Fair comments. I'm sure everyone actually appreciates your input from the firm's side of the fence.
As an aside, do you have any ideas regarding clients who might have been left with negative balances after the Jan15 fiasco? What's the word in spreadbetting circles on the pro side? I'm not in that situation myself as I had no exposure to CHF. However, now I've searched around (on the interweb thing) I see that the fall out is much larger than I initially imagined. It would seem that this not limited to larger experienced 'should know better' traders but seems to involve a great many smaller traders who were trading on very big leverage. There are instances with clients with £5,000 accounts suffering losses of £150,000. I would suggest than many of these clients will never be able to pay off these losses?
Is there any word from any of the firms on how they intend to proceed? I notice that many of the US firms have already written off negative balances; I guess they fear interference from the authorities?
Cheers,
Steve.
we put our clients negative balances back to zero after the snb. We were able to do this because our liquidity providers reacted kindly to us asking them to show some leniency with the fills they were giving us on our hedges. We got an improvement and we passed that improvement onto our clients.
I don't want to take the moral high ground because had my liquidity providers (LP) not been so generous it would have left me having to make a difficult decision: do I let my clients have negative balances and chase them for it or do I make their balance zero and suffer a bad pnl for a few days but have their trust for ever.
different spreadbet/cfd firms have acted very differently in how they are treating their client snb balances and that's quite strange because usually all s/b firms have a similar attitude when it comes to dealing with negative balances, and that is to pursue the loss.
Firms that run risk were better placed post snb to not chase client losses as they didn't need the client loss to pay the loss they have with their LP's. more B book firms than STP firms have been sympathetic to their clients and helped them a little.
its very important to remember that a retail client is usually only active for 5-8 months. The s/b company has to consider is it really worth spending for example £10,000 to bring a clients account back to zero when that client has only ever deposited £2,000 and was likely to be an ex-client in a few months anyway. From a commercial perspective why would they do that? from a moral perspective its more of a dilemma.
i'm pretty confident that the loss is the clients. what i'm not confident about is the manner in which they were filled and where they were filled. to be given a fill from an automated order engine that is then changed a few hours later to better reflect the move is one thing but to then change it again the next day is a bit of a slippery slope.
had I been inclined to change the rate I would have made sure that I only done it once and that I had plenty of evidence to support my decision. I would be transparent with that evidence to the point of posting it on our site. It's only charts from tier 1 banks and price confirmation of trades that were going through the interbank market, its certainly not top secret stuff.
its easy for me to say look how clever and generous we are in hindsight but the reality of it was it was a really bad hour or so.. it took everyone by surprise and the reaction by most firms would have been genuinely to try and do as much for their clients as they can. no one wants to see people wiped out like that. it was only a couple of hours later when the top bods at the s/b firms began to realise that actually we've all lost a game changing amount of money did we begin to consider the options that were open to us. which we now know included retrospectively changing the prices on deals that were previously confirmed as done.
I don't think there are many firms that would pursue a client who had £5k on deposit before the crash and suffered a £100k loss for the £100k if he clearly couldn't afford to pay it. They seem to be taking the approach of pay what you can in an agreed time. They certainly aren't fools and will make sure that if they do write some debt off a clients balance that it is only done after the client has convinced the s/b firm of their true financial position.
I don't know any risk managers in financial s/b firms who actively try and bankrupt people. it really is the last resort and something that no one has any pleasure in doing. In all my time in spreadbetting and CFD's I know of only a handful of people that have been pursued through the courts for a bankruptcy decision. we would prefer to agree a schedule of payments to get as much back as we could.
