Saxotrader pros & cons

Latest, dishonest hype from Saxo Bank, on its website: “[L]local brokers are often not government regulated . . . . When dealing with Saxo Bank, you are dealing in fully regulated and reliable environment. We are subject to stringent financial reporting and specific regulations regarding client treatment. In many countries, foreign exchange market regulations are quite relaxed or non-existent putting you at serious risk from rogue brokers and disreputable dealers.”

The hype is dishonest because Saxo is the FX dealer whose retail customers are at serious risk. My earlier posts on that subject, which describe my first-hand experience with Saxo, prove that. Any customer of Saxo can contact Finanstilsynet, which is the Danish Financial Services Authority (FSA), to determine if I am correct that Saxo’s retail dealing customers are not protected by, and have no resort to, a Danish regulator or Danish law. The same inquiry can determine if I am correct that confidentiality protects Saxo even against requests to the Danish FSA from Saxo's own customers. Anyone with an interest can ask Saxo for a customer trading agreement to check what I said that fine print in the agreement allows Saxo to price discriminate against individual customer orders and positions.

Anyone intrepid enough to try his hand at FX trading should be able to determine if there are any protections, contractual or legal, for customers of this FX dealer. Surely, that is a smarter course than simply buying the dishonest hype.

 

This is incorrect. There are US brokers who provide FDIC insurance through a bank, which amounts to $100k, still more than 30k Euro. However, the issue at hand is not whether the bank will go broke, but whether it engages in practices that are disadvantageous to the customer. In Saxo's case, if I understand correctly, it is the practice having the option to quote different prices to different Forex trading costumers.

 

I had an account with Saxo Bank in Australia about 2 years ago. I had to close the account because Saxo failed to get approval to operate on a retail basis in Australia. IMO they have a great platform, but their fees are high. I did not trade with them actively enough to reach any conclusions about the sort of price manipulation you are talking about.

They handled their exit from Australia very badly IMO. They did not notify their customers of a looming regulatory deadline - and I ended up having positions just closed on me, when they suspended trading with Australians. They got a temporary "no action notice" from the regulators and my positions were reinstated giving me a chance to liquidate myself, but I still think that is a very unprofessional way to run a business.

Subsequently they had to cease their retail operations in Australia. It is suspicious that no reason was ever given for their inability to secure regulatory approval to operate on a retail basis in Australia. They do now operate on a wholesale basis through various local partners.

 

Sonray, a Saxo retailer in Australia, may be a "cut out" to protect Saxo from the same scrutiny and problems that prevented Saxo from obtaining licensing in Australia in the first place. Customer orders and order fills likely are controlled and decided by Saxo, not Sonray. My guess is that Saxo was unable to obtain licensing in Australia because, as our experience with it shows, its business model depends on exploiting individual customer accounts. The sporty bells and whistles of the Saxo Trader (its platform, fronted in Australia by Sonray) are simply the lure for those accounts.

Without question, there's no scrutiny of Saxo's retail FX dealing by the Danish agency that Saxo holds out as its regulator. That should be suspicious enough for anybody to steer clear of Saxo and its partners like Sonray.

 

Saxo Bank Announces a DKr 728 million ($127 million) Investment from General Atlantic

6/20/2005

Denmark -- General Atlantic LLC (“GA”), a global private equity investment firm with $8 billion of capital under management, today invested DKr 728 million ($127 million) in Saxo Bank, a leading provider of investment banking services using state-of-the-art, online trading technology. With this investment, General Atlantic recognizes the bank’s unique business model, its strong growth profile, and its well-balanced focus on both capital market products and information technology. It also confirms the continuing recognition of the bank’s technology-oriented business strategy.

“We’ve selected Saxo Bank over many other investment opportunities,” said Florian Wendelstadt, Managing Director at GA. “We like its track record and we believe that its market position will continue to strengthen and remain at the vanguard of the industry. We’re encouraged by Saxo Bank’s multi-product trading capabilities, its access to the deepest liquidity pools, and its ongoing commitment to world-class technology. Together, these factors will allow Saxo Bank to capitalize on the strong secular trends driving increased electronic trading globally. This, in turn, will secure Saxo Bank’s leadership position for years to come,” said Wendelstadt.

Lars Seier Christensen, co-CEO at Saxo Bank, stated, “Our commitment to technology has enabled our company to define a unique position in this industry. The substantial trading flows and client confidence we have earned over the years are genuine testimony to the staying power of Saxo Bank. General Atlantic’s participation expands the resources with which we can grow and refine our current business opportunities.”

Established in 1992, Saxo Bank A/S is a specialized investment bank with a strong established presence in the global capital markets leveraging significant internal IT expertise. Of the bank’s 330 employees, just over 100 are focused on IT. Saxo Bank has been, and continues to be, an early mover in an industry characterized by rapid change, product expansion and broad acceptance of new technologies and distribution capabilities. The bank is well known for offering first class investment trading services through an online trading platform, the SaxoTrader, and for its role as a highly respected and globally recognized trading facilitator in the marketplace. As a result of the Company’s success, Saxo Bank is one of the fastest growing firms in Europe.

The co-CEO’s of Saxo Bank, Kim Fournais and Lars Seier Christensen hold the majority of the shares, and will continue to lead the bank. In addition, GA Managing Director Florian Wendelstadt and Principal Jonathan Korngold, both of whom are based in GA’s London office, will join the Saxo Bank board of directors.

“This investment is an endorsement of a sound and rational business strategy,” said Fournais. “We’re delighted to welcome General Atlantic to Saxo Bank and feel confident that the firm’s investment will be rewarded with progressively positive results as we pursue our program of growth through facilitation in the capital markets. The funds invested have been used to purchase a minority stake in the bank from the shareholders.”

