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Price Adjustment Rule --- put all our accts at risk?

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  • First Post: May 20, 2009 12:12pm May 20, 2009 12:12pm
I was just reading over the ideas behind the price adjustment rule:

http://www.nfa.futures.org/news/PDF/...Adj_112408.pdf

It seems to me that if this goes through, and say you have some money sitting in Oanda and their system goes very wonkey, then you could basically lose your entire acct as Oanda goes belly up because it can't adjust executed orders after the fact.

Am I missing something here? The recommendations state:

"For pricing errors that result from the failure of the FDM’s own system, the FDM should clearly bear that burden."

Is that really realistic? This is going to increase transaction fees immeasurably and widen spreads for bucketshops to be properly compensated for their risk.

I would rather that Oanda just try to untangle all of the orders and adjust things so as to spread the pain as much as possible in the most fairest way possible (which they'll be highly motivated to do in order to rescue their reputation).
Mountains out of molehills, my friend (and I think you don't quite fully understand the ruling). I have no clue where you got the idea that money could just be stolen out of your account from this ruling.
Quoting blazespinnaker
I was just reading over the ideas behind the price adjustment rule:

http://www.nfa.futures.org/news/PDF/...Adj_112408.pdf

It seems to me that if this goes through, and say you have some money sitting in Oanda and their system goes very wonkey, then you could basically lose your entire acct as Oanda goes belly up because it can't adjust executed orders after the fact.

Am I missing something here?...
I imagine they'll address the issue and deal with it.

There's actually no obligation for them to adjust anything even though they do have that option, I expect they'll hedge risk like they always have, no need to widen spreads any more than before with the exception of maybe during excessively volatile times. 20 or 30 pip spreads are a regular feature on Oanda around data as it is.

There are lots of options open to them, no big deal and certainly no need for the scaremongering that's for sure

Stumm and Olsen will cook something up between them, they usually do!
Blaze, maybe I could understand why you were a little perturbed by the no-more-nedging rule, but are you seriously saying you've got a problem with this too? The broker has 15m to report to the trader that there has been an error and has to answer to and explain to the NFA if they make adjustments. Take a look on pipmutt's NFP statement back from 2004 - which was a blatant trade cancellation after he'd rinsed them. Do you think they'd have awarded him that if his stops had been hit in the news spike? I doubt in the history of retail forex has a broker voluntarily re-instated a position that got spiked out without getting hassled and threatened by a disgruntled trader yet this sort of thing is commonplace. The playing field just got a bit flatter.
Sure, if you're at a broker who's system goes whack, then they have to pay off the customers who benefit. They're not allowed to go in and untangle the mess.

If they don't have enough buffer money, then who do you think pays? You think the government is going to step in and bail them out?

No doubt this is why they've been pushing for the capital requirements cushion.

Still, these companies have to remain profitable to stay in business. If their systems go wonky, they're going to have to widen spreads in order to pay for all those losses.

Big changes could coming down the pipe when this rule goes into affect as companies like Oanda find ways to manage this risk.
Quoting smittens4212
Mountains out of molehills, my friend (and I think you don't quite fully understand the ruling). I have no clue where you got the idea that money could just be stolen out of your account from this ruling.
Rather than condescend, perhaps you can explain to me where my understanding has gone awry.

As for "stolen" .. I never used that word. I said if the company goes bankrupt you won't necessarily get your money back.
Quoting blazespinnaker
Sure, if you're at a broker who's system goes whack, then they have to pay off the customers who benefit.
You're missing the other side of that coin, think about it for a minute....

I doubt very much if anything is going to change at Oanda that will affect traders, any changes will be to do with risk management and will all be done behind the scenes.
Rather than being vague, say what you mean. What other side? Oanda is the other side of all trades. They'll just lose if their system goes whack as big time traders execute trades because their external price feed tells them Oanda has screwed up.
Quoting blazespinnaker
What other side? Oanda is the other side of all trades. They can't adjust the order in their favor. They will just lose.
Are you being deliberately obtuse or really can't you see it?

3 minutes wasn't a lot of thinking time!
Quoting pipmutt
Are you being deliberately obtuse or really can't you see it?

