Best Thread Capital Spreads

[davecrom01]

Hi there,

I have it from the FSA that I have no grounds for a challenge. The fact of the matter is that my ENTRY price was based on a "palpable error", which covers system feed failure and verbal misquotation by a dealer. Even though the "last 10 pips" were genuine, is allowed to be irrelevant to the issue.

The email confirmations saying "we have pleasure in accepting your trade at LONG 99.22" and "we have pleasure in accepting your exit at 99.82" have absolutely no basis in contract law as they are an extenion of the "palpable error".

And as the chap from the FSS succintly put it : They do not have to prove or disprove anything. The can revoke any trade, for any profit, for any reason - legitimate or not. You are engaged in nothing more than a gentlemans agreement, and only the desire to show goodwill on their part, and the view of subsequent negative publicity, stops them from cancelling all and every winning trade you may experience.

So there we go.


Cheers
Dave

 

[0007]

Hi there,

I have it from the FSA that I have no grounds for a challenge. The fact of the matter is that my ENTRY price was based on a "palpable error", which covers system feed failure and verbal misquotation by a dealer. Even though the "last 10 pips" were genuine, is allowed to be irrelevant to the issue.

The email confirmations saying "we have pleasure in accepting your trade at LONG 99.22" and "we have pleasure in accepting your exit at 99.82" have absolutely no basis in contract law as they are an extenion of the "palpable error".

And as the chap from the FSS succintly put it : They do not have to prove or disprove anything. The can revoke any trade, for any profit, for any reason - legitimate or not. You are engaged in nothing more than a gentlemans agreement, and only the desire to show goodwill on their part, and the view of subsequent negative publicity, stops them from cancelling all and every winning trade you may experience.

So there we go.


Cheers
Dave

Interesting. What to do about CS ? - bit of a no-brainer really.

Mind you, based on the FSA's performance (lack of) over the years and their own damning report of their competence (lack of), I'd like to know what a quality lawyer makes of this.

 

[stevespray]

Hi there,

I have it from the FSA that I have no grounds for a challenge. The fact of the matter is that my ENTRY price was based on a "palpable error", which covers system feed failure and verbal misquotation by a dealer. Even though the "last 10 pips" were genuine, is allowed to be irrelevant to the issue.

The email confirmations saying "we have pleasure in accepting your trade at LONG 99.22" and "we have pleasure in accepting your exit at 99.82" have absolutely no basis in contract law as they are an extenion of the "palpable error".

And as the chap from the FSS succintly put it : They do not have to prove or disprove anything. The can revoke any trade, for any profit, for any reason - legitimate or not. You are engaged in nothing more than a gentlemans agreement, and only the desire to show goodwill on their part, and the view of subsequent negative publicity, stops them from cancelling all and every winning trade you may experience.

So there we go.


Cheers
Dave

This FSA chap is talking utter nonsense. Spreadbets are legally enforceable, by both parties, by vertue of Section 412 of the Financial Services And Markets Act of 2000.
If what you were saying re 'gentlemans agreement' were true then the spreadbetting firms would never be able to come after you for your losses. Clearly there have been cases where various firms have taken clients to court in order to recover debts incured.

Spread bet contracts, in the eyes of the law, are valid and enforceable contracts.

Steve.

 

[FXSCALPER2]

This FSA chap is talking utter nonsense. Spreadbets are legally enforceable, by both parties, by vertue of Section 412 of the Financial Services And Markets Act of 2000.
If what you were saying re 'gentlemans agreement' were true then the spreadbetting firms would never be able to come after you for your losses. Clearly there have been cases where various firms have taken clients to court in order to recover debts incured.

Spread bet contracts, in the eyes of the law, are valid and enforceable contracts.

Steve.

Exactly! It would be extraordinary if we have a legal system which allows a business to operate in the way suggested by the FSA fellow. In fact, it is pretty embarassing for the FSA to give such stupid advice. What if you legitimately traded and made lots of money and they just took it? According to the FSA guy, they would be able to do that with impunity. How can that be?

 

[davecrom01]

Steve, FX

Apparently not... there is no contract enforced by any communications be they a verbal mistake, or a trading platform/email mistake. He suggested that a compromise was a good offer to make but that there was no legal course of action available. Full Stop. Everything is covered by the "palpable error" and that they may chose to pay, or not to pay - at their discretion. The only advantage I might have would be to suggest it was a "goodwill gesture" to show an understanding and acceptance that it was their (CS) error that caused the problem, and even then - that they would probably just say "and it was our error that gave you the gain"...

Still think they should cough for the pips offered in the compromise though.

Dave

 

[FXSCALPER2]

They can revoke 'any trade, for any reason, legitimate or not'? That is astounding, to say the least!

