This just does not seem that hard. Why can't an fcm have sub accounts at their bank for each customer and provide full daily transparency to the customer on where their assets are at. Beyond that require that bank to send a statement to the customer daily and also allow electronic access to the sub account. That solves the problem. This is a more important regulation and solution to implement than any other piece of Dodd frank combined. Alternatively, if any customer or cat was sophisticated they would have access to a tri party account and sweep excess margin on a daily basis. I feel bad for any retail guy out ere, but anybody who lost money through a cta or fcm who did not explore this option, should be mad at them, not the regulators as they did not handle cash in the best possible manner.
Vincent, thanks, ur answer sums it up. There is a cost to safe guarding assets, there is also a cost to segregation, why do u think prime brokers want to rehypothicate assets? Why do u think u.k. Does not have segregation rules, why do u think the likes of mf global and cough cough new edge are pushing accounts for large clients to uk domiciled entities? Because they do not have to segregate assets and they can use client money to fund their balance sheet. At the end of the day all of these frauds are being perpetrated because the company did not have access to funding. Ironically probably a direct result of regulation. On a side note has anybody watched the marc drier documentary, this is eerily similar, in terms of their excuses and the fact they were both empire building. It is shocking a company of this size, whose son, was quote unquote in charge had not distributed ownership to anybody else? Surely anybody doing any kind of due diligence would have inquired about succession planning......a key component of which is not only distributing responsibility but also ownership.
I don't feel bad about them, they were very dishonest with me when telling me what rates they could offer me. Their are many other firms out there much better. If they were a good firm for anyone but very small traders they would have no problems growing.
AMP, RCG, Dorman, etc, etc, etc, the fact remains no one on this whole forum has a clue how to know who is safe or not safe. Small FCM to me is a plus in my book, and I bet the small FCM's have had more real accounting attention from NFA then big firms.
I have read all day and found some unsettling information on Dorman. This is link I found from CEO: http://www.dormantrading.com/AboutUs/Notices.aspx?newsid=180 . According to financial report mentioned in the letter, Dorman has $60,000,000 short options premium on file⦠Page 13 (âValue of customers' open short futures options contracts (60,008,353)â) and on page 4 (only â596,641 Cashâ). I think smaller firm like AMP are safer if this is the type business many large FCMs do. Such things scare me, to be honest. Especially after PFG and MF Global just 9 months ago. Just for fun, take Dormanâs $60 million USD in short options premium and give it to AMP⦠Result: wow, now AMP is big FCM. Itâs all how one cuts this pie, but I don't even want to try this. I feel safer with smaller FCM.
Maybe you feel better with a small FCM and that is fine and your choice. My point is the cost of doing business will be so great from the regulatory side the economics just will not work, forcing consolidation. What happens when the NFA/CFTC says if you want to offer reduced day trading margins minimum capital is $20m. At that point all small FCMs are out of business. This is what they basically did on the forex side. It is coming on the futures side. It will require much larger economies of scale to operate an FCM. Otherwise it will lose money.
Interesting... if this happens Dorman is out of business or will be merged also. They only have about $596,000 cash and the rest assets are securities & exchange memberships used for their assets. What are these securities? And how long will the exchange memberships keep this value? And what if we have another crisis??.. you get my point: wont both the securities and the exchange memberships lose their value and all Dorman is left with is the $596K in cash?
I am new to trading and this forum, but I've notice AMP is like a bull's eye here, attracts all the attention... I think the regulators should break apart old and bloated FCMs and make them smaller , more technically advanced and easier to audit.--no prop trading, short options etc. In my opinion, AMP kinda represent such an FCM, the new generation if you will. Or we can always have insurance!