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When broker goes bankrupt

  • #21
  • Dec 16, 2010 3:21pm Dec 16, 2010 3:21pm
Quoting fx111
Refco was a prime broker too, and claimed that money of their clients is in segregate accounts.
Refco was a bucket shop mate, their antics are why FXCM got the rep of being a dodgy broker. Refco was a market maker of the worst kind from what i heard, back in the dark ages of dealing desk only fixed spread retail FX!!! When all FX brokers profited from our losses.
  • #22
  • Dec 16, 2010 4:19pm Dec 16, 2010 4:19pm
Refco was the worst of the worst in retail forex market. Till that day, no retail broker can hold a candle next to that bucket shop ... FXCM does come close.

Because of FXCM direct involvement with Refco back then, I will never deal with them.

BTW, Refco was a bucket shop. Refco was the largest bucket shop to date.
  • #23
  • Dec 16, 2010 8:44pm Dec 16, 2010 8:44pm
Only trade with brokers that have bankruptcy protection:

Such as IB, Dukascopy and the like.........
  • #24
  • Dec 17, 2010 12:23am Dec 17, 2010 12:23am
Quoting Progressive
Technically, when the broker goes bankrupt, you go 'bankrupt' too. Read the contract when you open an account at an fx broker. Even it it's a registered one at NFA, CFTC, FSA.

But it seems that this apply mostly to the so called bucket shop/market makers. For second/prime brokers, it'a another field.
So what's the use of FSA's deposit protection with FSA registered brokers ?
and
Could you develop more please ("...it's another field...")

Quoting Gcapman
Only trade with brokers that have bankruptcy protection:

Such as IB, Dukascopy and the like.........
Dukascopy is a bank (I suppose) so they have a deposit protection as the swiss banks have (but AFAIK, it's not a big one (30.000 CHF max ?)).

Regarding IB it is always not very clear for me (apparently their FDIC does not concern the FX trading account ?).
Can someone enlighten this point ?

Have a nice day.
  • #25
  • Dec 17, 2010 4:27am Dec 17, 2010 4:27am
Quoting >Apocalypto<
Refco was a bucket shop mate, their antics are why FXCM got the rep of being a dodgy broker. Refco was a market maker of the worst kind from what i heard, back in the dark ages of dealing desk only fixed spread retail FX!!! When all FX brokers profited from our losses.
Quoting Jhig
Refco was the worst of the worst in retail forex market. Till that day, no retail broker can hold a candle next to that bucket shop ... FXCM does come close.

Because of FXCM direct involvement with Refco back then, I will never deal with them.

BTW, Refco was a bucket shop. Refco was the largest bucket shop to date.
Alright, good to know. I never liked FXCM although they are very popular.
I'm going with Oanda, they look healthy to me. But when i earn some more money planning to go with Interactive Brokers or Dukascopy, gonna investigate some more about them and decide when that time comes.
  • #26
  • Dec 17, 2010 6:53am Dec 17, 2010 6:53am
Quoting Gcapman
Only trade with brokers that have bankruptcy protection:

Such as IB, Dukascopy and the like.........
Don't bank on IB offering that protection..... if you have a good read you will see Futures and FX traders don't have that SEC protection.....

Cheers,
  • #27
  • Dec 17, 2010 10:57am Dec 17, 2010 10:57am
Quoting >Apocalypto<
Don't bank on IB offering that protection..... if you have a good read you will see Futures and FX traders don't have that SEC protection.....

Cheers,
What are you saying - when trading currency futures or spot forex with Interactive Brokers, in case of bankruptcy money is gone or?
  • #28
  • Dec 17, 2010 3:20pm Dec 17, 2010 3:20pm
Quoting fx111
What are you saying - when trading currency futures or spot forex with Interactive Brokers, in case of bankruptcy money is gone or?
Futures and Forex market/traders are not regulated by the SEC.

