OANDA - Safety of Clients' Funds

[Ingot54]

Just did some more googling and came up with this from one of the two founders of Oanda, Michael Stumm:

"Finally, with respect to safety of funds, all our client funds are maintained in a segregated escrow account specifically for this purpose. Moreover, if you are a U.S. person (i.e. have a SS number) then we can set you up with a personal segregated account, but the condition is that you maintain $50,000 minimum deposit."
http://www2.oanda.com/cgi-bin/msgboard/ultimatebb.cgi?ubb=get_topic;f=17;t=000137

Now then, those terms are fair enough I suppose RE minimum deposit, but why on earth can't they offer that to non US persons too ?!?

Thanks for that BSD ... and "Why ..." indeed!

As an Australian who is well aware of the way the volatility in the USA financial maekets affects our own in Australia, I regard the USA as a "SOVEREIGN RISK" country. Simply put - once I allow a foreign company to have my money, I will be pushing that sticky stuff up-hill with a forked stick, if they decide to play with me when I want it all back.

The way the Americans do things legally causes me to cringe had I the misfortune to get involved in any dispute over even the details of a trade. Imagine I put up $15,000 to open an account, and place a few trades. If anything goes amiss, the Australian Government is really unable to assist me, because I am "dealing in a speculative investment field with a foreign entity."

Imagine me trying to repatriate $15,000 if I am having a dispute with them from 12,500 miles away ... lol! Not for this little black duck. I want sovereign safety, and that means trading with an Australia-based company like IGM (Yes, I am aware that IG Markets is a British-based company, listed on the LSE) with an Australian bank a/c.

Oh yes, all is blue sky and ribbons when making the deposits and setting up the account, but at the end of the day, the USA is on the opposite side of the Atlantic and in the wrong hemisphere for me to bother doing business over there.

The object of my trading is to increase my account, not risk the entire bundle. AndresS states that they have "close to 3 X more excessive capital compared to other FCMs in the US" ... but maybe they have 3 X the risk...? We have not had that disclosed. And I don't care if they have 20 X excess capital ... that is STILL no guarantee.

If the money is safe, then simply put that in writing ... why the qualifying rider? Legal opinion might be that the way it is currently worded is open to interpretation ... and I've seen enough of the US interpretative legal antics thanks, to understand not to allow my money to be exposed to any rubbery paper words!

Traders dealing with companies like Oanda really should get a grip! Do you KNOW, absolutely, POSITIVELY, that your money is safe??? If you say yes, then I expect you to sign up to compensate me IF Oanda DOES go wheels-up in the ditch! (They likely won't!)

Quite apart from that, the charting platform on Oanda is crap. The day they offer something that comes close to challenging MT4, AND have a subsiduary in Australia ... I will rush in ... first in line! Before I place a trade with Oanda, I have to suffer losses from currency conversions on deposit ... and to get my money out again ... more currency conversions.

Currently I have to use MT4 for charting ... then place my trades with IG Markets in Melbourne ... stupid arrangement I agree - and sometimes pip-crucial with timing. But unfortunately, there are no real traders employed at IG Markets either ... thus the excuse for their useless charting too. REAL traders would not sanction such a useless charting package either.

While I am in the bashing mood ... IG Markets keep "upgrading" their charts, but they have obviously never tried to load their charts on a private computer ... heh heh. I need to take a cut lunch just to open the charting package, and a piece of fruit for dessert while it decides to flick between 15 minute chart and hourly views! Seriously - untouchable in my view.

Sadly, I have do have a lot of respect for OANDA ... I read that they really do apply honest principles in their dealings with their clientele ... full marks there.

But there is no way I am about to allow feel-good fuzzy logic to over-ride my good sense, when I decide who has contol over where and if my nest egg will one day hatch.

I thank you for tolerating my whinge, but hopefully there may be others in the same boat as I am ... longing for a half-decent Australian company to come along with a half-decent charting and trading platform.

Another cut lunch or two before that ever happens ... heh heh!

Until then, MT4 rules!

