FXCM

FXCM back out of guaranteeing stop limits & entry orders

Just to let Everybody know. I received an email in my post this morning from FXCM.

It is as follows -

Dear Client,

Thank you for trading with FXCM; we appreciate your business. We strive to provide the best possible execution under all market conditions. Recent market conditions have been highly abnormal, with the market gapping 100 to 200 pips in a matter of minutes on two occasions. In addition to the extreme volatility, there have been limited occasions following the release of economic news/numbers where the market has experienced temporary illiquidity. During these periods, we cannot provide execution guarantees for stop-loss, limit, and entry orders. As always, all trades are subject to the terms and conditions of the Client Agreement accessible through our website, www.fxcm.com.

Most traders will always have their stops, limits, and entry orders filled at the prices they specify. Only a very small portion of the time, less than 1/10 of 1% of the time, will FXCM be unable to fill these orders at the price specified due to extreme market conditions. As the largest Futures Commission Merchant specializing in foreign exchange - with over 50,000 live accounts, FXCM has access to more major banks and market liquidity than other brokers. This ensures that we can provide you with the best prices and execution even when the market is turbulent. FXCM's dealing desk will diligently work your order and try to get you the best price - we simply cannot guarantee it when there are large gaps in the market. We are proud that even when other companies are unable to put a price on the screen, we continue to quote aggressively.

If you have any questions please contact us, 24 hours a day, 7 days a week:

******

Well, well, well. The can of worms begins to get opened. I can live with the occasional non guarantee of entry in times of volatility, but I cannot live with the non guarantee of stop. One could effectively lose thousands

Etext

At FXCM you receive NO SLIPPAGE on stops and limits REGARDLESS of trade size.*

Other brokers claim to guarantee fills on stop orders but if you check the fine print they only back this claim for small trade sizes during normal market conditions. Many brokers routinely execute stops 5 to 15 pips away from the stop price. Only FXCM honors the exact specified stop level at all times.

Just lifted this from FXCM's website. It'll obviously take a while to filter through to their content publishing manager...

When I think about it again - this is a very disturbing move

As a customer of FXCM and CMS I find all of this intriguing.

It is only a few weeks ago that FXCM sent out another email which roughly paraphrased said something like -

******
FXCM will fulfil all stops, entries and limits, and that trading would continue in times of high volatility "unlike many of their competitors whose platforms continually ceased working so that clients could not get deals on in times of high volatility."

******

Now I am not stupid, or at least I don't think so. I may be a cynic - well there's no maybe about it, - I am a cynic.

I understand perfectly well that every time there is rapid movement in the market as at report times, and now it is happening about 5 minutes before the report times CMS trading platform freezes, will not connect and is inoperable. And I do understand why it happens. I may consider it to be unfair, and that really they shouldn't have set themselves up as a broker if they can't handle brokering at times of volatility, but I do understand it. It is a pain in the *** when it happens, but I would rather have that than a non guarantee of stop.

At least you know where you stand. If you are not in on a deal then you are not going to get in on one with CMS because the software just goes down, but a non guarantee of a stop could cost a small trader like myself EVERYTHING, and that is frightening.

I can live with a non execution of an entry order at times of volatility so that you don't get put in on a trade in the first place, but a non guarantee of a stop could be the kiss of death. What it means is that from now on I can only deal in small numbers - just in case, and behind the scenes in the back of my mind my confidence and peace of mind are being eaten away.

I do think that they will have to re-think this one, and re-think it pretty quickly or they will see their trading clients moving away. Non guarantee of stops, even in times of high volatility is potential suicide. A broker should always guarantee a stop! It is all a part of the broker/client confidence relationship. Without it I believe they are in trouble.

Etext

Anyone know if ac-markets.com are reliable in guarantee-ing stops on big news?

(they say they do - but is it true?)

I guess FXCM, like CMS, are saying "please don't trade the news, it's risky to us and it's risky to you!"

eText - does your system rely on news to make money, or can you stay ahead during "normal" trading?

