Making a claim against a cfd provider

[Lightning McQueen]

I have cleaned up the thread, please do not continue on that track please.

 

[stevespray]

Yes – Let’s try and keep a civil tongue!

Dreamer – For what it’s worth I think that there are some decent bits of advice being dished out here. If you have gone from a £5,000 opening balance (and up to your neck in debt) and traded up to well over a million then I’d like to give you the following advice;

Firstly you should take a huge chunk of your newly made fortune ‘off the table’. I started trading in the late nineties and it was so easy to make money in that raging bull market where stuff just went up and up. I made a small fortune and I didn’t even use a single leveraged instrument. All I could do was buy actual shares with upfront cash. What I realised by Feb / March time of 2000 was that the huge bull market wasn’t going to go on forever. What I also realised was that I had made a life-changing amount of money. Lucky for me I sold out pretty much all my holdings very near the highs and went into cash. I had a few friends who made much bigger amounts. Some made several million. Unfortunately several of them handed back most of what they had made because they wanted more and didn’t have the experience to detect when a major move was over. I personally know someone who worked their account up to £1.4m only to walk away with £80,000 once the correction took hold – that hurt!

Based on what you said about your prior debt and your circumstances I would suggest that winning over a million is a complete ‘shock’ to you if shock is the right word. I know that when I had my windfall I was in shock for a while.

Having had the experience, and seeing the experiences of some friends, I would definitely advise locking the majority of your winnings away and never allowing it to return to the financial markets again. Say you took £1m off the table. Interest alone is £1,000 per week in the right account. You could buy 6 or 7 three bed semi’s and rent them out for £750 per month each. This list of low risk possibilities is endless.

But what I would urge more than anything is that you recognise that this one windfall can change your life forever. When you first have more money all you see is the money. Once you’ve had it a bit longer you will see more. Most notable is the freedom that it gives you. An article in one of the broadsheets a few years back said that to retire happy you now needed £3.2m but I say that is nonsense. Recognise what you have and learn to make yourself more risk averse since you are no longer in that position which you were in 12 months ago.

Steve.

 

[dreamer628]

24 year old millionaire all made from a £5000 one year ago? Good going

Thank you very much

This past year's been the most extreme I can remember. At times it's almost a little surreal.

 

[dreamer628]

I have cleaned up the thread, please do not continue on that track please.

Great, thanks

 

[dreamer628]

Yes – Let’s try and keep a civil tongue!

Dreamer – For what it’s worth I think that there are some decent bits of advice being dished out here. If you have gone from a £5,000 opening balance (and up to your neck in debt) and traded up to well over a million then I’d like to give you the following advice;

Firstly you should take a huge chunk of your newly made fortune ‘off the table’. I started trading in the late nineties and it was so easy to make money in that raging bull market where stuff just went up and up. I made a small fortune and I didn’t even use a single leveraged instrument. All I could do was buy actual shares with upfront cash. What I realised by Feb / March time of 2000 was that the huge bull market wasn’t going to go on forever. What I also realised was that I had made a life-changing amount of money. Lucky for me I sold out pretty much all my holdings very near the highs and went into cash. I had a few friends who made much bigger amounts. Some made several million. Unfortunately several of them handed back most of what they had made because they wanted more and didn’t have the experience to detect when a major move was over. I personally know someone who worked their account up to £1.4m only to walk away with £80,000 once the correction took hold – that hurt!

Based on what you said about your prior debt and your circumstances I would suggest that winning over a million is a complete ‘shock’ to you if shock is the right word. I know that when I had my windfall I was in shock for a while.

Having had the experience, and seeing the experiences of some friends, I would definitely advise locking the majority of your winnings away and never allowing it to return to the financial markets again. Say you took £1m off the table. Interest alone is £1,000 per week in the right account. You could buy 6 or 7 three bed semi’s and rent them out for £750 per month each. This list of low risk possibilities is endless.

But what I would urge more than anything is that you recognise that this one windfall can change your life forever. When you first have more money all you see is the money. Once you’ve had it a bit longer you will see more. Most notable is the freedom that it gives you. An article in one of the broadsheets a few years back said that to retire happy you now needed £3.2m but I say that is nonsense. Recognise what you have and learn to make yourself more risk averse since you are no longer in that position which you were in 12 months ago.