Futures and Forex markets are regulated by the CFTC. Though Futures and Forex is regulated by the CFTC, neither one is protected from broker bankruptcy

The Equity market is regulated by the SEC. Equity brokers are required to be members of SIPC. SIPC is similar to FDIC in that, SIPC protects investment equity and the FDIC protects deposits.

Just like FDIC, if your SPIC registered broker declares bankruptcy, investors funds are protected up to $250,000.

Futures and Forex brokers are not require to signon with such funds protections agencies thus, if your Futures/Forex broker declares bankruptcy, then the client losses all equity invested with that broker.

There are Future Brokers who sign up for insurance for their clients equity but its not require by law to do so.

There are no CFTC/NFA regulated Forex broker who offers equity insurance for clients. Since CitiFX is regulated under SEC banks rules, they are able to offer FDIC insurance. That FDIC insurance is only for client money sitting on the sideline. If you have an active trade or your funds are in the mist of a transfer, then you are not covered under CitiFX FDIC insurance.
  • #29
  • Dec 18, 2010 8:32am Dec 18, 2010 8:32am
Thanx for clarification. I always thought that futures are protected from broker bankruptcy, everyone always says how better they regulated than spot fx, but i guess that's not the case.
  • #30
  • Dec 18, 2010 8:39am Dec 18, 2010 8:39am
btw. i would take Citifx into consideration because of that protection but i don't think they accept clients from my country, it's not on their list.
  • #31
  • Dec 19, 2010 10:06pm Dec 19, 2010 10:06pm
Quoting fx111
Were there any signs, any bad news about them before they collapsed and froze client's money?
I read that they suffered a loss 2009. - "Sonray’s latest accounts did display signs of financial stress. The company suffered a $1.5m loss for the year ended 2009, as expenses of $10.5m outweighed $8.3m in revenue, up from a $442,000 loss for the previous year as costs rose at about twice the rate of revenue."
http://www.contracts-for-difference....dministration/
I think as a private company there was no way for outsiders to know if Sonray was making those losses!
The facts you mention come out only afterward! ( may be I am wrong some people in the Know may knew !)
  • #32
  • Dec 20, 2010 5:01am Dec 20, 2010 5:01am
Quoting moksha
I think as a private company there was no way for outsiders to know if Sonray was making those losses!
The facts you mention come out only afterward! ( may be I am wrong some people in the Know may knew !)
Its funny you mention "private company" as Gain Capital/Forex.com just went public last week. As a public company, at least we'll know ahead of time if this broker goes under.

Gain is under the NYSE ticker: GCAP

For only $8, we all can own a part of a bucket shop. lol

Its funny, their stock went has high as $9, but has been in a decline ever since the IPO. I guess people know a bucket shop when they see one.
  • #33
  • Dec 20, 2010 9:57am Dec 20, 2010 9:57am
Quoting moksha
I think as a private company there was no way for outsiders to know if Sonray was making those losses!
The facts you mention come out only afterward! ( may be I am wrong some people in the Know may knew !)
That's why i love new CFTC rule, at least we can see broker's capital quarterly.
  • #34
  • Last Post: May 10, 2016 7:35pm May 10, 2016 7:35pm
Quoting moksha
On top of that even traders complaint when govt tries to regulate FX! becasue they think that it is impinging on free market! ( in other words to keep the high leverage etc they are happy for lax regulations!)
That is because decreasing leverage does not help protect the consumer... It simply forces the trader to have to deposit more money in the brokers account just to make the same exact trades. At this point, leverage is not even close to 50:1 and some currencies it is 10:1 or even 5:1.

So for anyone who actually learns the skill of trading they cannot even make money and their risk is increased because it becomes actually harder to manage risk when you have all of these strange and inconsistent margin requirements. Stops don't even get hit but the broker wants to close out your positions because all your money is being used for margin.

Also, they are forced to deposit more money with the broker and if they go under they take your money with them.
Trade at your own risk.
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