I would guess that your stops would be pretty safe with FXCM (0.1% stop failure) in "normal" trading, but it might be a slippery slope...

Steve

I can't see how any broker can guarantee stops. It makes no financial sense. Would you?

I can see why 'saying' they do would attract business, but I have yet to find any who don't have sufficient small print to protect themselves against those situations when it's really needed.

Trading around news times

I find it quite a good strategy to trade around the news. The prospective volatility can mean big moves very quickly - but it seems like - no more.

I can stay ahead during normal trading, but it means that I have to sit for much longer periods of time watching and waiting for the right opportunity to get in and hopefully take a few pips, and it means that limit orders while away from the computer could get iffy.

The problem is - many days the news that can affect the market can begin at 9.00 GMT or even before, then again at 1.30 GMT, followed again at 2.00 and so on, so on certain days the news can run throughout the day.

It will be interesting to see just how much the market actually has to move in one jump before FXCM stop honouring their stops and limits.

I also say that their statement -

"Recent market conditions have been highly abnormal, with the market gapping 100 to 200 pips in a matter of minutes on two occasions" is absolute cobblers! There is nothing abnormal about these market moves. The markets have always had the tendency to be this volatile around news times since I ever began looking at them. Indeed the very first profit I made on the Forex markets was $720 in about 5 seconds due to volatility at a news point (even though I didn't then know what had caused the spike)

They are beginning to make me nervous

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c6ackp said:

I guess FXCM, like CMS, are saying "please don't trade the news, it's risky to us and it's risky to you!"

eText - does your system rely on news to make money, or can you stay ahead during "normal" trading?

I would guess that your stops would be pretty safe with FXCM (0.1% stop failure) in "normal" trading, but it might be a slippery slope...

Steve

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I spoke with FXCM about this about 6 months ago. At the time they said they absolutely guaranteed all stops and orders. I asked how they could do this and was told that they are of a size that internal liquidity was sufficient to ensure that they had no or little exposure ie. buy and sell orders and stops on their own system should balance out any exposure.

I have been recommending FXCM as I believed that their spread (3 on Euro and 5 on most others) was a justified cost of trading if my stops and orders would be executed at the price I had set with no slippage. If this is no longer the case then it is hard to justify paying the wider spread when I can get the same service elsewhere but with tighter spreads.

On two occasions now I have seen something which caused me concern. As news was released the market (cable in the last instance) moved immediately upwards. The FXCM price flicked down and then moved with the market. No other chart or data source I have checked had any sort of downwards move. The flick down was of sufficient size to trigger stops for those that held longs before the news and to trigger opening shorts for those with pending limit short orders. In effect this flick down had probably taken out a fair number of those that were long before the news and had opened short positions for others which would now be significantly against them. If this is deliberate then we are at bucket shop standards.

It is hard enough to make a living from trading without your broker having his hand in your pocket whenever it suits him. Of course, the problem could be that most of the Forex 'brokers' are in fact making their own market and have no incentive for their clients to profit as any profit is effectively being taken from themselves.

The bottom line for myself is that I wont be trading around news. Even if you get it right there is a good chance that a stop hunt will have closed you out. If FXCM wanted bad feeling and bad publicity they could not have done it better. The correct thing for them to do now would be to re-instate all trades that they stopped out and cancel all shorts that they triggered but I wont hold my breath waiting for this one.

FXCM backs out ....

So... that brings up the question of who can you trust ? - is there a community managed register where we can vote on the value of the markets makers - perhaps that will hit them where it matters - customers ?

What's a retail broker for?

Yes Bramble,
That's what I expect. If they have lured me in with claims of no slippage, guaranteed stops and guarantee to close all orders automatically if my margin gets too thin, then that's what I expect. If they are't willing to eat a few pips on my little 1 contract size (or even 0.1 contract for pete's sake), their business model is wrong.

