Lawsuit Again, TD Ameritrade TOS Getting it Again

systematictrader

systematictrader

Not only TD Ameritrade knew about crude oil prices going negative prior to the event of April 20th. On top of that they liquidated well qualified accounts On the 24th of April for whom their accounts was able to withstand the entire drop into negative territory and did NOT even go in a margin call. So first they settled every one negative and for those who maintained or rolled the position to the next contracts TD Ameritrade after having the benefit of seeing the impact of negative prices decided oh we don't want any one to trade crude oil even their biggest accounts taking away their their chances to recover and or make a profit at the exact bottom.

https://tdameritradeclassaction.com/
 
There’s zero chance this class action will get any traction. If you’re selling the oil futures and no one else is buying, not even the market makers, are you willing to take physical delivery? I don’t think so. It’s in the account agreements that a custodian can liquidate anyone they deem high risk, per their own internal risk metrics.
 
Wise Old Man said:
There’s zero chance this class action will get any traction. If you’re selling the oil futures and no one else is buying, not even the market makers, are you willing to take physical delivery? I don’t think so. It’s in the account agreements that a custodian can liquidate anyone they deem high risk, per their own internal risk metrics.
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I don't think your understanding it, Its that they disallowed crude trading on ALL contracts ONLY after the fact when they knew all along. Your forgetting there are some who went through the drop in the negative prices, had no problem and carried on to hold the position in the latter months of crude oil and they liquidated those people.
 
systematictrader said:
I don't think your understanding it, Its that they disallowed crude trading on ALL contracts ONLY after the fact when they knew all along. Your forgetting there are some who went through the drop in the negative prices, had no problem and carried on to hold the position in the latter months of crude oil and they liquidated those people.
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No it's you who don't understand. Oil futures is NOT the same as other financial instruments like stocks or bonds; it has a physical delivery component which means if you can't close your position to get rid of the contracts at negative prices, you need to take delivery of the actual oil and what that means is that oil pipes and tanks and trains will start shipping all the crude oil that's traded under CL to the actual traders who were trading with TOS. So unless those traders who were trading with TOS either have megatonnes of storage capacity ready to take these oil delivered via pipeline, they are considered a risk to the brokerage firm regardless of how well-positioned financially they are. It has nothing to do with whether they had enough margin to cover the position, to withstand the negative price. You can have all the money in the world like Warren Buffet but if you don't have the storage capacity to store these million barrels of oil, you can't have those contracts on your hands upon expiry and rolling into the next contract does NOT work because the next ones were going into the negatives as well. If you do, then you should've made arrangements with TOS, the brokerage who will in turn with the clearinghouse to make the proper physical delivery arrangement and it's a complex process that has to satisfy various federal laws and regulations, not just getting some s*** dumped in your backyard. https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html It's not TOS' problem that those traders were ignorant and had no idea about what they were trading.

But the class action I see is not about TOS liquidating the positions; it's actually accusing TOS of knowing it beforehhand and did not inform the traders. That's even a bigger BS. First of all, the dipping of the CL price into negative price has never happened before and happened for the VERY FIRST TIME since the beginning of the trading of the oil futures and is due to extreme circumstances. HOW is the brokerage going to know beforehand something that has never happened before in history??!! And second TOS is NOT a full-service brokerage. Its duty and responsibility to its clients is the execution of their trades and has no obligation to inform, educate or advise their clients in any of their trading or investment activities especially about something that has never happened before. Traders are responsible to exercise their own due diligence to educate themselves about what they want to do and manage their trading appropriately instead of relying on others to hold their hands. Trading is a cut-throat competitive business and nobody is going to just hand you money for free. If you don't know how to trade something or how an instrument like oil futures work, then don't trade them!!

This lawsuit is based on pure greed with some ignorant idiots who didn't know what they were doing lost a whole bunch of money and now they are pissed and want their money back. Well if you are stupid and choose not to do your homework, then you lose money. That's it. Just because you have the money to sue doesn't mean you actually are right to sue. The law and the judiciary system are there to protect those who deserve to be protected not a bunch of ignorant cry-babies who chose not to know what they were doing. Just like @Wise Old Man said, this lawsuit is going to be thrown out of court in no time. It's just too bad we would've already wasted time, energy and money listening to the whining of a bunch of greedy cry-babies who choose to blame others for their own stupidity and ignorance and their equally greedy lawyers who choose to extort some money off their ignorant clients.
 
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And further FYI to you: Brokers do NOT need prior authorization from clients for liquidations due to risk in physical delivery. It is spelled out succinctly and clearly in any standard client agreements when you sign up to trade with any brokers. They are ALWAYS authorized to liquidate your positions in these situations as they see fit with or without the client's knowledge. Another thing that those traders should've read before signing to trade. And if you didn't read them before trading, it's not the broker's problem.
 
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"ALL CONTRACTS" Where are you plunging in about delivery and yada yada becoming storage delivery expert. THEY DISALLOWED trading on ALL CRUDE contracts, APRIL 24th, A Friday, NONE EXPIRATION DAY. Its got nothing to do with delivery the QMK20 and CLK20 Had already expired on Monday and Tuesday of that same week April 20th and 21st
 
There is two class actions to be,
First is the one them knowing about negative prices and not telling every one, people use a broker to get them through to the exchange, if the exchange gives your firm an advisory prices can go negative common courtesy is you tell your client. When in the world does a trader ever interact with an exchange directly? i never heard of it, a broker is your middle guy

Mind you they got every one out of CL, they did take people out of that position BEFORE, but did not get the ones out QM, that where the trouble is, they knew its gonna be trouble and acted, but only on half the customers the ones in CL instead of QM, which all couldve been eliminated have they simply sent out an email or they couldve raised margin. WHy in 2011 silver they raise margins and here you got crude warnings to go negative and they do nothing about it? till AFTER THE FACT?

