Personal EURCHF losses

[Splitlink]

i'm not kicking anyone. you post on a public forum so take the good with the bad.

just because i'm not fawning all over you it doesn't mean I don't sympathise with you but that's not my point.

my point is no one forced you to trade but you did and if you had made 3000 points by having the reverse position you wouldn't be moaning about how unfair it all is, you'd be dancing a jig to the bank and telling people how clever you are.

you bet on FX, its risky and you got caught the wrong way and took a pasting. its very sad and very unlucky but that's the business you dipped your toes in to. its no one elses fault and that isn't kicking someone when they're down its just speaking the truth.

My biggest dilemma with this industry is sometimes peoples lives are changed for the worst and that effects me. its why I always try and do things properly so I know in my own heart that I haven't had a role to play in someones downfall. you're all adults, you know the risks and i'm very sorry to hear that on this occasion you've had a life changing moment but posting on here looking for support is also going to draw other comments from people that know what happened and understand that when spreadbet firms say quite clearly 'You may lose more than your initial deposit' it is true. they aren't just words, it is a red flag that should say to you "you could lose the lot"

I hope you get your life back on track and your family is ok, I really mean that. I hope IG look at you sympathetically and you reach a fair compromise. I also hope you walk away from risky investments and do things in future that are more suitable for your net worth and your risk appetite because clearly FX is the last thing you need to be doing.

What you say about the risk is very true and I agree with what you say. However, I believe that forex dealers have a duty to protect the rights of their clients as well as they can. I am not sure that they have done this, because of the vast differences experienced between one trader's experiences and another's.

I do not blame the SNB, who were protecting their interests, but somthing was badly wrong in some dealerships.

 

[highbury fx]

@highburyFx - Point taken sir. We all knew the risks and the pitfalls. What we were not prepared for was the performance of our provider - IG Index in this case.

The issues are not that we lost, but how much we lost and why. The pertinent issues still remain unresolved

- Why did IG close out €100mn of client positions at the higher prices (>1.19) and leave €115mn of client orders to trade as an aggregate (using USDCHF) at 0.9250

- Why did IG take over ten minutes (for aggregating orders manually) to get their first phone order to the market?

- Why did IG still allow people to sell on the platform while they were aggregating trades in order to sell a block?

- We know they sold €115mn at 0.9250 (a derived price from USDCHF, USDEUR), but at what price did they sell the other €100mn and when?

I hope you see it's not as clear cut as the market moved lower and we lost.....there is a question of best execution and reliability of the broker's risk management (aggregation time), agreements with liquidity providers, and inconsistencies between client fills. How can one justify a stop of 1.20 not being closed until 0.9250 vs a stop of 1.19x being closed at 1.19x?

We are upset partly due to our poor risk management, but more specifically due to how we have been treated by a FTSE listed and FCA regulated broker.

fair questions.

1. they have an order autofill that populates all the triggered orders. They may have been able to get a block of orders done with the little bit of liquidity that remained straight after the announcement. €100m of EURCHF is equivalent to £6700 per point and I would be surprised if IG got anywhere near that amount done above 1.19 (I'd be surprised if they got 1/10th of that done). The remaining orders would have been aggregated (that's how you run risk) and IG would have done a deal in the market and passed the price on to the hundreds of orders waiting to be filled. The question you should ask IG is show us your hedge tickets. If they got filled at 0.9350 and filled you at 0.9250 then that's morally wrong, if they got filled at 0.9255 and filled you at 0.9250 you've been unlucky that they hedged at such a poor price (hindsight is amazing isn't it)

2. it takes time. the market had seen a once in 40 year event happen and systems were put to the test. When you run a dealing desk the first priority must be to do things accurately, the second priority is to do it quickly. On this occasion to make sure priority 1 was met it took them 10 minutes to make sure that what they thought was happening was actually happening. I understand why there was this delay, I understand how frustrating it must have been for you to sit and wait what seemed like a lifetime but IG would have been checking first of all that the move was real and not a fat finger, then they would have been trying to establish their exposure and then finally they would have hedged it.

3. the delay was with filling orders and people were still able to buy and sell on the platform. This does look a bit novice, an order that has been working for a few days should have been filled before someone was able to trade at the market. IG should have taken the pair off line the moment they had a delay in filling stops.

4. this is where your FOS complaint will show you the evidence you need. Everything has an audit trail and I can only assume that if IG are digging their heels in that their hedge was pretty bad. That doesn't make them bad, its just circumstances but for transparency they should show you. They don't have to, but I think they should.

what you consider to be poor risk management may not be, it was a huge event that impacted thousands of people instantly and unfortunately there wasn't enough liquidity to fill everybody at 1.1995.