Steve.

Excellent advice and most thought provoking; thank you. Pretty much everything you said is spot on.

I am starting to focus a lot more on capital preservation in my trades themselves by working to make all of my trades winning ones, which in practise means intentionally watching about 2 thirds of a trend/movement pass by from the sidelines, and only trading during the middle third, so as to make sure I am not misreading it or staying in too long. Also if there is anything about a movement that gives me even a 20-30% doubt I will no longer enter at all. Although yes it does inevitably mean frequently watching what would have been hundreds of thousands slip by I just have to keep reminding myself that it could also have been an equal or greater loss had I been mistaken, and that having more than enough in any case it is eliminating capital losses - as far as is possible - that is now the most important. And in any case it's not like the markets are going to go away next week!

On the plus side I am very rational and don't allow anything to change me. Also I have not become any less of a cheepskate and still delight in for exaple finding a Reebok coat in perfect condition worth £70 for 99p on ebay, unlike all the stories of lottery winners who promptly blow everything and more on rubbish within the first month and knock themselves off. The one thing I can enjoy now is lavishly giving especially when the recipient never expected anything like it, I just love the look on their face, although I get a bit bashful! My favorites were being able to fulfill my dream of paying off my parents mortgage and also when I when I was able give a supportive school friend who I hadn't seen for 9 years 1k when I learned he was getting married. I do give a third of my monthly earnings to charity but discretely: as my big fear on the personal side has been of people finding out about my financial situation and suddenly getting endless invites from all sorts of people who never would look at anyone like me before but who suddenly become the sweetest in the world. I know it's just human nature and some will see that kind of thing as a bonus but I keep to myself and those who know and appreciate me for who I am and if it all got out it might be impossible to know for sure who was and wasn't for real. At which point I'd either fall into the trap of believing in it all and trusting all kinds of weasels (I've always been dead naive) or else just become increasingly paranoid like some ancient Dickensian character

I'll definately take what you have written on board, and perhaps the sooner I can take some time out from trading altogether the better just so that I can stand back to get some more perspective and reanalyse everything. Trouble is though, with the markets becoming more volatile by the day I would then face the likelyhood of missing the opportunity of a lifetime first on the short and even more then on the long sides over the coming 3-6 months. Probably I'll just keep at it then for the next six months whilst working at becoming increasingly cautious, and take some time off then.

It's true that at the moment all money is just numbers and I'm not really thinking past that. Thank you again for your insights, and when I'm able to take some time I'll definately give it all the proper consideration.

 

[arabianights]

There's nothing wrong with risking the amounts you risked Dreamer against your implicit account balnce which was substantially greater than thirty grand... nor is there anything wrong with keeping most of your money outside of uncertain spread betting company accounts... the problem is CMC saw you risking it against thirty grand (which you would surely agree would be the act of a complete moron) and spooked out very quickly.

Whatever the outcome of this case maybe speak to someone at the next spread betting company first to explain you strategy and prove your liquid assets - and explain why you are not depositing them?

 

[stevespray]

There's nothing wrong with risking the amounts you risked Dreamer against your implicit account balnce which was substantially greater than thirty grand... nor is there anything wrong with keeping most of your money outside of uncertain spread betting company accounts... the problem is CMC saw you risking it against thirty grand (which you would surely agree would be the act of a complete moron) and spooked out very quickly.

Whatever the outcome of this case maybe speak to someone at the next spread betting company first to explain you strategy and prove your liquid assets - and explain why you are not depositing them?

It's been a while since I tried a CMC account but surely they ask about your 'wealth' situation before allowing you to open an account?

As one poster already mentioned, if you had traded with them for a while and had, on occasion, quickly phoned them with a switch card and deposited multipuls of £30k then they might well have offered some slack. The suggestion however is that it was a new account and I guess therefore that 'client history' or 'client - company relationship' just wasn't there so the company acted with caution.

Steve.

