agree. now one thing, we're all talking here, giving views etc and its all very well and 'entertaining' to an extent, but are any of us grilling our current brokers for better disclosure, asset protection schemes etc - e.g. am not an IB rep, shill or what have u but i've just found out about this: http://www.interactivebrokers.com/en/accounts/accountProtection.php?ib_entity=llc http://www.interactivebrokers.com/en/general/about/about.php?ib_entity=llc see financial & S&P credit rating report and Oanda for instance is also setting high standards in terms of transparency of spreads and some other stuff http://fxtrade.oanda.com/spreads/comparing_broker_spreads.shtml http://fxtrade.oanda.com/spreads/recent_spreads.shtml#eur_usd http://fxtrade.oanda.com/billofrights/ , why not be more demanding with our current brokers, switch if necessary, isn't now a rather good time? how course we'd all prefer to spend the time trading or posting on ET, but... :-;
RefcoFX lacks the legal power to segregate customer funds. They are not an FCM, and so, they are governed by general bankruptcy laws, not FCM bankruptcy laws. This means that customer funds do not receive any priority in a spot FX broker's bankruptcy, the way they would in an FCM bankruptcy. The meaning of FCM segregated customer funds is that in an FCM bankruptcy, your funds cannot be used to pay the broker's debts, except for covering trading losses by, or embezzlement from, the other customers in your pool. So segregation is meaningless for a spot FX broker. You are just another unsecured creditor, in that case, which means you get cents on the dollar, or maybe nothing. Segregation of customer funds is a creature of bankruptcy law, which simply does not authorize it outside of FCMs. No matter how your spot FX broker might organize its books or accounts, it doesn't matter, it has no effect on whether you will get your money back in a bankruptcy.
yes but cld we not take things too personal tho', and avoid language that is most likely to cause other people to take things personal plse... otherwise this is just going to go the way of the previous thred(s) on the subject, which i am sure is not what u want, right mate?
jim sorry for the handle issue. i do not play different identities, it is just a few years ago a "nonFriend" of mine appeared on this board and i preferred to hide under a new handle before he could track me down. sounds childish but was crucial to me at that time. sky cleared, we have no business connection of whatsoever anymore and i do not care anymore which handle i use. sorry for the confusion ... regarding the case. i have people who check out the brokers for me. it is kind of independent back office with long history of relationship. we were at bear stearns for futures and tradestation for single equities until last year. we found bear very complicated in their way of doing business. everything did take long for no apparent reason (not becasue they were so accurate!), this kind of thing. guess we were to small for getting true coverage ... . well, we decided to do something about it. MAN was on the list, IB as well. Refco was the final choice. Refco got a relatively small fine ten years ago, was very well reputed within the indstry, went public two months ago, we do segregated futures only. I still believe the choice was reasonable and fine. sure you do better ... after the fact. do i think any of the bigger brokers did not have any trouble, court case, customer complaint over the last twenty years? in this business? i doubt. if something happens at tradestation, their platform crashing , making people loose tons of money in a day, would you find someone who already complained about it five years ago. sure. after the fact everything is ... so obvious. you say the system is insecure, you could loose your money entirely in a segregated futures account, regulators are not trustworth, the exchange rules are full of wholes, IPO rules suck, you can do better dd on your own, and so forth. my answer: we have a major crisis - the shortest listing history in US stock market (what sigma event is this? what colour has that swan? black whole?). it took me five days to have my money back. i did not sweat for a nanosecond. whenever a broker offered us better rates if we only gave up segregation we refused. that was the major decision. that was the point IMHO. to me the key is: does the experience on my account justify a very different process of our broker selection process? my answer is: no. i am in this business for trading and my view is that our credit risk management is just fine. worst case. no loss. my point is that when the exchange and finally the US government lets investors down on segregated futures accounts, the entire system changes dramatically. since suddenly you have to price in credit risk of your broker. and consequently your trading costs multiple, forcing you to go to the best rated brokers ... which are probably the banks. forget about IB and what have you. customers' flight into quality - especially the pros. dramatic reduction in liquidity (guess what fees you get in a mor much more concentratet market) and consequently market efficiency. i think this was a great proof for the quality of the system. i am really bullish on it. it boils down to: can you privately with reasonable effort do better then the combined forces of SEC, CFTC, FMA, diverse accountants involved in the IPO, not to speak of the hundreds professional clients that chose Refco as well (call it references). or, sorry, i pointed the question towards you, i'd rather ask it myself. can i do better? well, definitely not. i do not make the mistake to underestimate what forces are at place in these shops. do they fail once in a while? sure. do i? well ... sure. my ego ain't big enough to deny that that i'd probably fail much more often then these people, who concentrate on something which is inevitably always sideWork to me. peace
