- Joined Sep 2013 | Status: Member | 19,707 Posts
FOREX IS MANY PAIRS GOLD IS JUST ONE WHY LIMIT YOURSELF
When changing timeframes, Alert: Entry and Stop-Loss levels... 1 reply
Saxo Capital Markets, known as Saxo Bank 8 replies
UK Financial Ombudsman Rules Against Saxo in SNB Dispute 0 replies
Fill order problem at FXCM micro 7 replies
Beware - Order fill glitch screwed me 7 replies
Disliked{quote} Did you honestly believe that the owners of Saxo, FXCM, etc really care about their own reputation while they fly in their private jets and look at us talking about what to do with negative balances or other stuff? They care only about money. Trading is only about making money so I personally focus on one thing and one thing only. If some broker starts playing with me then I just move along and never look back. You cannot have emotions if you want to be successful in trading.Ignored
Since the EURCHF prices of 0.9625 and 0.88 were lower than the prices Saxobank quoted on its trading platform to clients for order execution after the Swiss National Bank announcement, the amended prices resulted in worse transacted price for its clients exiting their short-CHF positions, and as a result meaning bigger losses to the clients.
On January 23, 2015, Saxobank reported that due mainly to negative client balances on which it may not be able to collect, the bank may be forced to take a loss of up to DKK 700 million (about USD 107 million), which is about 26% of the total capital of Saxo Bank A/S. Taking the estimated maximum loss into account, its capital would drop to DKK 1.97 billion. [58]
Complaint from clients on Saxobank amending deals
The CHF movements resulted in massive losses, in particular negative account balances, for many retail investors in different FX brokers. However, the treatment in different brokerages were largely different. [59] Major US brokerage FXCM forgave negative account balances of retail clients, which represented 90% of the negative accounts and 40% of the total debit balances owed. [60] Some brokerages such as Oanda, Dukascopy and Forex.com were among the major brokers which announced forgiving clients’ negative balances.
In contrast, Saxobank’s action of amending deals forcing larger negative balances of clients resulted in complaints. [61] Besides heated discussions seen over forums such as forexfactory.com and elitetrader.com, some clients formed groups such as “Saxobank Cheated Users Group” [62]to prepare for legal action against Saxobank. And Denmark-based Andersen Partners is one of the law firms known to represent clients against Saxobank in a class action[63].
A Vienna-based company, Censeo Asset Management, offered its clients a Saxo-brokered franc product which resulted losses. It announced that it cannot recognize the lawfulness of Saxobank’s action and would help its clients challenging Saxo’s repricing.
On January 29, 2015, the Danish Financial Supervisory Authority said in a statement that it is in close dialogue with Saxobank and will require the bank to provide a detailed report of the actions taken during and after the incident. [64]
Saxobank’s role as a market maker
Unlike its brokerage business in equity and futures, which are exchange traded, Saxobank makes prices on FX spot, forward and options and let clients to trade on the prices it quoted. On this basis, Saxobank acts as a principal (and not an agent) to the clients and deals done were considered final once the transactions were completed. Without clients’ consent, amending the prices of transactions done caused a lot of controversy. Saxobank’s CFO and Head of Risk said in an interview, “It’s not unlikely that we’ll face legal challenges”. [65]
DislikedSaxobank, as well as other FX Brokers, are bounded by the very basic principal of "contract" in contract law. They make prices which are tradable on clients' trading platform, that is an "offer". When client hit on the trade button or stops triggered according to their tradable prices, this is an "acceptance". With "offer" and "acceptance", a contract is sealed. Saxobank has no right to change the particular of the completed transaction without the consent of the clients. Amending clients' prices...Ignored
2. They are synthesizing fills for other Swiss pairs
http://az705044.vo.msecnd.net/20150127/Saxo-CHF1.png
Are you kidding me?
It sounds like Saxo didnt actually trade in the market for other Swiss pairs but made up fills based on the averages for EUR/CHF? I thought Saxo Bank was an ECN?
If that is the case then I suggest that Saxo clients read up on their T&Cs to see whether Saxo have detailed that as a policy in filling client orders. If its there then it sucks big time. The issue is that if they dont fill clients in the market then how did they fill customers? One possibility is that they took the other side of the trade on themselves so in effect buying Swiss pairs at the bottom of the market. Thats not the work of an ECN.
How its supposed to work
For clarity heres how it works, from my days in the pits, and from a certain former interbank dealer, who Ive checked with and who knows his onions too.
If you cant make a trade in an illiquid contract/currency then you can leg the trade. In currency terms, for trading USD/CHF you would trade the most liquid pairs, i.e EUR/CHF and the opposite way in EUR/USD. That gets you a USD/CHF trade. If you are a market maker you could also take the trade entirely on your own book and fill the client, or you could leg half the trade in the market and take the other side on your own book, if it was in your favour.
Now, in the SNB move, to sell USD/CHF, a trader would have sold EUR/CHF at the earliest opportunity and then bought EUR/USD. Now remember that EUR/USD was falling also it would have potentially meant a better entry point for that leg. Trading like that is an art form rather than a precise science but it can improve a position immensely if played right.
IF they filled customers that way then they are royally screwing people over as they are trading in the market for some positions and not for others and potentially not in the best interests of their clients. Again though, thats a matter for the T&Cs
This Saxo issue is important because it is giving us the first idea on how fills were accomplished over that period and how brokers may have been pricing trades, something that has not come out in the public eye from other brokers. This is one instance though and not a complete template to use for others. Other brokers use other liquidity providers and even using the same ones could have been filled at different levels.
What Saxos statement does do is raise more questions than it answers. It questions their risk strategy for Swiss trades as it seems they didnt have stop orders in the market for customer orders, according to the statement on pricing.
I want to make clear once more that these are questions I am raising because some things dont add up in my experience of being in markets for as long as I have. This isnt a direct attack on Saxo and they may well be right in everything they have done and played this by the book and their terms and conditions. They have put their response out and Im passing comment on it. If anything, the least I hope to do is to try and explain how things work so that people can form their views and have an idea of what to look for in their own personal situation, if affected by the SNB move.