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Brokers chasing you for negative account balance

  • Post #1
  • Quote
  • First Post: Jan 18, 2015 10:39am Jan 18, 2015 10:39am
Please post here if your broker is chasing you for money to repay a negative account balance following the EURCHF debacle,
whether you are going to pay and what action is taken if you haven't paid.

I wasn't involved fortunately but I contacted my broker LMAX (who I have always found to be brilliant and the best broker I have used up until now)
to find out what would happen in such a scenario. They just said that I would face legal action if such a debt wasn't paid.
Which is kind of scary! Makes me think about whether I should be using them in future.
I also wonder how this would be possible - even though they just match buyers with sellers presumably the people who are owed money
are going to be owed by thousands of others which would make legal action against them all impossible.
  • Post #2
  • Quote
  • Edited at 12:50pm Jan 18, 2015 12:24pm | Edited at 12:50pm
Quoting rsmith911
Please post here if your broker is chasing you for money to repay a negative account balance following the EURCHF debacle, whether you are going to pay and what action is taken if you haven't paid. I wasn't involved fortunately but I contacted my broker LMAX (who I have always found to be brilliant and the best broker I have used up until now) to find out what would happen in such a scenario. They just said that I would face legal action if such a debt wasn't paid. Which is kind of scary! Makes me think about whether I should be using them in future....
Even though all they do is just order matching matching buyers with sellers BUT they did lend you the extra money for you to trade via the leverage rate just like a loan and when your trade is closed, you repay that extra money that you borrowed with your account balance and your profit/loss. When your account balance is negative that means you don't have enough to pay for what the broker has lent you then you have defaulted on that loan just like you defaulted on your mortgage or your car loan. Since your account balance is not collateralized like your mortgage, your broker has nothing to repossess from you for them to sell to recoup some loan amount, so just like recovering from any unsecuritized loan, the only recourse that they have is 1) sending you to collection agency, 2) taking you to court or 3) hiring some "professionals" to show up at your door with some big sticks. Scary indeed thinking that you can all of sudden be on the hook for tens of thousands of dollars in just 1 hour.

I am disappointed and surprised to learn that LMAX chooses to go after the negative balances. Many brokers chose to forgive negative balances instead of demanding them to be repaid. If all those LP's REALLY have an ounce of conscience, they would choose to forgive these negative balances from their own clients, the brokers and in turn the brokers can forgive the negative balances from us traders since they were the ones who caused these large negative balances by artificially stopping liquidity thus single-handedly causing the huge 1.8K+ pips drop. If they had stayed in the market and continued to provide liquidity, there would be still negative balances but the carnage wouldn't be this big. This is almost like price-fixing so they really shouldn't stand to benefit from this ill-gotten gains but of course they are all made out of s***, so they are going to chase after the brokers until they are driven to bankruptcy and thus destroying the whole entire retail forex industry and then forex trading will again go back to their exclusive "Big Boys Club". And we are all going back to mutual funds.
Make your losses in demo. Earn your profits live.
Quoting Forexia
{quote} I am disappointed and surprised to learn that LMAX chooses to go after the negative balances.
Do you have a source for this as I was thinking of opening an account with them? Not so sure now.
Quoting mitch77
{quote} Do you have a source for this as I was thinking of opening an account with them? Not so sure now.
Quoting rsmith911
I wasn't involved fortunately but I contacted my broker LMAX (who I have always found to be brilliant and the best broker I have used up until now) to find out what would happen in such a scenario. They just said that I would face legal action if such a debt wasn't paid. Which is kind of scary! Makes me think about whether I should be using them in future. I also wonder how this would be possible - even though they just match buyers with sellers presumably the people who are owed money are going to be owed by thousands of others which would make...
My source. And honestly I used to think LMAX is pretty good too but after shopping around, there are equally good alternative brokers with cheaper cost.
Make your losses in demo. Earn your profits live.
Quoting rsmith911
I also wonder how this would be possible - even though they just match buyers with sellers presumably the people who are owed money are going to be owed by thousands of others which would make legal action against them all impossible.
And btw it wouldn't be difficult for them to pursue legal actions against all the traders. They will just go after the traders one by one just like how the US persecuted people for piracy violation for music sharing back in the nineties. Brokers like LMAX already have lawyers so they might as well use them.
Make your losses in demo. Earn your profits live.
Any reason in particular LMAX should pay for YOUR losses?
  • Post #7
  • Quote
  • Edited at 1:17pm Jan 18, 2015 1:03pm | Edited at 1:17pm
Quoting shrike
Any reason in particular LMAX should pay for YOUR losses?
Of course not........ but if you had the choice between a broker that doesn't make you pay if you account goes negative or does what would you choose?
They just said that I would face legal action if such a debt wasn't paid.
now I'm wondering how this act could be done ?
for said clients are overseas country, did they able to breach any country regulation?
I dont have any proper knowledge with regulation law, or much of it. no matter what I see this not proper to handle such inevetible event.
everyone seem mourn from having a huge loss, and they always got my deepest sympathy.
I dont trade with them fortunely, but for having such legal action, i would think more specific way at such act. did they gonna form a debt collector squad, and knocking at my front door as shown my negative balance trading statement ?
Having to pay a negative balance just seems common sense, there's far more important criteria in choosing brokers...making clients pay negative balances is just business, they're not charities...
Quoting fxindikator
They just said that I would face legal action if such a debt wasn't paid. now I'm wondering how this act could be done ? for said clients are overseas country, did they able to breach any country regulation? I dont have any proper knowledge with regulation law, or much of it. no matter what I see this not proper to handle such inevetible event. everyone seem mourn from having a huge loss, and they always got my deepest sympathy. I dont trade with them fortunely, but for having such legal action, i would think more specific way at such act. did they...
Depends on the country, debt in the UK is a civil matter not criminal. And yes people knock your door and seize goods. They can also mark your name in the courts making it hard to get credit in future.