3 minutes wasn't a lot of thinking time!
I really can't see it. Enlighten me.
Let me give you an example:


Oanda ****s up. They quote 200 pips off the current market price that my external feed from townsend tells me about. So I put in an order in for 10mio and Oanda executes because their system screws up and thinks it's OK.

Oanda can not go and fix that. They owe me (and whoever else) 200 pips on 10 mio. Times a dozen traders or so, well, that could get expensive!
Quoting pipmutt
Are you being deliberately obtuse or really can't you see it?

3 minutes wasn't a lot of thinking time!
I can't see it either. As I read that rule that MMs are not allowed to alter fills to the disadvantage of the client. Now if there is one of those Oanda spikes and my target gets hit 500 pips off-market, they wont be allowed to adjust the trade like they do now. Guessing they will have to change up in one way or another.
Quoting blazespinnaker
I really can't see it. Enlighten me.
You're focussing solely on winning trades which they are obliged to pay out, what's the opposite of winning trades? Losing trades, which they have no obligation to correct.

I doubt that will be how they approach the issue as it's likely to lose clients but it's certainly a better option than going into liquidation!

I'm sure there are other options and algos they can run to delay/freeze quotes and fills if price volatility exceeds a preset threshold, Stumm is supposed to be an IT guru isn't he? Tweak up the way quoting engines are filtered for bad ticks would be one way.

There's always the easy route, along with other MM's just petition NFA to allow them the same options as STP brokers, or maybe Oanda themselves could STP trades above a certain limit, maybe route them through a different company.......the options are endless, those are just things I'm thinking up off the top of my head and I don't really know anything about the marketmaking business.

Come on blaze, you like being creative don't you? Well here's your opportunity!
Quoting blazespinnaker
They quote 200 pips off the current market price....
Hang on, you're saying that you would notice that discrepancy and have time to exploit it but Oanda and their banks of servers, filters, algos and whatever other IT crap they have running the show wouldn't even notice before it's too late?

Come on....seriously?
Quoting birdt
The playing field just got a bit flatter.
I totally agree, and anything which helps traders get a fairer deal has got to be good.

I'm going to go back to reading and let someone else get a word in, I feel like I've commandeered the thread, sorry folks!
I have to agree, it wouldnt be the case of a trader exploiting a latent feed without the broker knowing. If this is the case the broker deserves to lose money and you should pull your money.

The issue that most brokers should have with this rule is if they STP everything to the banks or even to another broker. A bank/broker can come back 15 mins later and say that the price they gave was no good, they could reneg on the trade, and or change the price. If the bank goes back on the trade in any shape or form after 15 mins the broker will have to eat it. This does happen but not that often and while it sucks for the broker it shouldnt bankrupt a well capitalized broker. I dont see spreads rising, fees maybe and quite possibly. Spreads will come down as more players re-enter the market as volatility comes down. Volume should increase as bigger trade sizes and more trades will be needed to make a decent profit. The spread is still calculated based on supply and demand; market regulation shouldnt change this.
hmm, looks to me as US brokers paid bloggers are working overtime spiting propaganda in an attempt to keep their sheeple from fleeing their pens
I think a better policy would have been brokers forced to have a website where they list all of their price adjustments and there total executed orders.

It'd be nice to see these stats for slippage as well. We need stats on brokers which shows their failure rate.

I think NFA should focus on greater transparency. Not dumb ass rules about what people have to do.
Quoting fxtrader42
If the bank goes back on the trade in any shape or form after 15 mins the broker will have to eat it.
That's interesting, can the bank actually do that after 15 mins though, isn't there an agreement in place to protect both parties?

Could the broker do the same thing as the bank and change the deal later as well?

If the bank wants to change price can the broker say no thanks and cancel the deal altogether?
Quoting blazespinnaker

I think a better policy would have been brokers forced to have a website where they list all of their price adjustments and there total executed orders.

It'd be nice to see these stats for slippage as well. We need stats on brokers which shows their failure rate.


Slippage and erroneous quotes aren't 'failures', they're perfectly normal unavoidable occurrences.
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