies into a "myname" designated acct at their prime broker's, RBS in this case, i v.much believe i am safe in the event they shld go bkrupt. if it is under a "theirname" customers segregated acct at RBS, then that doesn't make me feel too good...
negotiations r ongoing... obviously they aren't keen... but i am prepared to pull the money and they know it... plus i can't possibly be the only one asking, sooo... lets wait & see
now, if they simply segregate the monies into a "myname" designated acct at their prime broker's, RBS in this case, i v.much believe i am safe in the event they shld go bkrupt. if it is under a "theirname" customers segregated acct at RBS, then that doesn't make me feel too good...
negotiations r ongoing... obviously they aren't keen... but i am prepared to pull the money and they know it... plus i can't possibly be the only one asking, sooo... lets wait & see
i have a few months ago but we cldn't agree on leverage (they won't budge from 3%, while i get and use 1% from the second-tier prime broker). also unclear they have the infrastructure to let me trade in blocks and allocate to client accts. UBS, Fimat etc clearly confirmed they cldn't do it. From memory, RBS said they wld be more comfortable if i were set up as a fund... which is sthg i am working on but thats still a long shot...
but i am talking to them (RBS) again... may enter into a prime relationship with them just for my PA (despite the low leverage), and to get a feel for how good they are, spread-wise etc... its just the time it takes, the paperwork etc... i know its worth it tho' ...
but i am talking to them (RBS) again... may enter into a prime relationship with them just for my PA (despite the low leverage), and to get a feel for how good they are, spread-wise etc... its just the time it takes, the paperwork etc... i know its worth it tho' ...
Quote from 2cents:
no fx broker wants to admit it openly yet but they are pretty much all facing significant client / funds withdrawals as a result of the refco collapse... nobody's comfortable leaving more money than necessary on the account at this juncture... now, one way to restore confidence would be to offer some good measure of segregation to margin fx accounts, and to make it CLEAR in the fine print how exactly client monies are protected, how often they r shifted from seg. to non-seg accounts etc...
dunno for any of u guys but i have been arguing with my brokers, asking for CLARITY specifically, as well as more protection (even at a cost) over the last 4 weeks or so, but pretty much to no avail so far... as a result, am about to pull a big chunk of $ off the table anytime now, see if they get THAT message...
I think what you see in the players still standing when the dust clears is that they have partnerships with the larger banks to guarantee funds.
Currently marketing on things like "pip cost" is how most players are working, which is silly. Its like when computer manufactures focused on Mhz as the only measure of a computer speed. A lot of brokers who claim low pip costs can't honor them anyway. Execution and safety of funds will be the most important things going forward. So you will see more market markers backed by the UBS's and Deutchebanks of the work. First tier or nothing.
After that shake out, every market maker worth dealing with won't have a big safety of funds issue. The next battleground will be the platform. For a lot of traders its an after thought or a place to show place gimmicks (Trailing stops, etc.) but as the market matures the ability to create more advanced contingency orders will be more important to retail traders.
Trader/God
100% agree, its just a transitional thing i think:Quote from tomcole:
I see your point, but think of it as paying for their balance sheet. Any pickup in P&L the added leverage gives isnt worth much if a shop closes their doors overnight.
. at $0.5-1mio AUM, i still find high leverage to be a highly desirable thing, thats why i am still 'accepting' the higher (broker) credit risk, while trying to minimize its impact in all sorts of ways, segregation being one of the best countermeasures, if implemented 'properly' (and thats not easy either...)
. above $5-10mio AUM, there will probably be less and less instances, if any, where using max. leverage will make sense / lead to larger gains (losses) faster, in which case i will probably be happy with std leverage (3%) for any AUM in excess of say $1-2mio, and higher safety of funds / credit rating etc will make the choice of a big bank a no-brainer...
but i have yet to get to that level ;-)