Is autotrading legal?

Discussion in 'Professional Trading' started by ginux, May 17, 2007.

  1. ginux


  2. What's illegal about it? IMO, there is nothing wrong (legally) with giving trading discretion to someone else. If that's a newsletter service that does so for pay, so what?

    Of course the newsletter/owner itself must be a registered investment advisor and/or other registrations with SEC and also register with some States. Otherwise the newsletter/owner itself is in violation.

    Newsletters that give general advice and not specifically giving trading instructions to a particular individual, are not required to register - they call that freedom of the press / freedom of speech.
  3. Nothing in there that says it's illegal, just a cautionary letter that says be damned careful. But, we already knew that, right? I took a hit last year by using Option Smart and posted my experience here for all to read, just do a search.
  4. ginux


    that's the point. SEC says the owner has to be registered if there is autotrading involved. But Collective2's FAQ say there is no need to.
  5. Where did you get that idea? I just looked at and they agree with what I posted:

    "Do I need to register with the CFTC or the SEC in order to sell my trading advice? Do I need some kind of license to start a trading system?"
    If you are an American citizen, the short answer is: No, you do not need to register with any government agency, or pass any kind of test, or have a license in order to publish trading advice.
    However, you must be aware of certain restrictions. The most important restriction is this. You cannot provide individualized advice to clients. That is, you cannot offer different advice to different clients based on their individual financial situations.

    Here's an example.

    Allowed: "Attention all subscribers to my trading system: Buy IBM because I believe it is going up!"

    Not allowed: "Dear John Doe: based on our conversation earlier today, in which you told me you were nearing retirement, I think you should buy IBM, because it will appreciate in value!"

    The other important restriction is that you cannot manage clients' trading accounts on their behalf. You can't have access to their money, or issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration.
  6. ginux


    From the SEC link above,

    Generally, the SEC considers firms that publish investment newsletters and that also engage in “auto-trading” to be investment advisers.
  7. qin - when it comes to stocks and auto-trading, I would have to agree with you and registration being needed. This was actually discussed on the C2 forum awhile back and eventually the discussion ended with the supporters of C2 saying go away.

    At best, it's a grey area. I would be curious to hear the SEC's take on C2 and the auto-trading functions going on there.
  8. There's not arguement there. We are all (including collective2) saying the same thing. Autotrading requires registration.

    "You can't ... issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration."
  9. ginux


    C2 is NOT saying the same thing. They allow users to autotrade systems from publishers who ARE NOT registered.
  10. ginux


    and check the net for 'sec autotrading', they have prosecute several newsletter publishers for their autotrading program.

    So yes, is C2 legal?
    #10     May 17, 2007