 

[dreamer628]

There's nothing wrong with risking the amounts you risked Dreamer against your implicit account balnce which was substantially greater than thirty grand... nor is there anything wrong with keeping most of your money outside of uncertain spread betting company accounts... the problem is CMC saw you risking it against thirty grand (which you would surely agree would be the act of a complete moron) and spooked out very quickly.

Whatever the outcome of this case maybe speak to someone at the next spread betting company first to explain you strategy and prove your liquid assets - and explain why you are not depositing them?

Sure, and in future I would definately inquire about any new provider's margin procedures and if necessary provide evidence of my ability to meet requirements. The reason I didn't with them before I started was because with all my current providers I had become used to a markedly different process and one which frankly is far better for any customers, and cmc's stated t&c don't really look any different from any of their competitors.

Still, bearing in mind the information regarding their procedures set out in their t&c and the margin call, and specifically:

1. "If you choose to ignore this message and do not pay sufficient cleared funds to your account or reduce your open position(s), then we may take the necessary action to reduce or close your open position(s) in order to reduce your margin requirement.", which I evidently did not choose to ignore, thereby negating that clause, the only such provision made in the margin call that allows for liquidation; and

2. Their giving the option to make payment by telephoning the helpdesk OR making payment online, whilst making it physically impossible to meet the deadlines by phoning to make payment even had I called them prior to the positions starting to move against me, as the time that they kept me waiting on the phone before answering was longer than the entire period in which the positions were open.

3. "to this end, you may wish to leave "headroom" (i.e you may wish to deposit an amount which exceeds that required to meet the Margin Requirement at that time)", when in fact their actual margin call procedure evidently makes this absolutely essential (as is the case with standard futures brokers) to prevent your positions from being closed the moment they move against you, which is an inevitable feature of any market at all, and yet in their t&c they are not even recommending it, let alone stating it as a requirement, but are simply putting this forward as an option that you may by personal preference 'wish' to do.

If the risks to them are too great then they should not be accepting highly leveraged trades without at least making the leaving of sufficient 'headroom' highly recommended. The point is that nowhere do they give sufficient warning as to the risks - that are as I have mentioned specific to them of all the cfd&sb companies - inherent in opening a position that utilise their perhaps absurd ntrs. And whilst their incoherent t&c do obviously give them the ability to do whatever they like whenever they like, it bears taking into account that whilst bank charges are obviously completely above board in the sense of their being in the small print, the courts have still ordered the banks several times to pay compensation and change their procedures on the basis of their not having made said procedures clear enough to customers. In this case however even after I had read through their entire opaque t&c and margin call email I remain adament that the procedure that they are carrying out is not really allowed for anywhere.

If the argument is that cfd accounts are only open to those with a fair degree of previous experience then this argument is frankly even more invalid as whilst the information that I provided when opening the account stated that I did have experience in trading similar products with other providers cmcs unadvertised procedures are so wildly different from all of their competitors (again, whilst not making this clear anywhere) that such experience is not only useless for this purpose, but is in fact deeply detrimental in this sense, as it leads one to expect fairly similar procedures with the fourth company as with the other three (again unless they had made clear the contrary).

If I push and win this case it will open the floodgates for a potentially endless series of similar claims from others, many of whom are no doubt less financially able to sustain such losses as were incurred. Just as importantly it will also force them to thoroughly rewrite their t&c so as to make their procedures clear to new customers from the outset, preventing others from unfairly losing money to these sharks.

 

[dreamer628]

Now here on the other hand is a cfd&sb company with a clearly set out margin policy on their home page: it's called etx capital and read this:

"Due to the higher risks involved when dealing on leverage, it is important to be aware of ETX Capital's margin call procedure. Clients are required to deposit sufficient initial margin before opening a position.

If a client’s portfolio moves against them and there are not sufficient funds in the account to cover their open losses and deposit requirements, they will be notified and asked to resolve the situation within:

3 business days if their account has a negative balance of under £10,000
24 hours if their account has a negative balance of over £10,000

This can be resolved either by the client reducing their positions or by them adding funds to their account. If they are not contactable during this period or do not respond to messages, ETX Capital reserves the right to reduce or close positions on their behalf in order to bring them off margin call. This measure is used only as a last resort and as a precaution against losses escalating."