Man/Mind, I really appreciate your sincere and high quality contributions to this forum. There are far too few messages of this caliber on the forum. Cheers, Old European
"Refco got a relatively small fine ten years ago" for repeatedly embezzling, on an almost daily basis, and then returning segregated customer funds, and for using them as bridge loans to cover its debts. This should have been your dealbreaker. It simultaneously indicates both criminality and concealed financial weakness. It is fundamentally far worse an indication than almost all other types of broker misconduct. Your broker selection process is sorely defective if it ignores a persistent historical pattern of embezzling customer funds. Segregation helps if you can trust your broker not to embezzle. If your broker is an embezzler, then segregation is meaningless. So you put one bullet in your six-chamber revolver, put the gun to your head, closed your eyes, pulled the trigger, and you lived. Now your survival is proof that what you did was safe and reasonable? So you will continue to do this in the future, without learning anything from the experience? And the only thing that could possibly change your mind would be a bullet passing through it? Are you aware that in past FCM bankruptcies, customers did, in fact, lose segregated customer funds, and that neither the exchanges, nor the U.S. government, made them whole? Are you aware that the exchanges and the U.S. government have both specifically warned that your segregated customer funds in futures accounts are at risk, and that they will not make you whole? Are you aware that the CFTC and the exchanges specifically recommend that you do need to perform your own due diligence as to the safety of your segregated customer funds in futures accounts, and that you are rejecting the advice from the same authorities in whom you place so much faith?
whats yr point mate, shld 'mind' be shot or what, for having a different opinion? who do u use for yr futures trading, i assume they must have a pristine record, right? who wld U recommend / advise against i wld be interested to know actually, or perhaps if u cld let us have a bullet-point due diligence checklist that wld be most helpful honestly, better than a 2-page dissection of s.o.'s post, but thats because i'm not good at reading prose, thats just me...
jim well. usually when i read CFTC documents i feel that i am not the classic customer they are referring to, as well as Refco is probably not the classic broker they typical talk about. the comission tries to protect the dentist from fraud by a two-people shop, where one of the principals passed two exams and got a stamp that allows him to act as an IB or whatever. do you actually think the CFTC is saying: well yes, there is a public offering and this company is clearing member of the exchange and a third of the world's most professional operations deal with them, BUT please do not trust anyone, go straight into their office, look the CEO, at least the CFO, straight into the eye and record the answers to your questionnaire on to some lying detector? and do they say this: we fined them ten years ago for a percentage fraction of their profits (which was way too little for what they actually did), but, buddy, between us, who says they are not still doing IT? i tell you that the CFTC would love that everyone out there would do their business with companies like Refco. they bite on their fists every night now that it could happen that one among them, one OF them, one of their dearest members goes belly up. they will check and doublecheck whether they can make the system as such even more reliable. and you now why? not because they are nice, but because their income depends on liquidity and liquidity depends on trust. and what will you do? spend day and night for six months checking out your current broker by private investigators (let's face it: whom to trust after anderson, enron, worldcom, parmalat, Refco)? i am sure if i go belly up it is because my trading sucks, not my broker ... peace
No, mind should not be shot for having a different opinion. My fear is that because of his opinion, he will one day shoot himself. I will not here recommend any specific futures broker, or any specific complete due diligence checklist. I will instead limit myself to the following specific aspects of due diligence. Check the FCM's regulatory history, which is a matter of public record with its regulators. Do not deposit funds with an FCM having a history of embezzling segregated customer funds (like Refco), or of intentionally cooking its books (beyond merely technical accounting disputes or errors), or of lax risk management (Refco was also known for this).