The partnership between the two companies will continue to support Saxo Bank’s growth strategy. The bank’s position as a pure-play online capital markets facilitator continues to drive revenue from direct trading partners and indirectly through financial intermediaries including 50+ white label partners, who distribute the SaxoTrader platform under their own brand, to their local client base.

The bank’s IT orientation and focus on Internet lead generation, automation and data interface enables geographic expansion. Commented Fournais, “We serve clients in more than 120 countries, and we have partners in more than 30 countries. Our growth prospects are not limited by geographic barriers. Rather, we are looking at emerging online investment communities, evolving regulatory frameworks and committed partners who believe that they can serve local traders.”

Both parties strongly believe that the online capital market is here to stay and they believe that information technology is the major competitive edge. As Saxo Bank moves ahead with business plans for the coming years they aim to gain a stronger market presence in both the US and Asia.

“We are very excited about the growth opportunities for Saxo Bank. The Company has strong momentum in the marketplace with a very high-quality client base,” added GA’s Jonathan Korngold. “As retail investors increasingly seek electronic trading solutions on a global basis, Saxo Bank stands to benefit from this macro industry trend and will remain well positioned to expand both domestically and internationally.”

An important distinguishing element of General Atlantic is its long-term investment horizon and value-added approach. GA invests with a view toward maintaining ownership for a significant period of time whether a company is public or private. The firm provides a strategic advisory role as an active board member working with the entrepreneur and management team to strengthen market leadership. As an early investor in E*Trade, GA helped the Company build its online capabilities and pursue an IPO, and GA is the largest shareholder of Archipelago, which is now being acquired by the New York Stock Exchange.

“General Atlantic’s approach to investing makes it a very attractive investor to Saxo Bank,” said co-CEO Lars Seier Christensen. “The firm offers far more than just capital. It has deep experience and expertise in information technology, a global perspective and worldwide presence, a long-term approach to investments, and it provides sustained strategic assistance for its portfolio companies.”

- About Saxo Bank A/S

Saxo Bank A/S is a modern investment bank specializing in online investments in the international Capital Markets. Saxo Bank enables clients to trade currencies, shares, CFD contracts, futures, options and other derivatives as well as portfolio management via our online trading platform - SaxoTrader. SaxoTrader has been internally developed by Saxo Bank and is available to today's investor directly through Saxo Bank or through one of our global partnerships as an integral part of their own infrastructure. Today, Saxo Bank's most significant area of business is White Labelling, which is the development of tailored versions of the online trading platform to other banks and brokerage houses. Saxo Bank has 58 White Label Partners and thousands of direct clients in more than 120 countries. The bank's website www.saxobank.com - has a membership of over 500,000 and is visited by more than 60,000 investors every day. Saxo Bank currently employs more than 330 employees from 32 different countries.

- About General Atlantic

General Atlantic LLC, is a leading global private equity firm focused on investing in companies providing information technology or using information technology to drive growth. The firm was founded in 1980 and has about $8 billion in capital under management. General Atlantic has invested in over 140 companies and has current holdings in approximately 50 companies, of which almost one half are based outside the United States. The firm is distinguished within the investment community by its global strategy and worldwide presence, its commitment to provide sustained value-added assistance for its portfolio companies and its long-term approach. General Atlantic has nearly 70 professionals among its 130 employees worldwide with offices in Greenwich, New York, Palo Alto, Washington, D.C., London, Düsseldorf, Singapore, Tokyo, Mumbai, Hong Kong, and São Paulo. For further information and a listing of our public and private portfolio companies see www.generalatlantic.com

 

Heck, I'd invest in Saxo, too, now that I know its business model, which is to fill every customer's stop loss while dodging some or many of the customer's profitable trades, namely by refusing to honor profitable limit orders when the limit prices are breached. All you need is a handy set of excuses to explain why an order isn't filled. That business model cost us 12k USD.

 

No, you are wrong. Saxo Bank is located in Denmark, and regulated by Danish law and the Danish financial regulator. Like all other banks in Denmark.

 

I traded a six-figure USD account with Saxo Bank, using the Saxo Trader. I contacted Finanstilsynet, which is the Danish Financial Services Authority (FSA), when Saxo burned the account by refusing to honor profitable limit orders. Finanstilsynet replied to me in writing that it could not and would not provide me with any information about Saxo, on the ground that confidentiality prevented it from disclosing information about Saxo, even to Saxo's own customers. You may call that regulation; I don't.

I subsequently learned that Saxo was shut down in Australia by Australia's FSA. It is not registered with the UK FSA or with any USA regulator (like the CFTC) or self-regulating group (NFA, for example). So, I stand by my report that Saxo's fx dealing with retail customers is unregulated. If you have first-hand knowledge to the contrary, post it.

 

Yes, Saxo Bank is regulated by the Danish FSA, Finanstilsynet. If they have done anything not legal, please call the Danish police fraud squad: 004533141448.

 

You're joking, right? I contacted Finanstilsynet, as I said, but it replied only that it would not reply. If you'd read my post, you'd know that. So, according to the regulator, there was no way to find out if other Saxo customers were similarly defrauded, and no way to find out if the so-called regulator offered any recourse.

I then had an attorney read the Danish statutes in English translation that Finanstilsynet provides via its website, and learned that there is no law governing retail fx dealing. So, you tell me, how is a Danish policeman going to help?

My point is that Saxo Trader customers are not protected from manipulation of their fx orders, contrary to the hype of Saxo's website. That's my first-hand knowledge, learned the hard way. It cost 12k USD.