I have one question. How do you know 100% for sure that IG were able to get such a huge amount done above 1.19? I don't believe they could've done that and that puts a lot of your argument in doubt for me.

I wish you well. I hope you don't trade again.

 

[igeurchfloss]

Even ignoring anecdotal differences stated by retail traders.....the numbers don't lie.

As per a seperate thread, this is a variance of the pricing at different brokers. It tells us a story too

1) IG @0.9250
2) FX Pro @ Average was 1.11
3) CMC @ 1.00684 (after requote from 1.1898!)
4) Swissquote @ 1.06
5) Activtrades @ 1.10
6) FXFlat @ 1.044
7) WH Selfinvest @ 1.044
8) Dukascopy @ 1.03
9) ETX @ 1.06
10) Fineco @1,01
11) 11) Avatrade @ 1.0450

 

[highbury fx]

What you say about the risk is very true and I agree with what you say. However, I believe that forex dealers have a duty to protect the rights of their clients as well as they can. I am not sure that they have done this, because of the vast differences experienced between one trader's experiences and another's.

I do not blame the SNB, who were protecting their interests, but somthing was badly wrong in some dealerships.

100% agree. How can most S/B broker fill at 1.06 and IG at 0.92.

IG hedged it at the low and didn't improve. A lot of the other brokers wouldn't have had anywhere near the volumes IG had and were able to get their hedges done quicker and were able to improve the rate once a couple of firms started doing the same. It all snowballs and every firm tries to at least match their competitors in terms of fills, slippage, tools etc. IG have always been this stand alone goliath. their stance was and still is, we're the market leader, you don't like it go somewhere else but we know we're the best so you'll moan but stay with us anyway.

It stinks, but that's the downside of dealing with IG. They're like a stubborn wife, you don't like their attitude but there are more pros than cons in staying together.

This isn't the first time IG wont compromise and it wont be the last. but they wont go bust like worldspreads and they wont shake you down like some other firms do. they'll offer you amazing tools and a great product list but they wont care about you the way a broker with 1,000 clients will. The broker with 1,000 clients wont be able to offer you anywhere near what IG can.. its all swings and roundabouts.

The EURCHF debacle is forgotten by all except those who took a kicking from it. Most of IG's clients are only worried about today and tomorrow, not 6 weeks ago. IG know this will blow over, they have the resource to wait for an official conclusion if one ever comes or just to sit it out until it all blows over. they have far more patience than any of their clients and deeper pockets than most of them as well.

 

[igeurchfloss]

I have one question. How do you know 100% for sure that IG were able to get such a huge amount done above 1.19? I don't believe they could've done that and that puts a lot of your argument in doubt for me.

The closeouts at 1.19xx were what caused IG the £12mn trading loss. The remaining £17.3mn was passed to remaining clients. So I'm not saying they actually traded at 1.19xx in the market, this is the price they probably filled half the clients at. The other half were shoved in an aggregation pool and got closed much much lower.

 

[highbury fx]

The closeouts at 1.19xx were what caused IG the £12mn trading loss. The remaining £17.3mn was passed to remaining clients. So I'm not saying they actually traded at 1.19xx in the market, this is the price they probably filled half the clients at. The other half were shoved in an aggregation pool and got closed much much lower.

hang on.

the loss was from clients being filled at levels that left them owing money they could not pay IG. This is why the loss was "up to £30m" because some clients can pay but a lot wont.

How do you know IG filled €100m of EURCHF at 1.19xx ? If they have done what have IG said is the reason for filling some clients at a very different price to the others. This explanation will be very important in understanding the whole picture. They cannot fill order lines 1,7,11,15,22,26,41 etc at 1.19xx and the other orders at 0.9250. That's not what happened, there is a different explanation.

 

[igeurchfloss]

We have it in writing that their systems closed out some clients at preferable prices due to their automatic closing system. As a result of this, they lost £12mn. They say they could have, but didn't requote these clients.

The other £17.3mn is the losses suffered by remaining clients who were closed out at 0.9250

Hence their quote..."We lost a maximum of £30mn subject to what we can get back from clients who are in negative balances"

 

[igeurchfloss]

Additionally....check this out. We have clients in our group who had parts of their position stopped out at 1.19xx price...and a part closed out at 0.9250

I will make up the number here so as not to reveal too much detail about the person

Person X had 20 long EURCHF with stop @ 1.1900. After SNB announcement, 18 were stopped out exactly at 1.19 and 2 were stopped out with slippage at 0.9250

 

[highbury fx]

We have it in writing that their systems closed out some clients at preferable prices due to their automatic closing system. As a result of this, they lost £12mn. They say they could have, but didn't requote these clients.