They offer (on their 'black' account) full access to market tools and data for trading on all markets using both CFDs and spreadbetting, unlimited trade sizes, and financing paid on short positions held overnight, and most importantly they appear to have a strong focus on customer service. The only downside I can see is that they have only been operating under this name since 2002 and the parent company Monacor seems to changed hands several times and is rather difficult to find information on. Does anyone have any experience with them or their predecessor TradIndex, or have any idea as to their financial security?

 

[dreamer628]

I've just seen a review on thereviewcentre.com that I find really interesting, because cmc's argument against me both on the phone and when I emailed them to complain was that I should have used their online payments service, which is supposedly quicker. But here was another user's experience with online payment using their spread betting service:

"I got a margin call, went to fund my account at CMC Markets Spread Betting and less than 40 seconds after the margin call they closed the trade off, even though I had put money into the account. They did this twice. I fail to understand the point of sending an email as the margin call and then closing the trade off within a minute. Why bother with the margin call, it's not like they give you enough time to do anything about it."

Maybe I should consider myself privilaged to have been given two minutes on the cfd platform! Definately seems believable though, because when I had funded the account online earlier in the evening it took a good ten minutes for payment to clear in the account. So the argument that I should have paid online instead is bogus. Aside from the fact that they clearly write in the email that you can phone the helpdesk to pay as an alternative. Aside from the fact that it is normally physically impossible to load the website, login to the payments page, input your debit card details (anew each time - louzy alzheimers website) and have the server forward the details to them within two minutes. But apparently even then they won't credit your account with the funds following a margin call any time soon.
Gosh I'm turning this into a blog!

 

[dreamer628]

Incidentally whilst on the subject of firms unadvertised procedures, my main sb provider Igindex came up with an interesting one recently: If you order to open a position of more than £50/point on an index, and this order comes into activation 'out of hours', then instead of charging for example a 6 point spread on the FTSE, they widen this to 18 points. Then, if you had set a limit order or stoploss, which then also gets activated out of hours, they will close the position with another 18 point spread. And they'll never tell you beforehand, and you don't even get to find out until you wake up the next morning! Try making a profit on that! Actually I did, but it was still reduced by two thirds, which kind of defeats the purpose considering any normal margin for error.

Oh and another tip for IG: don't bother discussing anything/placing telephone deals at night once they redirect operations to Melbourne. Their Australian agents are the nastiest and most agressive bunch of cretins I've ever come across. Odd for Antipodeans, or at least what we see of the immigrants. Your only hope is if they connect you to the one poor displaced Brit on the floor. Which exacerbates my other gripe about an IG oddity, which is that whilst they are always upgrading their nice shiny platform with all kinds of extra features and weird and exotic markets, it actually doesn't list any of the Aussie shares for trading online. So you have to phone up and get your head bitten off by a Russell Crowe wannabe (in my case usually for wanting to 'buy' small stakes (around £2000 each) in a dozen companies) for the privilage of dealing in the shares of a country where supposedly a large part of their operation is based. Come on IG why can't you start listing ASX constituents online too?!! Please!

 

[dreamer628]

And just to freak everyone out, here is why you don't want to leave any more money in your cfd/sb account than you absolutely have to to keep your positions open.

 

[nobrainer]

Dreamer,
To be quite honest I have 6 figures at Gt but expect them to return around 80% of that money. I also have similar amounts at Etrade and gni. The point is if you are big trader making a lot of money you need to have a lot of margin in your accounts esp. in wonderful markets such as these to cover increased margins etc. Moreover if a big story breaks, you never want to run out of margin ever. Its a cardinal mistake.
Of course providers can go bust ,but that's the risk a successful margin trader takes on as the potential profits by not being able to trade are far more important.
As regards your situation, I certainly think you could win this case but question whether it is worth the energy or time wasted chasing a piddly 30k when you could trade and make that money in a week in the current markets. The lesson I've learnt in the past 7 years of trading is don't waste your time on chasing peanuts and concentrate on making the best of any chances you get.
As an aside, If you are capable of making the sums you have mentioned , then trade DMA and pay the tax like I do. You'll make way more and have a lot less hassle along the way.