Each country will be different.
Quoting shrike
Any reason in particular LMAX should pay for YOUR losses?
Goodwill, long-term business relationship, positive PR, Extreme circumstances, loss due to unfair business practice on liquidity "providers"' part, just a few that comes to mind

The only people that we should be taking to court is actually the liquidity providers for artificially driving down prices to cause financial losses
Make your losses in demo. Earn your profits live.
Quoting mitch77
{quote} Do you have a source for this as I was thinking of opening an account with them? Not so sure now.
You could create some sort of limited liability legal form like the british limited or the german GmbH (also, the LTD comes a lot cheaper and might be preferable anyway as LMAX is a UK broker). You may want to discuss that with your accountant/financial advisor/Steuerberater.
I'm curious, what about the margin call? It's an automatic stop loss basically if your equity goes too low to handle the trade. If a broker, LMAX in this case, didn't honor their own margin requirements how is that YOUR fault? The entire reason margin calls exist is for this very thing.

Instead of calling the broker to find out what happens if you have a negative balance you should first read the contract they made you sign when you first opened a live account with them. That's the only legal documentation they can hold you to. If they don't stick to the contract it's called a "breach of contract" and they would be liable.
Quoting Forexia
{quote}The only people that we should be taking to court is actually the liquidity providers for artificially driving down prices to cause financial losses
lol what
Not with FXCM. It is FXCM's policy to credit accounts to a zero balance when debit balances occur as a result of trading.
One of the greatest concerns traders have about leverage is that a sizable loss could result in owing money to their broker. At FXCM, your maximum risk of loss is limited by the amount in your account. All accounts are tracked by our "Margin Watcher" feature. With the Margin Watcher feature, if account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions.

Why FXCM in 225 Million loss?
Quoting neil324
{quote} Depends on the country, debt in the UK is a civil matter not criminal. And yes people knock your door and seize goods. They can also mark your name in the courts making it hard to get credit in future. Each country will be different.
holy crap! seize goods!!! now i'm taking this issue seriously, at first i just imagine such act would be imposible. all this time we all doing everything by online, registration, deposit, withdrawal, entry trade, etc. and even complaining with our delayed withdrawal by online.
and now when times goes to broker bankruptcy, all clients are taking responsible from such event which absolutely coming from brokers sided. and all clients taking this 'mad' responsibility. just doesnt right, unfair, and they call this a 'legal action' ? for the Godsake.
is there anything we can do to help those our fellow traders ? perhaps a petition at change.com? or any else way we can do, even a bit.
It is too early, some brokers are going to review executions especially for those whose stops were executed quite high 1.19+. But one of my friends received a call from his broker asking him to repay the negative balance. But they also hinted that they would be happy to make a deal if he is ready to pay 50% of the balance now they will forget about the rest. I also heard from someone that LMAX offered them to repay just 30% of the balance, but it was relatively small amount, unlikely LMAX would go to court for it. People with huge negative balances will probably won't go off so lightly and might have to declare bankruptcy to unload the debt.
Wookey
Quoting Forexia
{quote} I am disappointed and surprised to learn that LMAX chooses to go after the negative balances.
Not just that. In a case of Default with LMAX, you have to pay:

- If the Debit is £10,000 or less (or an equivalent amount in any other currency), by no later than 4.00pm on the business day

- If the Debit is higher than £10,000 on the same day or, in the event that the negative cash balance arises after 2pm, by noon on the next Business Day following the day upon which the negative cash balance arises.

- If you do not pay, they charge you interest on the amount due, 4% above the standard interest rate.
Forex is a losers game.
Take a look at this!!


6.3. If a Stop Out execution has resulted in a negative Balance of the Customers Trading Account, the Customer shall not be liable for this loss. Company makes an adjustment of the full amount of negative Balance from own resources.

Problem is, I'm not sure if this is still valid, it's from 2010

Source:

https://forum.fxopen.com/showthread....unt-Protection
Forex is a losers game.
Quoting teddybomber
{quote} lol what
Quoting Forexia
{quote} The only people that we should be taking to court is actually the liquidity providers for artificially driving down prices to cause financial losses
Correction: LP's erasing liquidity by artificially stopping price quotes that caused the precipitating drop in prices which in turn caused this massive negative balances by traders and brokers. They chose to abandon the market leaving us holding the bag of s***. Well this is REALLY their shit which they created themselves so WHY should we pick up the tabs? Haven't we given them enough in the bailout money that they received four years for the financial crisis that was again caused by them? No this is THEIR S***, we are going to shove it right back at them. Thanks for providing me a chance to clarify.

If I were those brokers, I would look at my client's trading activities, if the trader's negative balances was incurred within the first 3 minutes after the news release when the liquidity "providers" were there providing pricing quotes and making market, I would consider recovering them from the trader but if the negative balance was a result of the trade not being able to be executed due to the liquidity "providers" shutting down the market, I would shove it back to my liquidity "provider" with my middle finger sticking up in a very friendly gesture and not go after my clients, the traders for a cent. If they take me to court, I would sue them for colluding for price fixing.
Make your losses in demo. Earn your profits live.
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