 

[BSD]

Ingot, I certainly agree with you that the USA have lost all the marbles they had remaining post 9/11, and while I certainly hope for a speedy recovery over there I do understand that good things will probably need their time. Umm.

As for Oanda, there really is nothing I'd hope for more than that they'd get their act together and start guaranteeing their customers funds, or do we really have to wait until governments start imposing the same regulations on "spot" FX brokers that futures brokers have had to comply with since eons...

I really don't quite understand what the problem is, it all appears rather ridiculous, do the what must be pretty insubstantial savings from not insuring your clients money for at least all non US persons weigh more than the image loss that comes from refusing to protect your clients prime asset ?

 

[Ingot54]

BSD - On reading over my post I know it sounded very negative towards Oanda ... and I sincerely apologise to them for the slur ... not my style really. They are probably one of the best and straightest out there right now.

But it is very frustrating here in Australia to just accept what the brokers choose to dish up to us. We have all these "get-rich-our-way" trading companies offering mentoring/DVD courses/ "education"/ "state-of-the-art" trading platforms and so on ... when it is clear to anyone who has traded for more than 5 minutes that these outfits are purely there to lure newbies like a moth to a candle flame.

What is needed over here is :

A) A local company (and there are many - all of whom offer their own proprietary platforms and charts) who really will get back to the basics of trading, and offer something that could seriously challenge the MetaTrader4 charting package.

B) Some decent companies who just set out to train people to trade well, forgetting about their profits in the short term. Too many shonky eBook sellers, and shonky "me-too" copy-cats.

C) Regulation. The current state of play here is largely ad hoc in my view. It is not difficult for a company to set up as a broker, but a couple of horror stories have surfaced regarding stop-hunting in the past, and I am wary.

There are some excellent forums now - of which most of us are aware ... this one is growing and powering on, and of course www.forexfactory.com and www.babypips.com. There are some others too where people actually post their trades - winners and losers, from which one can really learn.

One of my personal maxims is : "Get the METHOD right and the money will take care of itself"

Hopefully one of the local companies here in Oz will see things the same way.

Until then I will regretfully use my dual system ... charting with MT4 and trading with IGM.

 

[BSD]

BSD - On reading over my post I know it sounded very negative towards Oanda ... and I sincerely apologise to them for the slur ... not my style really. They are probably one of the best and straightest out there right now.

Ingot, I couldn't agree more with you, they are truely a fantastic company in all respects, I've been with them many very satisfied years with a small account that I'd like to upsize when they start insuring client funds, the only quibble, although it's a major one, I have with them is this non-insurance of clients funds issue here.

Btw, do you know what's become of your very decent fellow Australian Nick Radge from reefcap.com ?

He used to run a fund and had a pretty good forum at one point, but the website seems to be down now.

 

[Ingot54]

By the way - I missed saying what was also bothering me ...

What is to stop a company from saying: "OK. We absolutely guarantee the safety and security of client's funds deposited with us."?

Why hedge around the issue with rubbery statements like: "Finally, with respect to safety of funds, all our client funds are maintained in a segregated escrow account specifically for this purpose ..."

Having funds segregated sounds lovely, but in NO WAY guarantees security in the event of a bankruptcy. Most companies have in fine print that "segregated funds, while kept apart from trading funds, may still be called upon in the event the company deems it necessary ...blah, blah, blah."

Escrow?

Says who?

AndresS, saying that "Safety of funds is something that OANDA takes seriously" only to clarify that with "Like most FCMs in the US there is no insurance for your margin account" is really in no way compatible with your desire to be an industry leader.

The single most important issue for a brokers client is safety of funds !

Refco has clearly shown that size is no protection against bad things happening.

The futures clients of Refco emerged unscathed from the bankruptcy, it's their spot forex customers that were left holding the bag, just like Oandas FX clients would lose everything in the event of a bankruptcy.

Surely Oanda can do better than that ?

So why does Oanda NOT put some genuine leadership out there, and come out with a simple and true statement - in layman's terms, that "your unused money is absolutely and positively guaranteed, and in the event of a bankruptcy, will be returned in full to you."

I still don't read that, and the reason is that they don't mean that.