I think I understand their situation, they are going to take some hits now and then. It needs to be built into the price they charge, and planned as a cost of their operations. I get the idea that most of these places never actually take these little order to market, but just lay them off other 'in house' orders, or just take the other side if the odds are right.. So in addition to their 3 pips, sometimes they are raking in the other side of the trade! If their model is to draw in small traders who are new to Forex, who know that most traders proceed to lose their stake, the retail broker is going to have to find a way to convince those new traders that at least the losing will be from the trading choices, and that the losses will be limited to the account value.

It makes sense to me that these places need to prioritize. Guaranteeing limit stop loss orders on open positions needs to come before market orders for a fill.

It seems proper that all this is in flux right now, and the market will eventually select those shops that accurately portray their policy.

JO

Absolutely true JP - I believe one of those instances you are referring to was the NFP release recently... I was indeed one of the unlucky souls that was long at 1:28 ..stopped out at 1:29 and taken into a short , then stopped out again at 1:30 before the market launched a couple of hundred pips or so up...

I did try to have this clear 'stop hunting' exercise out with an FXCM rep. on the chat service immediately afterwards but got nowhere...perhaps my opening comment of " you robbing b******s have just cost me a small fortune" didn't help me win them over either.. !

It's unrealistic to expect brokers to guarantee stops at these times - if a market gaps then it is simply not possible to fill an order 'inside' that gap, there's no market at that price. You wouldn't (I hope) expect a stockbroker to fill an order when a stock gaps, why should FX be any different?

If you really need to absolutely gaurantee a stop then have a look at CFDs - some brokers will take 'Limited Risk' orders, where you place a stop on entry & they do gaurantee that you'll be filled at that price. The trade off is that you'll get a much wider spread (7-8 pips on the majors), but that's how they're able to do it.

Simon

That is a valid point Turtle Trader but until now FXCM have guaranteed stops - this was for many (myself included) the main reason for staying with them, despite the higher spread on Cable (5) compared to brokers such as ACM (3)...so for me the guarantee was worth the extra 2 pips.

However, apparently the additional price to pay is that stops have been hunted out and there have been several occasions recently where this has been put in question..perhaps them removing the 'guarantee' will mean that stops are no longer hunted out so much..! If they are then I expect most of FCXM's private clients will vote with their feet.

I think the problem is actually deeper than the failure to honour the guarantee they have made. If they have a problem with their guarantee then a simple solution would be to have a check box on the trade or order entry screen which allowed you select the option of a guaranteed stop or order entry. If you selected this option you would pay a 2 pip premium and would have a absolute guarantee that the stop or order entry would be honoured.

My real concern is that they had no problems honouring stops that took out those that were long or honouring the short limit orders that opened new short positions when they flicked their prices down. They can't have it both ways. They make a point of being FSA regulated, if I get caught in one of these moves they will get one chance to put it right or a formal complaint will be made. As it is I'm not happy that trading around the news has become significantly riskier. I actually closed a position on cable just before the NFP figures. I closed it because I was going out. It was slightly in the money and was running with a 30 pip stop. This trade would have been stopped out for a loss as, had I not been going out, I would have been running this trade. So, I either close my positions before news or I widen the stop to allow for any 'strange' price movements but by doing so reduce significantly the purpose of the stop and increase my risk/reward ratio at these times.

At which point do you cross the line from trading to gambling? It seems to me that if the table is suddenly and at the brokers discretion weighted in the brokers favour then you are not trading the market but gambling against the broker.

jpwone said:

I think the problem is actually deeper than the failure to honour the guarantee they have made. If they have a problem with their guarantee then a simple solution would be to have a check box on the trade or order entry screen which allowed you select the option of a guaranteed stop or order entry. If you selected this option you would pay a 2 pip premium and would have a absolute guarantee that the stop or order entry would be honoured..

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From what I remember of the SBs that offer this 'guaranteed stop' service, that's exactly how they operate.

The spread gets widened from say 4 points to 10, but you get a guaranteed stop.

Having said that, I think you are 'required' (=forced!) to place your stop a goodly way out in the first place (+/-2.5%?) and I have never tested this facility myself.