 

[davecrom01]

They can revoke 'any trade, for any reason, legitimate or not'? That is astounding, to say the least!

Hi Scalp....

I think his point was that given they do not offer a regulated price, only their own interpretation of the price - that despite the "Gentlemens agreement" of the racetrack being abandoned (as Steve said via the 2000 legislation), they still have, in effect, got carte blanch to call any trade they want as being "off the price" should they wish to do so. And that it is only the desire to keep customers that weighs against that.

I should have asked if it would apply to a spread bet on a regulated market, and if so, what is the % of error that allows a call of "palpable" to be made...

Dave

 

[0007]

Davecrom01,

Possibly of interest - they do cover SB:

about the Financial Ombudsman Service
issue 67, investment-related complaints

 

[grantx]

Dave,

There may be slight problem here regardless of blame in that being resident in a foreign country means FSA oversight and protection ,ay not be applicable . I stand to be corrected on this point but I know it is the case for UK residents trading through a US broker.

“Alas their email confirmation, indeed any confirmation including human confirmation, holds no water in legal terms in relation to spread betting companies.”

In the US an e-mail is as valid as evidence as any other kind of communication – printed, verbal or tape recording. Indeed, this is why the various law enforcement agencies are keen to get hold of e-mails, especially in white-collar crime. I’m sure this must be the case in the UK

““palpable error", which covers system feed failure and verbal misquotation by a dealer”. This is not an error – it’s two, reflecting gross negligence and incompetence. You may argue for one but two is taking the pisss.

The FSA guy has got be wrong. I honestly can’t accept what he says. Somewhere in the FSM 2000 there is mention of the client having the choice of enforcing an illegal or incorrect contract (trade) but the broker does not have the same choice – the client determines the question.

Ns1000,

If SB punters could afford an independent quote system , they probably wouldn’t be using SB’s in the first place. And how would one decide which is the “correct” price – the SB quote or Reuters or E-Signal, etc.? It’s the dealers who need an independent quote system.

Grant.

 

[davecrom01]

Grant,

Thanks for the input. I am a UK citizen, but I travel a lot with trading and I'm currently spending time in Canada - thats not an issue, my account is UK based. Was actually born in Stepping Hill hospital right near you!

The "and" / "or" argument doesnt matter. I didnt get both, I just got email. I said "and" because palpable error can be either.

The FSA told me, specifically, that the automated email was classed as an extension of the palpable error caused by the incorrect price feed getting through to the platform. It is not classed as forming a contract.
---------------------------

0007, I'll have a read through. Thanks for finding those and letting me have them...

Cheers, Dave

 

[stevespray]

Dave,

It does not matter how they communicate the existence of the contract. They can use any method they choose (or not). The pivotal point in the matter which you raised relates to whether a contract was formed or not. This is basic statute law. This business about “gentleman’s agreement” is relevant to betting shops and online bookies who take bets on sports events and the such. A completely different set of rules apply for financial bets – these bets are contractual in nature.

The only way that a particular firm or person could escape the contractual obligation is by showing that A ) The contract never existed, or B ) That one party tricked (or used foul means) into accepting the offer of contract. So far as you have mentioned neither of these things occurred.

Essentially it is important to determine how a contract is formed. For a contract to be formed there has to be ‘an offer to contract’ followed by an ‘acceptance’. In terms of spread betting the quoting of a price is not generally considered to be an ‘offer to contract’ in just the same way that a price on an item in a shop is not considered to be an ‘offer to contract’. Instead these prices either marked on goods or quoted via the internet are regarded legally as an ‘Invitation to treat’ or ITT for short. Type the words ‘invitation to treat’ into Google and see what it throws up. Anyhow, an ITT is basically a way of a store keeper (or spread bet firm) reflecting a price to you that he or she might be prepared to accept for an item or service. It is then the client who makes the ‘offer to contract’ at the indicated price. Still, at this point in time, no contract has yet been formed. The client may withdraw their offer at any time up until the moment the vendor either accepts or rejects the offer. If the vendor accepts the ‘offer to contract’ then a contract, in the eyes of the law, is deemed to have been formed at that exact moment in time. The law in the UK makes a critical distinction of this moment in time – before that moment there is no contract – after that time, if there was an acceptance, a contract exists. Therefore, whenever there is a legal dispute, the dispute always resolves around whether a contract exists or not.

The FSA guy is incorrect because he does not know or understand the relevant laws on which he appears (at first glance) to be commenting on. He does not appear to understand that financial spread bets are legally enforceable. This rather large omission of understanding causes me to personally question everything else which he has advised you since the basis of his comments appear to revolve around a situation where winning bets are paid out, not on the basis of contractual obligation, but on a ‘good will’ basis.

An interesting experiment would be to ring the FSA again tomorrow and ask the same set of questions to a different person!!!