As a purported industry leader, I expect Oanda to be more accountable for client's cash..

It is not their money, and is placed there in goodwill for the use of the trader.

Maybe when the new site is completed, we will see a statement to this effect ... or will they wait until the regulator weilds the big stick?

 

[Ingot54]

Nick Radge ... still going strong!

Btw, do you know what's become of your very decent fellow Australian Nick Radge from reefcap.com ?

He used to run a fund and had a pretty good forum at one point, but the website seems to be down now.

Yes BSD Nick Radge is still going strong over here.

The rerason his website is down is that he caters now only to subscribed clients as far as I can see. I used to visit his forum, but as you say it has been taken down.

His new site is : http://www.thechartist.com.au/

I still get the occasional newsletter from him, but declined to join his new format because I feed on free words and share what I learn freely, while Nick is now charging for his! I can not find any free forum there now ... just to register will cost you.

I believe he prefers smaller groups now because the prices for his services are quite high ($' 000's) but by the same token, his courses are comprehensive and intense ... probably fair value for money. He' s no mug!

W@ith best wishes

Ingot

 

[BSD]

Thanks Ingot

Too bad Nick Radge doesn't appear to be running his fund any more.

Btw, I do wish we'd hear sthg from Oanda on the topic here...

Best,

Markus

 

[grantx]

Andress,

Correct me if I’m wrong, but “3x more excessive capital” (you don’t believe in understatement do you?) equates to what? If the US works on a similar basis to the UK, this is almost meaningless as it certainly doesn’t reflect a reassuring capital to clients’ liability/exposure ratio. It only takes one client to go down big, to bring the whole house down.

Further, and I stand corrected, Bramble is not a US citizen/resident and therefore is beyond any safeguards offered to US clients.

Djl,

“been around a long time”, like Barings and Refco?

Bramble,

“Pretty sure that FSA (or whatever it is these days) regulated brokers are required to maintain this sort of structure for client monies.”

Only if you have been designated a “Private client”. You could be a “non-private client” or numerous other categories which afford little, if any, protection. You pays your money, and you takes your choice.

Grant.

 

[grantx]

I would like to add a further comment.

While it may be reasonable (if somewhat unrealistic) to expect clients to behave rationally at all times with regards to their trading, firms also need to assume a degree of responsibility and control over clients. Specifically, by setting margin levels sufficient to ride a big draw down. 100:1 gearing with some FX firms is a bit of joke. But at these levels, it's a massive earner.

Grant

 

[TheBramble]

Bramble,

“Pretty sure that FSA (or whatever it is these days) regulated brokers are required to maintain this sort of structure for client monies.”

Only if you have been designated a “Private client”. You could be a “non-private client” or numerous other categories which afford little, if any, protection. You pays your money, and you takes your choice.

Grant, I wasn't making that statement about the FSA (or SFA as they are affectionately known...). Confused.

btw - Both your six foot Swedish girlfriends said to say "Tja" and asked if they could stay over again tonight?

 

[chump]

Let's get the facts straight....you can post and read the Nick Radge forum FOC...IF you wish you can pay a measly sum and join a private forum within that site to get his daily analysis of ozzie markets and the views of other members as they discuss charting together. No, I'm not a member as what they do is not what I do ,but other than that no issues. Radge is the exact opposite of the usual screw em sites. I can't think of a safer pair of hands to be in for newbies.

 

[Hittfeld]

Let's get the facts straight....you can post and read the Nick Radge forum FOC...IF you wish you can pay a measly sum and join a private forum within that site to get his daily analysis of ozzie markets and the views of other members as they discuss charting together. No, I'm not a member as what they do is not what I do ,but other than that no issues. Radge is the exact opposite of the usual screw em sites. I can't think of a safer pair of hands to be in for newbies.

I only can second that. One of the best sites to learn and practice free systems as well. Now that IB is offering aussie markets I have a chance to finally trade TechTrader myself.

Regards

Hittfeld

 

[grantx]

Bramble,

As they found it so restful I said it was OK. However, men dressing up as Dorothy (Wizard of Oz) is not attractive to women.

You've got to control your bitches.

Grant.