Hi, I have been asked by my current FCM to move to another FCM and to close my positions in 48 hours as my "trading style and needs are outside of their preferences". Aside from the reasons for this, are they allowed to do this and can they really give me only 48 hours? I have some positions that can take time to unwind or would incur a loss so I am now trying to transfer my positions to another FCM but looking for a good FCM takes time as the risk department has to accept my positions before going forward. Has anyone else been in a similar position? Any recommendations/ideas? Thanks PS: I trade futures spreads/butterflies.
You are lucky they giving you 48 hours, they see you as too must risk and most likely not enough funds in the account to keep them happy to keep you. I had this once ten years ago and I ask if I wired twice the account size to leave in T-Bills and they kept me.
Well, what they can do or not do legally is clearly stipulated in your written agreement with them. So, you would need to read the fine print. Aside that, 48 hours especially for someone who has positions on the book that take time to unwind seems very irresponsible and disrespecting the business relationship. Unless you have violated agreements or otherwise violated risk limits they should give you more time to unwind. The problem those vendors exist is because most with negative experience never bother to report or name the firms in public domain even though this is one of the most powerful tools a customer has. Imagine anyone else with larger funding amounts does his due diligence and finds out about your story, I am pretty sure they would stay away from that FCM as well. But most customers who are treated like that are either afraid or too lazy to bother. I highly recommend you to settle your business with this firm, move on, but then log a complaint with their regulator and/or to also share your experience with the name of the firm in public domain. That is the ONLY way to reign in such behavior and unethical business conduct.
I disagree with your stance. First of all the FCM did not discover the way OP trades overnight. If it is true that it would take longer time to unwind his positions then he most likely did not set up the same positions hours before FCM send the suspension notice. Secondly, every FCM should have strict risk limits in place which cannot be overridden and thus should prevent customers from ever taking larger risks than permitted by the FCM. Simple as that. And FCM should also do its due diligence when onboarding new customers and part of that is to get an idea of their approach to trading and risk management. I can put up any positions and trade in and out of positions as fast as I want with holding periods at my own choosing as long as I do not violate risk limits (which should be hard coded and should prevent me from violating them in the first place). Lastly, it does not harm the FCM if it gave a week or even 2 weeks notice unless it is a shady shop that cannot even implement hard coded risk limits that customers cannot override. It only hurts the customer to kick someone off their platform within 48 hours. I stand by my opinion that an FCM that kicks out customers (unless the customer in any way has acted illegally) with 48 hour notice are irresponsible and do not deserve funding and trust by clients. At least it very much violates standard business practice.
I agree to what you post, but reality is we don't know if original poster has received other letters from FCM, if overall positions are in instruments that don't have much volume or open interest. I have found most firms give you more time to either lighten positions or transfer to others, but it usually comes down to money and risk. The exchanges set minimums but FCMs can increase them. They are usually very sensible people, but like anyone who feels they are in a corner, they have to do what is best for the firm.
I have not done anything illegal, never had a margin call and never breached any risk limits (it is not possible with the way the software is setup). And also never received any other warning letters. I hold some large positions (on individual outrights) but everything is hedged and the volatility on my account is pretty low. I think the main problem really is that I asked to switch platform last week (from CQG Trader to CTS) which resulted in a lot of emails back and forth Monday and Tuesday to get CTS setup correctly as the original setup was not tradable (I have never been rude and always very professional). I received the email from the Chief Risk Officer this morning asking to close my positions after asking for a tweak to make my account tradable... They never did any due diligence and were quite happy to accept my account... Anyway, thanks for the answers, I am in talks with risk department of 2 other FCMs and hoping to get approval as soon as possible. I read the paper work and am not sure if they can proceed to liquidation as I do not breach any limits (unless they invent new limits...)
So are your positions are too large or are you are trading a thin market such that you cannot unwind in 48 hours ? You probably should unwind what you can, then talk to the risk manager about what you cannot unwind and why. Given a good reason, if you are not over leveraged, they will give a bit more time on the hard to unwind part. Are you trading exchange traded spreads ? STIR? Often spread markets can be pretty thick so I am wondering what markets are you trading.
I second what you said, OP should unwind what he can unwind during the trading hours of the positions he holds, else he runs the risk of getting auto liquidated and that could potentially get much worse fills than doing it himself. The more I think about this the more I feel pretty weird about this. 48 hours...that's like asking a tenant to vacate the premises in a few days without prior notice.
Fair points, though some points you make usually warrant a reduction of risk the FCM would impose not a booting off their whole business setup. When my PB raises risk limits then I get prior notice and even if I did not they would simply raise limits and that could result in liquidations (though this never happened to me, just saying hypothetically speaking). But getting a notice to leave the business is outright weird. If they do not want clients to trade thin markets or illiquid names then it is the responsibility of the FCM to check beforehand and potentially restrict trading in certain assets.
I trade STIRs, the spread markets are quite thick, but some butterflies or double butterflies not really. Of course I can cross the spread but I'd rather avoid this. And unwinding in some cases is not possible as I am in liquidation mode and unwinding a position on a legged double butterfly involves expanding my position while legging out... My only hope now is to find a new FCM and transfer my account quickly enough. I have also asked my account rep to get an extension (I have unwound a position already).