What makes this thread so interesting is, that it also takes up important issues concerning money and risk management. To blame the SB company indefinitely for a setup where you could not secure your own position is a mistake. If you had several SB accounts at the time, why didn't you hedge the position? I mean at least be honest about it, with your experience today you would not build up a huge position like this, without being able to secure your exit somewhere else. The same thing applies to trading the DMA, if something goes terrible wrong with your current broker, you have to have an alternative up and running in order to act quickly.
No this is correct, but at least you have to have a basic security. This involves alternatives being able to exit your position.
There is definitely a big risk to let a market maker decide the faith of such a huge position. Anyway, I am in favor of more strict regulation towards SB companies. 2 years ago EU MiFID "Best execution" directive policy was not implemented. Today as I understand it, every bit of client communication must be recorded. If this was the case 2 years ago I don't know.
They have a duty to 'treat their clients fairly'
True, but not is they can get away with not doing so
I think somewhat this has been improved since TomTom had his encounter with CMC. SB companies are more carefully now, especially as MiFID directives has been implemented by the EU. Also increased competition will see to that SB behave more accordingly to set rules. But you will never get away from your own responsibility, one should not hand over all the security issues to a Market Maker. There are way too many things that can go wrong.
With all the respect, I think the picture you are painting is way too black. It seems you have have had really bad experience with SB. People lose money trading SB because they do not take care of the simplest rules of trading, like money and risk management. SB is not perfect, but with them you trade the markets at a lower entry level. DMA is to preferred if you like to have larger stakes. Still all the same, you have to adapt the basic trading principles in order to succeed.BlackSwan, don't mind telling you that much of what you've posted there is a load of...Do you really think people betting/trading at that size is what kills market makers? Absolutely not - it shouldn't be unless the MMs are crooks i.e. they proactively bet against their clients.
True Marketmaking, which is what the SB companies are supposed to be doing is simply passing on the spread yet leaving the risk with the client. MMs are supposed to have a NET book on every stock/instrument which they then hedge or insure against and if they do this properly and manage it right, they'll always make money at a certain margin.
The problem is, the MMs are GREEDY and very much so. Their regular margin is NOT enough for the majority of them. They like to exploit their extensive inside knowledge of the markets to trade against their clients and grow their own accounts. There's actually nothing wrong with wanting to trade or even to use your extensive knowledge to your own advantage. What's wrong is trying to use this AGAINST YOUR CLIENTS to enrich yourself and that's where the jiggery pokery around execution and prices comes in. Many SB companies (not all) deliberately manipulate prices to the disadvantage of their clients. How many times do we experience slippage to our advantage?..did I hear never?
The issue of SB companies being 'glorified bookies', though apt, is flawed. They are SUPPOSED to be more than that. Why? because normal bookies have no real underlying market! They simply quote prices based on their OPINION. You are therefore ALWAYS trading against that opinion and nothing else. It is up to them how they then manage their NET book for profitability.
SB companies on the other hand DO have an underlying market which offers its own real world prices based on supply and demand and they are supposed to quote around these real world prices. Though there's a 'betting' layer on top of this trading market layer, that's really just a devise for the MAIN benefit of SB which is no CGTax.
The market element is MORE important than the betting element hence why SB firms are FSA regulated!
BlackSwan, don't mind telling you that much of what you've posted there is a load of...Do you really think people betting/trading at that size is what kills market makers? Absolutely not - it shouldn't be unless the MMs are crooks i.e. they proactively bet against their clients.
True Marketmaking, which is what the SB companies are supposed to be doing is simply passing on the spread yet leaving the risk with the client. MMs are supposed to have a NET book on every stock/instrument which they then hedge or insure against and if they do this properly and manage it right, they'll always make money at a certain margin.
The problem is, the MMs are GREEDY and very much so. Their regular margin is NOT enough for the majority of them. They like to exploit their extensive inside knowledge of the markets to trade against their clients and grow their own accounts. There's actually nothing wrong with wanting to trade or even to use your extensive knowledge to your own advantage. What's wrong is trying to use this AGAINST YOUR CLIENTS to enrich yourself and that's where the jiggery pokery around execution and prices comes in. Many SB companies (not all) deliberately manipulate prices to the disadvantage of their clients. How many times do we experience slippage to our advantage?..did I hear never?
The issue of SB companies being 'glorified bookies', though apt, is flawed. They are SUPPOSED to be more than that. Why? because normal bookies have no real underlying market! They simply quote prices based on their OPINION. You are therefore ALWAYS trading against that opinion and nothing else. It is up to them how they then manage their NET book for profitability.
SB companies on the other hand DO have an underlying market which offers its own real world prices based on supply and demand and they are supposed to quote around these real world prices. Though there's a 'betting' layer on top of this trading market layer, that's really just a devise for the MAIN benefit of SB which is no CGTax.
The market element is MORE important than the betting element hence why SB firms are FSA regulated!
Apparently, and some traders even have the nerve to withhold they should be able to keep the profit. In this regard I am referring to substansial incorrect prices.