The other £17.3mn is the losses suffered by remaining clients who were closed out at 0.9250

Hence their quote..."We lost a maximum of £30mn subject to what we can get back from clients who are in negative balances"

which is precisely my answer number 1 in the list of 4 answers I gave you.

their system initially autofilled some orders but the second wave of orders got manually filled.

it reminds me of a time when I was in a pub and my mate ordered a pint of bud and got charged £2, I also ordered a pint of bud at the same time but got charged £2.50. when I told the barman my mate was only charged £2 thinking he'd give it to me at the same price I didnt expect the barman to tell my mate he owed him 50p.

My point is, some IG clients were lucky but do you want IG to now go to them and fill them all at 0.9250 instead of the good fortune they had in being filled at 1.19? would their misery make you feel better?

you are not due an improvement on your fill because some clients whose orders triggered before you got a better price. if some one had a sell stop at 1.1995 they were in front of the order queue on someone who had a sell stop at 1.1994 and they are entitled to be filled first.

TCF does not mean everyone gets the same price. it means they must be treated fairly and all IG need demonstrate is they treated you and all their other clients as fairly as the directive demands.

 

[igeurchfloss]

Still to be confirmed. Hearing IG severes ties with UBS in Switzerland. Not accepting client incoming payments from client accounts at UBS. Maybe they severed the ties due to lack of liquidity provision on 15th Jan.....

 

[igeurchfloss]

Being going through so much stress since Jan15th.....however this at least made me laugh for a moment

 

[gerryg]

Still to be confirmed. Hearing IG severes ties with UBS in Switzerland. Not accepting client incoming payments from client accounts at UBS. Maybe they severed the ties due to lack of liquidity provision on 15th Jan.....

Maybe taking clients for a ride, pretending they are on the way of resolution??

 

[igeurchfloss]

It just looks like IG did that to avoid paying money to UBS for depositing money. IG have their own bank in Switzerland which they will use.

On another IG note, is anyone else with IG and has experienced a huge negative balance?

 

[igeurchfloss]

Has anyone had any more info from IG Index? Seems they are standing by their best execution of 0.9250 on the back of no liquidity.

 

[Trader333]

Looks like there are a lot of people with IG who lost on the SNB announcement:

http://www.telegraph.co.uk/finance/...02/How-370-investors-lost-18m-in-minutes.html

 

[Lightning McQueen]

excerpt quote from the article comments -

..."anyone who keeps their life savings with a spreadbetting firm should be certified too stupid to suck oxygen"...

 

[timsk]

Looks like there are a lot of people with IG who lost on the SNB announcement:

http://www.telegraph.co.uk/finance/...02/How-370-investors-lost-18m-in-minutes.html

I hope FoMo doesn't read that article by Katie Morley as she states: "Profits are tax free." And she should know, after all she's a Senior Personal Finance Reporter at Telegraph Media Group and was named the Young Journalist of the Year 2013 by the Harold Wincott Foundation for business, economic and financial journalism.

Sorry - a tad off topic - but I couldn't resist!

 

[Forexmospherian]

I hope FoMo doesn't read that article by Katie Morley as she states: "Profits are tax free." And she should know, after all she's a Senior Personal Finance Reporter at Telegraph Media Group and was named the Young Journalist of the Year 2013 by the Harold Wincott Foundation for business, economic and financial journalism.

Sorry - a tad off topic - but I couldn't resist!

Hi Tim

If its based on "majority" ie 70 -80 -90% of all spread betters - she's correct

If its based on the most profitable 5 -10 % who pay no other form of tax and are in full time trading catagory - or the "supposed" 20% of all income tax payers who are not fully declaring their correct remunerations etc etc - then all the tax experts at KPMG - GT - Deloittes - Price waterhouse Coopers - Ernst & Young etc - will say - SHE IS WRONG - ;-)))

Sorry for going off topic in this thread - I promise I will not do it again and now back off holiday will get back on the list you wanted answers for Tim

Have a good week

Regards


F

 

[Hedge Fund Wizard]

Sorry but this is the stupidest thing I ever heard.

The ones to blame for the huge losses are the liquidity providers as they stopped giving liquidity which is their job and brokers themselves for not taking extreme risk protection measures. The brokers knew if their clients were net short or long and where all their orders were (I wonder what would happen if the Swiss reserve bank let's go of the floor? Hmmm)

Look at what for example Dukascopy brokers did to margins on EURCHF last year - their risk management team assessed a real risk of floor release and increased margins greatly. They managed their own and their clients risk. They and many others reversed negatives and great brokers even honoured filled stops.