Hey Torch - have you thought of starting a 'No Metaphors' thread?

Seriously though, do ACM REALLY guarantee stops? You'd need to carefully check ALL the small print and then I'd follow that up with written confirmation request from the CEO signed in blood while holding his children hostage for the duration of your account holding with them. Then, and maybe then, I'd believe it.

Relax Torch, there is plenty of time for heart-failure later

Hey Torch,

I do understand that pressing that mouse button for the first time is a bit of a pants filler, and I also do remember the heart racing and thumping like mad as though my ear drums were about to burst feeling as I was trying to get a stop-loss in it before world war 3 broke out and I got caught wrong footed

But let's keep it in perspective. I will still run trades with FXCM, just be a bit more wary at event times. After all I still run trades with CMS and they crash on me EVERY time an event order is either imminent or has been announced. You just have to get your head around it and work it to your own advantage if possible.

News times are indeed very risky times to be on ar trying to get on anyway. I do remember a month or two back sitting either side of Cable, watching it climb 85 pips to my benefit, smacking my stop in at the entry level and then going for a quick bladder relief to come back and find that I was out - Price reversed and heading in the other direction as though Dracula himself was sniffing around.

What I am saying is - don't get too paranoid or sweaty about it. They have only said they will not honour stops at times of extreme volatility, and it must be said that on Friday when the GBP went ape I did ring them and they did restore what I claimed was an error of judgement on their behalf.

If you are going to trade you have to do it somewhere with somebody. As long as you know the possible pitfalls and try to avoid them is all that counts

Trade well

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Torch said:

"...the market will eventually select those shops that accurately portray their policy."

Well said. I went live with FXCM this week, basically with the understanding that 'accuracy'(/honesty?) was not going to be one of the key services I could expect. Basically, the experience of going live for the first time is enough of a pant filler without worrying about losing equity beyond that allowed by my r/r and strategy .
Hence jumping knowingly into the snakepit was the price I had to pay for such a backup and for a sort of peace of mind. Lo and behold... the comforting guarantee is whisked away and all I can see is no good hissing reptiles laughing at me for my gullibility.

ACM is now tempting - tighter spread, stops loudly guaranteed on their splash page (even FXCM never didn't do this) and a goodish rep. BUT whoa there tiger.. they are now in cahoots with RefCo which is of course the Goldfinger to FXCM's Oddjob. So ... maybe not.

What brokers then do 'accurately portray their policy'? Is this then best we can really hope for? That there's no guarantees swimming with sharks so go with the least dishonest sharks?

Sorry for mixing my snake and shark metaphors, guys.

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Response from FXCM

Just received this email from FXCM. Please note, I am not an account holder with them. I simply emailed this morning asking why their web page was still showing the guaranteed stop facility.

Please note the emphasis is mine.

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Thank you for your e-mail. In response to the email that we have sent to our clients, I would be happy to clarify your concerns. If you would like a call to explain the email and policy I would be more than happy to do so, as we want you to be comfortable and confident trading with FXCM.



The reference you are citing is from our website, however, there is the disclaimer that states, "All stop-loss, limit and entry orders are guaranteed against slippage except in extraordinarily volatile market conditions. All quotes and trades are subject to the terms and conditions of the Client Agreement accessible through this website." FXCM has built its reputation as offering the absolute best execution availble in the FX market and this remains true today.



As I’m sure you already know, FXCM is the largest online FX dealer in North America in a market where size determines access to prices no matter the market conditions. Consequently, FXCM still provides the highest level of trade execution at the most competitive price no matter the market conditions. The FXCM policy of honoring stops and limits at the price specified by traders is a policy that still stands, meaning that in normal market conditions, or 99.99% of the time, you will be filled on all stop, limit, and entry orders-a standard created by FXCM that no other dealer follows. This, in turn, means that we still offer the greatest degree of precision in trading in the FX industry.

