Refco Fallout
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Jimrock i agree with your statement on refco fx it is a cover up to make fxcm look like the good guys along with that they attract customers to their company . How can they arrange this transfer if 5 companies are going to buy out Refco . Maybe they can make a deal with the new buyers but i think the accounts have more money in them than what Fxcms share are worth . This is such a currpt indusrty i wasnt aware of this till now . See what money can do ones morals. Sickening . I hope there is a silver lining to this but i dont think so .
jimrockford,
FXCM "rescuing" RefcoFX alsways sounded like a complete joke to me. If they take over the accounts, this means that you can withdraw the very next day. Now if the cash is there why wouldnt you be able to withdraw right now ?? More likely, the cash is not there and FXCM will cover the hole to the extent of Refco's ownership in FXCM, "relieving" Refco of some of the debt. Of course most customers probably wont withdraw but trade themselves to zero, so in effect FXCM will be buying back their shares at a huge discount! (You see the trick is to "keep them trading" that's why you are still allowed to trade with Refco FX, since most customers lose and Refco's debt to them must be actually decreasing). Mind you, FXCM can resell the shares again, to another "strategic partner" for cash.
I may be wrong but this sounds like a rather profitable business transaction!
FXCM "rescuing" RefcoFX alsways sounded like a complete joke to me. If they take over the accounts, this means that you can withdraw the very next day. Now if the cash is there why wouldnt you be able to withdraw right now ?? More likely, the cash is not there and FXCM will cover the hole to the extent of Refco's ownership in FXCM, "relieving" Refco of some of the debt. Of course most customers probably wont withdraw but trade themselves to zero, so in effect FXCM will be buying back their shares at a huge discount! (You see the trick is to "keep them trading" that's why you are still allowed to trade with Refco FX, since most customers lose and Refco's debt to them must be actually decreasing). Mind you, FXCM can resell the shares again, to another "strategic partner" for cash.
I may be wrong but this sounds like a rather profitable business transaction!
hi fader, fyi here's skelsey (Steve_IB) reply http://www.elitetrader.com/vb/showthread.php?s=&postid=880166#post880166
as you'll see on that same thread or direct from IB's website, they disclose their financials, credit rating reports etc. as far as risk management, check their website http://www.interactivebrokers.com/en/accounts/smart.php?ib_entity=ca , notably:
"Advanced risk monitoring and profitability across products with real-time margin display, profitability, Options Analytics, and Value at Risk (VAR) tools."
hope this helps,
(disclaimer: i have no relationship whatsoever with IB as of yet)
and there is this as well, as far as futures trading: http://www.cftc.gov/files/tm/fcm/tmfcmdata0508.xls (scroll down)
methinks fxcm and acm are simply horrified at the idea that they are going to have to give access to their financials etc to ALL the bidders in the refco's fxcm & acm auction / liquidation process... unlike when they sold the shares to Refco in the first place, this time they can't choose the bidders, nor the extent to which disclosure is required...
in this context any quick & economically viable deal saving them the scrutiny from direct competitors is worth putting forward i'd think
)Your questions were more than answered by 2cents. I am, incidentally, an IB customer, so I have personally observed that excess funds are swept nightly. I have personally witnessed IB's risk control practices as a customer, and I have read, on their website, about their capital cushion.
Quote from 2cents:
methinks fxcm and acm are simply horrified at the idea that they are going to have to give access to their financials etc to ALL the bidders in the refco's fxcm & acm auction / liquidation process... unlike when they sold the shares to Refco in the first place, this time they can't choose the bidders, nor the extent to which disclosure is required...
in this context any quick & economically viable deal saving them the scrutiny from direct competitors is worth putting forward i'd think
I seem to remember reading about other disputes over bidders not being able to obtain full financial disclosures, and allegations that the initial proposed Flowers deal was an effort to limit financial disclosures. I would not be at all surprised if the disclosures of criminality, within Refco entities, are only the tip of the iceberg, and that the Refco criminals are looking for ways to keep as much of that iceberg submerged as possible.
Here's something to look out for. The regulators and prosecutors are partially to blame for this mess. This happened on their watch. Their reputations are damaged by it. They have a strong incentive to help cover up the full extent of their failures. This type of behaviour is very common, where the government officials who you would, at first, think are your natural ally, in wanting to expose and to punish the wrongdoing, are actually working for the other side, because it is in their best interest to minimize the appearance of regulatory and law enforcement failures. Elliot Spitzer is a hero, but he is the exception to the rule, not the norm. J. Edgar Hoover, for example, who ran the FBI for about 50 years, doggedly insisted that there was no such thing as "organized crime". He persisted in asserting this position, until he was embarassed and forced into admitting the existence of organized crime in 1957, after police in New York made a spectacular bust of a nationwide meeting of several dozen crime bosses, in Appalachin, New York, who were in the process of negotiating a re-organization of what they called "this thing of ours".
Here is one more thing you should deserving careful thought. If a futures trading firm is offering very low margin requirements, like $500 for e-minis, then WATCH OUT. This means they have weak risk control, like Refco, and so they are much more likely to go bankrupt during a black swan market event.
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