Trading with a bank guarantee

Discussion in 'Forex' started by cstfx, Mar 17, 2008.

  1. cstfx


    In light of recent events and volatility in world markets, what's the proper way to set up account funding to trade currencies using a bank guarantee/letter of credit or custodian services? I know that Dukas will do this for 1MM and up, but what US banks can or will do this for less than 5-10MM standard? I am currently trading with use of a prime account thru FCStone, which I thought as being safe(r) than most solutions for forex trading, but today was a splash or reality about the dangers of having assets with FCM's.

    Any ideas where to start to set up something like this?
  2. Your funds are in danger in ALL Forex brokers.

    It they go bankrupt, you'll have to wait the legal bankruptcy process (about two years), to get a % of your money back. There's just NO way around it.

    Don't believe the separate bank account/custodian/prime brokerage/insurance BS.
    This has ABSOLUTELY NO legal validity, and your money WILL be pooled with the broker money to finance the liquidation claims.

    The NFA has said it clearly:

    The NFA recently issued an Interpretive Notice mandating that cash forex firms disclose that customer’s funds are not “protected”.

    From Section 1. Disclosure — The following statement should be “prominently displayed”:
    The NFA recently issued an Interpretive Notice mandating that cash forex firms disclose that customer’s funds are not “protected”.

    “The transactions you are entering into with [Member] are not traded on an exchange. Therefore, under the U.S. Bankruptcy Code, your funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used for off-exchange forex trading, if [Member] becomes insolvent and you have a claim for amounts deposited or profits earned on transactions with [Member], your claim may not receive a priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even customer funds that [Member] keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors.”
  3. cstfx


    Do you even know what a bank guarantee or letter of credit or bank custodial relationship is? All three of these options are funds kept in YOUR bank account at YOUR bank of choice. This isn't about your 5k account with your 400:1 leverage that YOU are used to, but hey, don't let facts get in the way. Post before you think. It's served others quite well on this board.

    Do you just cut and paste your rants from thread to thread?
  4. Did people ever get their money back from when Revco went under a few years back?
  5. You did not understand his question. He does not want to give cash, he wants to give only a letter. That is a smart way! He is assured to never have to wait or get sticked.
  6. I have seen many of his posts that are completely wrong, and he even replies to argue with facts or throw some nonsense back at you to force you to stop discussing the correct things.

    I will be very much interested in your finding as I want to do a similar thing to what you want to do, but for different reasons.
    PM me if you want to know my reaons. I do not want to post them here.
  7. Yeah, I think they got back something like 20 to 30 cents on the dollar more than a year after it went bankrupt.
  8. siki13