It is only in extremely abnormal market conditions-- which are rare but can happen— are we not able to honor this guarantee just like no other dealer could in any market. Indeed, it is impossible for any dealer to fill an order at a price that does not exist. The only difference is FXCM has greater access to liquidity and thus, greater ability to execute conditional orders at the price specified than any other dealer. FXCM will continue to the best of our ability to fill your orders at their specified prices by using our own dominating access to liquidity.



During times where traders see concentrated periods of intense volatility, where the market gaps significantly, the best course of action for clients who wish to avoid the risks associated with a volatile market is simply to stay out of the market altogether. I hope that this helps to clarify your question. If you have any questions please let me know.



FXCM is committed to offering clients excellent execution, easy accessibility, safety of funds, and the most exceptional customer service in the foreign exchange industry. If you have any questions or concerns, please feel free to contact us by phone, email or live chat 24 hours a day, 7 days a week. Our email is [email protected]. You can call us at +1 (212) 897-7660, or toll-free (US only) at +1(888) 503-6739. Our international toll-free numbers are available at the following page: http://www.fxcm.com/toll_free.html.



Kindest Regards,

Matthew Ketcham
Forex Capital Markets, LLC
Financial Square
32 Old Slip 10th Floor
New York, NY 10005
Tel: (212) 897-7660
Fax: (212) 897-7669
Email: [email protected]

"During times where traders see concentrated periods of intense volatility, where the market gaps significantly, the best course of action for clients who wish to avoid the risks associated with a volatile market is simply to stay out of the market altogether."

I would not trade through major new releases, as a full-time intraday trader. The problem is more likely to be an issue with and have greater implicatins for traders who place one trade per day, who may also have jobs, and who's trades are active in the market during news release times.

Firstly - many thanks to TheBramble for getting in touch with FXCM in the first place.

And secondly to jtrader - you are bang on, and this is the problem. I am self-employed and some days I sit here all day and trade, but on others when I have been called out on jobs, I will set my trades or their entry points before I leave the office and leave them unattended with a stop loss and take profit point. And this suggestion by FXCM makes it all very hairy.

It must be said that as one of the trading platforms which I use I have used FXCM now for 10 months and so far I have not had cause for complaint except on two occasions when I claimed that they had made a bad judgement call and they did agree in the end and re-emburse me on both occasions.

It will also be very interesting as an FXCM client to see if the failures in stops and entry points (should they occur) in the future are ever to the clients benefit, or always to FXCM's. I will monitor it, believe me.

As it stands at the moment to state that "During times where traders see concentrated periods of intense volatility, where the market gaps significantly, the best course of action for clients who wish to avoid the risks associated with a volatile market is simply to stay out of the market altogether" is an absolute load of c**p because from my experience if the market gaps so suddenly (which is the whole issue here) you don't see "concentrated periods of intense volatility". This is the whole point, and neither do FXCM see them, or they would have them covered.

I would like to meet the bookmaker who has remained in business who says - Look people, if it is a small 6 horse race at Chepstow, then fine, have a flutter because we can handle that. But if it is a big race like The Grand National, stay out, because if we can't lay off your bets in time, then we will not honour your bet.

The answer of course should be - You must lay off the bets in time, or like any bookmaker you must stand the loss! Your job as a broker is to make sure that you either have enough liquidity yourself to cover the bet or make another provision for it to be covered.

CMS do make a limit. They say that they will guarantee ALL STOPS up to a limit, and that limit is 5 units. That's fine. I am not an unreasonable man, I can live with there being a limit, but a statement which tells me to stay out of the market when it looks volatile or I may not get my bets covered is I am afraid one that I am going to have difficulty with if I am not there to note that the market is volatile.

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jtrader said:

"During times where traders see concentrated periods of intense volatility, where the market gaps significantly, the best course of action for clients who wish to avoid the risks associated with a volatile market is simply to stay out of the market altogether."

I would not trade through major new releases, as a full-time intraday trader. The problem is more likely to be an issue with and have greater implicatins for traders who place one trade per day, who may also have jobs, and who's trades are active in the market during news release times.

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