 

[Xeno]

Still, bearing in mind the information regarding their procedures set out in their t&c and the margin call, and specifically:

To be fair, you've missed out:

“Specified Event”
means any of the following events:
(a) you fail to make any payment or fail to do any other act or thing required by clauses 7 and 9.1 of this Agreement;

7.1 You agree to provide to us and to maintain on your Account at all times such margin as is required under this clause 7 of these Terms of Business. This is repeated for every Contract entered into by you and shall relate separately to each Account, if you have more than one Account with us.

7.5 You undertake to provide us with and to maintain on your Account at all times sufficient cleared funds in order to meet the Margin Requirement. You should keep in mind that a failure to meet the Margin Requirement at any time is a Specified Event (please see definition of this term). As a result, failing to meet your Margin Requirement may result in us closing out your open positions without notice to you under clause 17.

While the T&Cs might not be the most consistent, I don't think you've got a case. In a practical sense, not having enough there to start with given all the things that can go wrong with a margin call (and the speed required when a neg eq call) is pretty careless, especially given their lesser margin requirements compared to other companies.

On the other hand, I'm not going to have a go at your risk taking ...

cheers
Xeno

 

[dreamer628]

Dreamer,
To be quite honest I have 6 figures at Gt but expect them to return around 80% of that money. I also have similar amounts at Etrade and gni. The point is if you are big trader making a lot of money you need to have a lot of margin in your accounts esp. in wonderful markets such as these to cover increased margins etc. Moreover if a big story breaks, you never want to run out of margin ever. Its a cardinal mistake.
Of course providers can go bust ,but that's the risk a successful margin trader takes on as the potential profits by not being able to trade are far more important.
As regards your situation, I certainly think you could win this case but question whether it is worth the energy or time wasted chasing a piddly 30k when you could trade and make that money in a week in the current markets. The lesson I've learnt in the past 7 years of trading is don't waste your time on chasing peanuts and concentrate on making the best of any chances you get.
As an aside, If you are capable of making the sums you have mentioned , then trade DMA and pay the tax like I do. You'll make way more and have a lot less hassle along the way.

18% cgt and 0.5% sd seems an awful lot to pay out for the government to put up even more tv adverts on intimacy and pay per click linked information on how to lose weight. Is DMA really so much better that it makes up for that? How? I do understand that the spreads are a lot thinner, which I know a lot of people dislike about sb but they don't bother me because I don't trade on that short a timescale so the spread costs are a very small proportion of my winnings. Are there other significant benefits to DMA versus the better cfd&sb companies eg IG and Spreadex?

 

[Kyoto]

On the subject of CMC's electronic funding of CFD accounts, while in years gone by this has been done in minutes, it's been my experience in the last few months that transfers can now take up to two hours to show as deposited in the Marketmaker platform, so I imagine that phoning them would actually be quicker, even if you're stuck in a queue for 20 minutes. I always phone them to withdraw money and I've never had to wait though, for what it's worth.

The volatility caught me out recently, and I got a margin call email on my account and then a liquidation notice email 15 minutes later - which was before an electronic funds transfer had time to 'appear' in the account. In other words they closed my positions arbitrarily and pretty much at the bottom of a downward spike as you might expect . I've had the account for years without incident, and the margin call was for £40 (no, that's not a typo - £40!) so I thought that was a little harsh, but I only blame myself because I put myself in a situation where I could be 'disadvantaged' by the counterparty and I was.

Because it was my first margin call in years of trading I felt a bit like I'd been given detention after school at first, but because it only cost me a few hundred it's hard not to see the funny side of it now. But the serious point is that in this environment the CFD and spreadbet providers are probably going to be harsh - possibly extremely harsh - and customers have to factor that in.

I'll add another 'incident' into the fray as some food for thought. I was short on the Dow recently with CMC and tried to lock in a 500-point intraday profit, but was unable to due to apparent technical/lagging problems with the platform. As I recall it took 10-15 minutes to get the position closed and when I did it was for a 100-point loss (the trend had changed and I didn't want to hold against it). I've had a lot of apparent 'technical issues' of late with CMC and while it may be because of the extraordinary volatility in the market and volume of trading, it suggests that it's unwise to take heavily geared positions that may prove difficult to close out quickly. Someone once told me "never take a position that can't stand a 1-hour powercut" and I always thought that was very sound advice; unexpected problems can have a habit of happening sometimes.