Steve.

 

[0007]

Dave,

It does not matter how they communicate the existence of the contract. They can use any method they choose (or not). The pivotal point in the matter which you raised relates to whether a contract was formed or not. This is basic statute law. This business about “gentleman’s agreement” is relevant to betting shops and online bookies who take bets on sports events and the such. A completely different set of rules apply for financial bets – these bets are contractual in nature.

The only way that a particular firm or person could escape the contractual obligation is by showing that A ) The contract never existed, or B ) That one party tricked (or used foul means) into accepting the offer of contract. So far as you have mentioned neither of these things occurred.

Essentially it is important to determine how a contract is formed. For a contract to be formed there has to be ‘an offer to contract’ followed by an ‘acceptance’. In terms of spread betting the quoting of a price is not generally considered to be an ‘offer to contract’ in just the same way that a price on an item in a shop is not considered to be an ‘offer to contract’. Instead these prices either marked on goods or quoted via the internet are regarded legally as an ‘Invitation to treat’ or ITT for short. Type the words ‘invitation to treat’ into Google and see what it throws up. Anyhow, an ITT is basically a way of a store keeper (or spread bet firm) reflecting a price to you that he or she might be prepared to accept for an item or service. It is then the client who makes the ‘offer to contract’ at the indicated price. Still, at this point in time, no contract has yet been formed. The client may withdraw their offer at any time up until the moment the vendor either accepts or rejects the offer. If the vendor accepts the ‘offer to contract’ then a contract, in the eyes of the law, is deemed to have been formed at that exact moment in time. The law in the UK makes a critical distinction of this moment in time – before that moment there is no contract – after that time, if there was an acceptance, a contract exists. Therefore, whenever there is a legal dispute, the dispute always resolves around whether a contract exists or not.

The FSA guy is incorrect because he does not know or understand the relevant laws on which he appears (at first glance) to be commenting on. He does not appear to understand that financial spread bets are legally enforceable. This rather large omission of understanding causes me to personally question everything else which he has advised you since the basis of his comments appear to revolve around a situation where winning bets are paid out, not on the basis of contractual obligation, but on a ‘good will’ basis.

An interesting experiment would be to ring the FSA again tomorrow and ask the same set of questions to a different person!!!

Steve.

Steve,
That's also my understanding of the law. Very well explained.
(I agree entirely with your comments on FSA who I doubt would even know how to organise a party in a brewery let alone do it.)

 

[grantx]

"An interesting experiment would be to ring the FSA again tomorrow and ask the same set of questions to a different person!!!"

If you sent an e-mail threatening to assasinate him, his wife, children and all relatives, would that constitute a bona fide threat? "It was a palpable error, my Lord"".

 

[Trader333]

If all this is true then it basically says that any bookie can back out of any bet at any time. Next we will have high street bookies telling all their clients that because a low priced favourite won a race that all bets are void.

This cannot be right, either that or I am in the wrong business and have failed to realise that the easiest way to make money is to set up a SB company. Any potential losing bets I incur I will just void on the grounds that I would lose money if I allowed them to stand.


Paul

 

[ns1000]

I agree entirely. CS is FSA regulated, and has an obligation to treat customers fairly (something the FSA is currently pushing hard). Fairly does not mean letting traders have everything their own way, but scrapping a trade because it makes money is neither reasonable nor fair.

They argue that because the price was wrong they have the right to scrap the trade. They may well do under the T&Cs, but this does not mean that their t&cs comply with their obligations to treat customers fairly. The price was wrong, so a fair amendment is surely to change the price to the correct one. In this case the trader agrees to the compromise. CS messed up quoting a bad price, and according to the principles of their agreement, should not be punished unduly. However, it is not fair for the trader to void the trade entirely. The SB company will normally ask what the situation would be if the roles were reversed - would the trader be asking them to reinstate a loss. I think in this case, had he gone short, he would be getting a phone call from CS with a generous 'price improvement' to the correct opening level.

I second another posters advice to go to the Financial Ombudsman. As the FSA moves from rules-based to principles-based governance, it's pretty clear that this does not comply with the principle of treating customers fairly.

 

[rwb]

Steve & 0007, you're spot on about FSA. Northern Rock is just the tip of the iceberg in relation to their effectiveness.

What they are good at is creating lots of extra regulatory paperwork, then employ an army of compliance officers who probably wouldn't find gainful employment elsewhere (like the HIPS 'surveyors') and they will hound the life out of the regulated companies/individuals yet achieve absolutely zilch. Their so called efforts to protect consumers etc from bad practice is a joke, all they have done is increase costs for all regulated companies who now have to employ extra staff just to ensure they comply with meaningless regulations and this cost eventually has to be paid by us.

