What are the safest futures brokers? MF Global and PFGBest have me worried!

Quote from TheBlackHand:

I never knew Knight were in to futures. That must be recent after the Penson acquisition?

Thanks.
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Knight acquired Penson's exchange memberships, hardware/software and personnel for about $5mm. It fills a 'strategic gap' in the firm's offerings as they now have the ability to offer equities, bonds, futures and spot FX.

There's a good focus on Managed Futures and perhaps a little bit of full-service.

Another nice aspect is that PNSN was one of a few firms that offered CTS T4, TT's X Trader, NinjaTrader, RANOrder, CGG, PatSystems, etc. Basically, everything. Probably even Rithmic and others....

( http://knightfutures.com/ )

Under the Knight banner I think business will flourish; will let you guys know if I find reason to believe otherwise...

I've always found it best to deal with a Clearing FCM, rather than a Non-Clearing FCM.


CHeers,
CTA
 
Quote from rompit11:

Atlas did open my eyes, Zchartist. Atlas was pretty damn accurate on PFG. I think its a good place to start. We need more rankings like Atlas.

Nice bora bora images though.
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They were pretty damn accurate based on the false numbers given by Wasendorf. They computed false numbers to obtain this rating and have been proven right...Good job . The reality is that the same fraud can happen at any of the Atlas top rated FCMs.

I don't say that all their rating are useless but check this for example. The first number is excess capital/ capital required , second is excess capital / segregated funds under control:

PFG : 0.47 0.02
Advantage : 0.56 0.015
ADM : 0.99 0.065
Crossland : 1.74 0.057
Dorman : 3.86 0.053

I don't pretend to be more accurate than Atlas but just based on excess capital which is basically the "cushion" a firm has before seg funds are hit in a bankruptcy, there is something wrong with their ratings...
 
@TraDaToR

I get what you're saying, but this is only one financial factor that is questionable by itself in my opinion.

For example, I read it here somewhere that Dorman released its financial report and it has 60 million in short options, the rest assets are securities & exchange memberships used for their assets and only 500+K in cash.

It is unsettling for me. I'm more of a cash person. And then there is PFG financial fraud.

So really, these financial numbers that you gave doesn't say anything by itself . It's criteria but only one criteria and not enough to give a full picture.

Atlas is using more. Here is the quote from Atlas site:

"A host of components enter into the evaluation of each FCM, some of the criteria are listed below:

•Company valuation
•Net capital levels
•Inflow and outflow of customer funds
•Regulatory actions

•Regulatory penalties
•Exchange actions
•Exchange penalties
•Proprietary trading (y/n)"

So lets take "Inflow and outflow of customer funds" criteria, for example.

I also read somewhere on the forum that Velocity in 6 months dropped from 72 mill to 61 mill. By itself it's probably not enough but with all the other elements combined it might tell a story.

Not to mention Regulatory penalties. PFG had plenty of them.


To conclude, I not saying that Atlas is 100% correct but it gave us a broader picture into health of FCMs using multiple criteria. Consider or not consider it is up to an individual. But Atlas is a good thing, we need more of those.
 
Just want to add to my previous post.

Despite PFG falsified all the financial numbers, Atlas still put PFG on the bottom of the list.
The innovation of Atlas is that it uses combined multiple criteria to look into FCMs not just one or two financial numbers.
 
I am OK with inflow/outflow of customer funds. It's a good thing to add to the picture.

But for example "exchange penalties", depending of what it is, is misleading. Good traders are getting exchange penalties, not weak hands. Good traders get fined by the exchanges for violations of messaging policy, manipulation...and it's the FCM which gets the fine. You are more likely to have traders fined for too many messages at Newedge than at TradeStation...Is it a bad point for Newedge? I shouldn't be.

Same for transparency. I know FCMs who don't give a shit about website, advertisement... They got their niche of clients in Chicago, don't feel the need to make the information available and it's just fine. Both MF and PFG were quite transparent IMO and it didn't help judging their health.

As you said, excess capital is just one criteria but it should weigh a lot more in the Atlas Ratings. It's not normal that firms with so much excess capital show up at the bottom of the list.
 
@TraDaToR

To me...excess capital means nothing compared to the risk the firm is taking like dorman, they have 5ook cash.

They using securities, but who knows what securities they are...
And customers with 60 million dollars of short option premium...

One big move and the option premium will reverse and they will have 60 million negative with only 500K cash to cover it.

That is why excess capital does not mean that much when you calculate trade risk compared to excess.


P.S. I think another good criteria for Atlas would be recent mergers, who bought whom and for how much. Like open e-cry, was sold several times... tradestation, penson etc.
 
Please answer how RCG, who have been in the futures business for like 90 years, is at the bottom, and Amp, one of the smallest fcms, is one of the better rated fcms. Amp is rated over numerous high quality fcms. Not intentionally shitting on Amp, but there is no way they are better than RCG, Crossland, Advantage, etc. It is a stupid list. Stop defending it.
 
Quote from ExchangeBonds:

Please answer how RCG, who have been in the futures business for like 90 years, is at the bottom, and Amp, one of the smallest fcms, is one of the better rated fcms. Amp is rated over numerous high quality fcms. Not intentionally shitting on Amp, but there is no way they are better than RCG, Crossland, Advantage, etc. It is a stupid list. Stop defending it.
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I think you have hit the nail on the head here.

My biggest issue with the list is that it is not transparent in terms of the criteria. I was trying to understand why the likes of AMP are ranked at 66, Options Express at 63 and Vision Financial Markets at 50.

Other than a general overview of what is taken into account, there are no specifics on scoring methodology.

Having something that leads to poor / wrong decisions is as good as having nothing, if not worse.
 
"Please answer how RCG, who have been in the futures business for like 90 years, is at the bottom..."


Here is my answer:

MF Global traces its roots to the sugar trading business started by James Man in England in 1783, which evolved into broader commodities trading before its later transformation into a financial services business during the 1980s focused on commodity futures trading.

From Wikipedia, the free encyclopedia
 
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