One last point. It was suggested in reply to the original poster that they fund their account in order to make the money back and cost CMC in the process, but the original poster thought the company wouldn't be disadvantaged because they would make their money from the spread anyway. I think this only follows if we assume the company hedges everything in the market, and I'm not at all convinced that they do from what I've heard. I don't believe their interests are really aligned with those of their customers in this respect, but neither do I believe that this is any different from a number of other similar providers. I don't think a lot of these providers play a particularly clean game, but I always felt like the best revenge was to try and keep making money from them

 

[TomTom]

A fellow trader I know well had similar problems with CMC. He placed limmit orders to buy on an index, within a short amount of time all orders were executed. He was over £2k per point Long. When he profits were in 6 figures after 30 mins he attempted to close by using the platfrom market maker. Guess what ? Message come up to phone dealer as the platform would not let him close. When he spoke with the dealer he was informed his sell order would not be accepted at £2k per point. When he requested to sell at 200 per point excuses like low market volume at 16.00hrs . He explained he was trading the other side and there was enough volume and the dealer said sorry we can not accept your order. After consistant attempts to close on market maker platform the market suddenly turned and all profits were wiped out and postion liquidated at the exact bottum of the days range.
After a complaint and requested the transcript of the relevent conversation, CMC requested payment for of over £100 to get this info, so paytment was sent and cashed.
I chased it up and CMC confermed they had the required transcript and would be forwarding it ASAP. Weeks passed and then Guess What ? We do not have any records of this.
They say its up to me to proove what i say actually happened.

Indeed spreadbetting companies are bad news for traders & investors alike.

Read all posts and expierances then decide if you should really be using them.

 

[ns1000]

A fellow trader I know well had similar problems with CMC. He placed limmit orders to buy on an index, within a short amount of time all orders were executed. He was over £2k per point Long. When he profits were in 6 figures after 30 mins he attempted to close by using the platfrom market maker. Guess what ? Message come up to phone dealer as the platform would not let him close. When he spoke with the dealer he was informed his sell order would not be accepted at £2k per point. When he requested to sell at 200 per point excuses like low market volume at 16.00hrs . He explained he was trading the other side and there was enough volume and the dealer said sorry we can not accept your order. After consistant attempts to close on market maker platform the market suddenly turned and all profits were wiped out and postion liquidated at the exact bottum of the days range.
After a complaint and requested the transcript of the relevent conversation, CMC requested payment for of over £100 to get this info, so paytment was sent and cashed.
I chased it up and CMC confermed they had the required transcript and would be forwarding it ASAP. Weeks passed and then Guess What ? We do not have any records of this.
They say its up to me to proove what i say actually happened.

Indeed spreadbetting companies are bad news for traders & investors alike.

Read all posts and expierances then decide if you should really be using them.

Come on - are you seriously claiming that CMC charged you £100 for nothing and you left it there - that is if it's you we're talking about rather than 'your friend'. I have to say it sounds like your only telling half the story. If their calls aren't recorded, take it to the ombudsman.

That said, I doubt you'd get anywhere. No-one will let you trade £2000 per point on indices no matter how much is on the futures book. They're too nervous that the fair value may be wrong. If the platform was consistently rejecting the trade what message did it give? why didn't your friend / you pick the phone up

 

[TomTom]

ns1000 This is true, held a postion over £2000 per point and did pick up the phone if you read it correctly.
Seen his statment too that conferms it.
Indeed I believe he has taken this to the odbusman to solve as CMC denies that they had done anythng wrong.
In my opinion it was there platform that was lettinghim open these postions and not letting him close with a message to contact dealer, then he did as one can see by what i have written.

 

[ns1000]

Apologies - I missed the bit about him phoning.

Still don't think there's really a case for CMC to answer though. He didn't put the trade on in one go, but in a number of smaller clips - not their platform that's at fault. They're under no obligation to make a price in the size. Pretty sure that somewhere in the t&cs there'll be a clause allowing them to limit size in one clip.