Dave will be wasting his time trying to get something done via FSA. And I have to say that the Ombudsman will be a lengthy and frustrating process which most people end up wishing they'd never embarked upon. It is fair to say that sometimes the threat of engaging Omb's'n may provoke an improvement in any offer of settlement in a dispute (only because the company involved knows they will be tied up in additional paperwork and costs for months during the investigation - something to be avoided for any company).

The whole mess of Dave's trade is a warning to all about what traders are up against and it sheds further bad light on CS who could have shown a more conciliatory attitude without any large outlay. The fact they didn't speaks volumes and I for one am now reconsidering my position with them.

rwb

Steve,
That's also my understanding of the law. Very well explained.
(I agree entirely with your comments on FSA who I doubt would even know how to organise a party in a brewery let alone do it.)

 

[0007]

As far as the FSA's concerned, my information from the IFA (independent financial advisor) world is that the FSA is reminiscent of that described by Gervase Phynn in one of his true life stories of education in Yorkshire:

Back in the days of free school milk, the local Headteacher dutifully filed his consumption returns daily, year in year out. Never heard anything from County HQ who presumably were satisfied in their monitoring. To liven up his mundane routines, the teacher decided to "adjust" his returns and while submitting them on time and in the usual way, he entered details like little Johny had consumed 8 bottles of milk in one day and some classes had consumed a year's supply of milk in a week .....or details along these lines.

This went on for quite some time and there was no response from HQ who presumably were quite satisfied. The next stage in the jolly jape was to omit the actual submission of a daily return. You can guess the rest..........................HQ was straight on the phone wanting to know where the return was !

Believe me, failure to submit FSA compliance paperwork strikes fear in the heart of organisations trying to run a business. Apparently the FSA are very good at collecting returns.......................... but the odd NRK or Equitable Life does sometimes slip the net.

 

[davecrom01]

The only way that a particular firm or person could escape the contractual obligation is by showing that A ) The contract never existed, or B ) That one party tricked (or used foul means) into accepting the offer of contract. So far as you have mentioned neither of these things occurred.
------------------

HI Steve,

Once again, thanks for the informative post. I think the bit I quoted above is the crux fo the issue. The contract is (was) null and void due to this palpable error caveat, because the price they quoted and confirmed that I had got in at - was not a valid price. So I think Point (A) is the issue at hand.

However, I am going to call them again today and ask the same question of someone else.

I am just suprised that I didnt get the compromise offer of the 10 "genuine" pips - and it has given me a reason to pursue this.

Thanks for your help - its a good starting point to recontact the FSA.

Cheers,
Dave

 

[davecrom01]

The whole mess of Dave's trade is a warning to all about what traders are up against and it sheds further bad light on CS who could have shown a more conciliatory attitude without any large outlay. The fact they didn't speaks volumes and I for one am now reconsidering my position with them.

Hi!

Yes, I do think the issue of me getting the whole 60 pips appears to be null and void - as if I got the wrong price, I got the wrong price - and it was SUBSTANTIALLY different from the "actual" market price however I look at it. We cant have a mistake on pricing threatening to kill a company because 10,000 traders took a price with zero risk that was actually 50 pips off the price.

But you are right - the fact there was zero understanding or discussion about the token gesture of giving me the last 10 from the price that THEY say the market was actually at when I took the trade, really suprised me. Its the only reason I'm pursuing this.

Thanks for you comments.
Dave

 

[stevespray]

Dave,

You seem to be missing the whole point of legal principle here. Read back and understand how a contract is formed. In your case the firm ‘creates’ its price whatever means it feels is appropriate. It then advertises that price either via the dealing platform or verbally over the telephone. The quoting of this price is not an offer but an ‘Invitation to treat’. You then ‘click’ (or, in the case of a phone deal, ‘say’) that you would like to buy or sell depending on your view. At this point a contract has still not been formed since your request to buy or sell represents an ‘offer to contract’ that you are making to the firm. The firm then decide if they are going to accept or reject this ‘offer’. This is the critical bit. If they accept your offer the contract exists – if they reject your offer no contract exists. This is statute law - there is no way of circumventing this procedure on how a contract is formed. I guess what I am suggesting is that they cannot retrospectively reject your offer if the contract has already been formed. If an offer is to be rejected it must be rejected prior to any acceptance. It is generally regarded that nothing can be written into a set of T&C’s which alters these facts. It strikes me that the various T&C’s that the SB firms have make various convoluted attempts to limit liability or circumvent basic contractual law.
Your bet (legally) cannot be ‘voided’ as such because the contract is already formed. Technically the decision to void the bet is just a synthetic way of creating a situation to have the chance to ‘consider your offer’ after the event. Remember “Possession is nine tenths of the law”.

Steve.