Lastly a broker is supposed to allow you to trade. Their platform did not allow trades to be placed when prices went negative. This isnt cry babies this is people unable to place trades when they need to place their trades.


Second lawsuit is about them liquidating all contracts simply because they do NOT want any one to trade crude oil any more, Why? because THEY got burned having reimburse clients that couldn't place orders during prices going negative since they could not place trades and after seeing what can happen all of a sudden they decide its not safe when they knew and had same info before the incident. Incompetence at its finest
 
systematictrader said:
There is two class actions to be,
First is the one them knowing about negative prices and not telling every one, people use a broker to get them through to the exchange, if the exchange gives your firm an advisory prices can go negative common courtesy is you tell your client. When in the world does a trader ever interact with an exchange directly? i never heard of it, a broker is your middle guy

Mind you they got every one out of CL, they did take people out of that position BEFORE, but did not get the ones out QM, that where the trouble is, they knew its gonna be trouble and acted, but only on half the customers the ones in CL instead of QM, which all couldve been eliminated have they simply sent out an email or they couldve raised margin. WHy in 2011 silver they raise margins and here you got crude warnings to go negative and they do nothing about it? till AFTER THE FACT?

Lastly a broker is supposed to allow you to trade. Their platform did not allow trades to be placed when prices went negative. This isnt cry babies this is people unable to place trades when they need to place their trades.


Second lawsuit is about them liquidating all contracts simply because they do NOT want any one to trade crude oil any more, Why? because THEY got burned having reimburse clients that couldn't place orders during prices going negative since they could not place trades and after seeing what can happen all of a sudden they decide its not safe when they knew and had same info before the incident. Incompetence at its finest
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Your posts just demonstrate nothing but your ignorance to the hilt. First of all, HOW can you trade on negative prices??!!! If I want to charge you $-2.5 for an apple, HOW are you going to pay me? What are you going to pay me in? This is WHY they disallowed trading because there was no market with negative prices. You obviously know NOTHING about how financial markets work. The financial market is not something that's out of a vacuum that people just created out of thin air. It's a place where buyers and sellers meet and decide on a price and exchange money for financial instruments or vice versa very much the same as any other markets just because it's online it's no different. The platform is just a tool. Negative prices mean there is no market. No trading can be done so of course you won't be able to place trades. It's not TOS' fault. It's just how the market was at the time. If you had traded with any other broker at the time, you would've had the same problem. They raised the margin on silver in 2011 and still allowed trading because the price did not go NEGATIVE!!! You could still trade it as long as the price was not negative, obviously. They just raised the margin because it was a very volatile situation.

Second, if the advisory was issued to TD Ameritrade, then it was also available on the exchange CME website. So you could very well look it up yourself and be aware. And lord and behold, the advisory was indeed published. https://www.cmegroup.com/notices/clearing/2020/04/Chadv20-160.html So in this case, all of the traders would've been well aware of what was about to happen to the crude price and how it would not be able to be traded. So it's the traders' fault that they didn't do due diligence. I told you TOS is a discount broker not a full-service one, any information, advice that it chooses to disseminate to its clients is solely out of their courtesy and discretion but never their obligation. Their function is to execute your orders. This was also stated very clearly in their client agreement when you sign up with them to trade. If you don't like it, next time, use a full-service broker that will hold your hand every single step of the way when you trade but be prepared to pay hefty commissions because nothing comes free.

Anyway I will let you hear it from the court that it was your own incompetence and ignorance that landed you in this s*** and not TD Ameritrade. Have fun paying the lawyer fee though!

Oh and p.s. just some further information for you, in addition to what I told you about physical delivery which you obviously didn't even bother to read or understand. You ARE able to deal with exchanges directly. You don't have to rely 100% on your broker. The exchange here is not something that exists out of thin air. It's got phone numbers, people you can talk to and information that you can look up to find out about the instruments that you trade. The physical delivery information that I posted before was taken from their website. In here everything is accessible. You can do everything yourself. You don't have to rely on people to serve you all the time.
 
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JSOP said:
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Second, WHERE do you get the proof that TOS received an advisory from the exchange beforehand that the price will go into negative when the situation has NEVER happened before in history?..
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This is one of three notices I got before the expiration, and I'm just some schmoe retail dude.


https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2020/04/Chadv20-152.pdf

Here's one before it, not specifically tied to options. Read the very large font carefully. The CME is wholly complicit in this. Search for my commentary on the forum about this if you like. It was a serious kerfuffle.

"This Sunday, April 5 (trade date Monday, April 6), as an operational step toward potentially supporting negative pricing and strikes, the MDP 3 Security Definition (tag 35-MsgType=d) for these NYMEX Energy outright futures and options on CME Globex will be flagged as eligible to trade at negative prices. The options on futures will also be flagged as negative strike price eligible.

*Trading at negative prices for these outright markets will not be supported at this time. Negative strike prices will not be listed.*

Negative order prices will be rejected with Execution Report (tag 35-MsgType=8) message:

  • Reject code tag 103-OrdRejReason = 1012
  • Tag 58-Text=<’Price must be greater than zero'>
Any changes will be published in future CME Globex Notices.

Negative trade price instruments, and negative strike price eligible instruments, are identified in the MDP 3.0 Security Definition (tag 35-MsgType=d), in repeating group tag 871-InstAttribType:

  • tag 872-InstAttribValue= 9: Negative Strike Eligible
  • tag 872-InstAttribValue=10: Negative Price Eligible
  • tag 872-InstAttribValue= 14: Zero Price Eligible"
 
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