I believe that no negative protection needs to be a key essence in all Brokers. This ensures that the brokers themselves do not expose their clients to undue risk as with the Swiss bomb of 15 Jan 2015. As such brokers would either not allow trade on pegged /floored currencies or only allow trades against the floor or peg.

If you look at how profitable and huge these brokers are they should sue the liquidity providers or take this hit themselves and not shaft their clients. So what if the owners take a little less profit this year? They're already billionaires.

And let's not forget the massive conflicts of interest. How many liquidity providers own shares in brokers?

This is a huge scam to transfer wealth from fx retail traders to the big players who made a killing on the right side of the market and as all their liquidity providers are banks/ financial institutions which trade in fx themselves for profit they may have had a vested interest in making the Eur/

Liquidity Providers in the interbank market are mainly Tier One and Tier Two banks. Their main business in the FX arena is to provide liquidity (a two way market) to their institutional clients, many of whom are corporates hedging their foreign currency exposure or repatriating profits earned in global markets in a currency other than their own (like McDonalds converting a £100Million GBP balance to USD and sending back to the US.

So now let's look at it from the banks perspective. You are the FX trader for Go Man Sex, a client calls you at 7 am requesting a price for 1000 EURUSD (that's 1Billion in base currency. You quote 60-80, they say "sold". By taking the other side of that trade, your bank is now "long" 1Billion EURUSD at 60. You have just taken on huge risk, not because you want to (the banks FX desk may have a bearish bias for EURUSD). The FX desk will now have to try and unwind that exposure over the course of the day, whilst minimising the potential risk and losses to the FX desk P&L. So it isn't fair for them either.

Now this is where you and I, as FX traders come in. These same banks offer liquidity to brokers that pool their clients aggregate positions together. When the SNB removed the floor, no body knows where this was going to stop,so naturally, you and many others, want to sell in an attempt to limit losses and reduce negative exposure. Why would the banks take the other side of your trades, until they themselves can be sure what the ramifications of the SNB decisions are going to be? They aren't a charity. They have shareholders. Why would they try and catch a falling knife and take your position off your hands, not knowing if they themselves will be able to sell that without a big loss. So all banks withdrew their liquidity on that day and refused to provide a price, not just to you and me, but to each other as well. That is a bigger problem in itself (the lack of liquidity in the system), but has more to do with banks worried about counter party credit risk and protecting their balance sheets in a deleveraging world post-2008.

 

[igeurchfloss]

All your points are valid....except I think there are FCA/MIFID rules regarding what you can and can't do with your client orders.

For a bank to switch off lines/phones in order to unwind their own prop positions before their clients is wrong I think - COBS 11

In any case the spread betting firm has relations with the liquidity providers. It's not their clients who have a choice who to use and when. Therefore most of the responsibility for negative balance should be borne by the spreadbetting firm and its liquidity provider.

Liquidity Providers in the interbank market are mainly Tier One and Tier Two banks. Their main business in the FX arena is to provide liquidity (a two way market) to their institutional clients, many of whom are corporates hedging their foreign currency exposure or repatriating profits earned in global markets in a currency other than their own (like McDonalds converting a £100Million GBP balance to USD and sending back to the US.

So now let's look at it from the banks perspective. You are the FX trader for Go Man Sex, a client calls you at 7 am requesting a price for 1000 EURUSD (that's 1Billion in base currency. You quote 60-80, they say "sold". By taking the other side of that trade, your bank is now "long" 1Billion EURUSD at 60. You have just taken on huge risk, not because you want to (the banks FX desk may have a bearish bias for EURUSD). The FX desk will now have to try and unwind that exposure over the course of the day, whilst minimising the potential risk and losses to the FX desk P&L. So it isn't fair for them either.

Now this is where you and I, as FX traders come in. These same banks offer liquidity to brokers that pool their clients aggregate positions together. When the SNB removed the floor, no body knows where this was going to stop,so naturally, you and many others, want to sell in an attempt to limit losses and reduce negative exposure. Why would the banks take the other side of your trades, until they themselves can be sure what the ramifications of the SNB decisions are going to be? They aren't a charity. They have shareholders. Why would they try and catch a falling knife and take your position off your hands, not knowing if they themselves will be able to sell that without a big loss. So all banks withdrew their liquidity on that day and refused to provide a price, not just to you and me, but to each other as well. That is a bigger problem in itself (the lack of liquidity in the system), but has more to do with banks worried about counter party credit risk and protecting their balance sheets in a deleveraging world post-2008.