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Australian Brokers and ASIC

  • #1
  • First Post: Edited 1:56am Mar 9, 2011 12:49am | Edited 1:56am
Hi all,

Recently I got tired of the hassle of wiring funds to offshore Brokers such as Oanda and wondered had the state of FOREX brokers in Australia improved, perhaps with the view of opening a few Aussie FOREX trading accounts.

I was horrified when I opened up a live chat session with an Aussie broker when he told me that he would not reveal any financial position of his broker and that under ASIC law it was not mandatory, stating that it might give his competitors an edge. I even provided the CFTC link ....

http://www.cftc.gov/ucm/groups/publi...cmdata1210.pdf

.....showing the financial data of US brokers.

The only thing that the broker would tell me was ....

ASICs requirements are this "custodian net capital requirements are 500K or $5 million NTA (Net tangible assets)".

So they place your funds in a segregated account with one of the major banks here but as we know in the case of bankruptcy, our money is the last to be paid out after legal costs/investors/etc....

I'd be interested to know if anyone in Aus has done any due dilligence on the brokers here and have found any reputeables ones where they will disclose their financial data ?

I'd welcome any other comments too...

Joe

ps. if you are thinking of placing your money with an Aussie broker think carefully and do your due dilligence
  • #2
  • Mar 9, 2011 1:58am Mar 9, 2011 1:58am
They didn't even give you correct information. Its 10 million, or an adjusted liquid surplus calculation. Which is 50k + x% of dollars over X amount with 3 brackets..

Perhaps you should catch them out on their misinformation.
  • #3
  • Mar 9, 2011 2:06am Mar 9, 2011 2:06am
thanks....I'll take your word for it for now, I haven't even been able to find the info on the ASIC website yet, if anyone does please post the link
  • #4
  • Mar 9, 2011 2:12am Mar 9, 2011 2:12am
Its written in all the RG's.

Required ASLF:
Adjusted Liabilities =
Required ASLF =


=

$0
$50,000 + ($0 - $1mill)
$0 x 5.0% + ($1mill - $100mill)
$0 x 0.5% (> $100mill)
$50,000

These are the requirements in accordance with client liabilities.

So if you have 1 million in client funds, you must keep 50k more than 1 million at all times + the original 50k. I hope this is clear. So the client funds must exist + the surplus.

So if things go sour, the client funds are there + the surplus as they must be kept seperate from company funds.
  • #5
  • Mar 9, 2011 5:47am Mar 9, 2011 5:47am
Quoting Takisd
Its written in all the RG's....
I'm no legal expert but I believe that if things go sour (bankruptcy) the courts freeze ALL assetts which includes the segregated accounts, leaving our monies if any left to be paid out.... if anyone knows different and can quote the law by all means do so.

Joe
  • #6
  • Mar 9, 2011 5:58am Mar 9, 2011 5:58am
Quoting Takisd
Its written in all the RG's.

So if things go sour, the client funds are there + the surplus as they must be kept separate from company funds.
In theory but in reality "Client funds with Aus OTC brokers are not at all protected.
That is the fact. read any PDS ( product Disclosure statement of ASIC registered brokers )
Australia in that regards is at par with "small questionable jurisdiction countries"

Irrespective of a 47 million dollar collapse of a OTC broker ( Sonray Capital markets, Saxo white lable ) ASIC still thinks retails clients of OTC do not deserve protection at same level as ASX participant broker level through national guarantee fund

I can guarantee you when you mention the Sonray collapse to Australian brokers they will claim that oh yeah but our business model is different .. but reality is IT DOES not matter what business model they have if brokers goes belly up your money is toast.
They are supposed to be audited .. but if Auditor does not do his duties ...
One broker even claims that they have Insurance agiant their own people ( including directors) committing fraud ! like what happend with Sonray...
What a load of BS , which insurance company will offer an insurance for self committed fraud

The only thing you can do is perhaps go with real big brands! that still does not offer Client money protection
By the way one wonders why Saxo does not offer products directly in Australia!
  • #7
  • Mar 9, 2011 6:13am Mar 9, 2011 6:13am
If a broker is using client monies to pay the bills, then I have no doubt they will collapse, and it will fall under the above. But they would have to go bust really quickly before their auditor finds out. If KPMG or the likes got hint of this happening they would report it immediately to the government.

I understand your hatred towards sunray, but that was because of their own dealings and not problems with the Australian regulator. They obviously were commiting fraud if they got away with using client funds to line pockets or pay bills.
  • #8
  • Mar 9, 2011 6:16am Mar 9, 2011 6:16am
Quoting moksha
In theory but in reality "Client funds with Aus OTC brokers are not at all protected.
That is the fact. read any PDS ( product Disclosure statement of...
That Aussie OTC brokers are not required to publicly publish their financial data should set alarm bells ringing for all. CFTC have the US brokers publish their data monthly !
  • #9
  • Mar 9, 2011 6:20am Mar 9, 2011 6:20am
Quoting Takisd
If a broker is using client monies to pay the bills, then I have no doubt they will collapse, and it will fall under the above. But they would have to go bust really quickly before their auditor finds out. If KPMG or the likes got hint of this happening they would report it immediately to the government.

I understand your hatred towards sunray, but that was because of their own dealings and not problems with the Australian regulator. They obviously were commiting fraud if they got away with using client funds to line pockets or pay bills.
So the question is if Sunray had to make their financial data, public, on a monthly basis would that have been enough to alert traders ? Probably ... How is the blind trader to know what the heck the broker is doing with the money ? I think it definitely could go bust within a year !
  • #10
  • Mar 9, 2011 6:24am Mar 9, 2011 6:24am
If anyone is interested in reading ASICs guide here's the link

https://storm.asic.gov.au/asic/pdflib.nsf/LookupByFileName/RG166a.pdf/$file/RG166a.pdf

The word "Guide" in Regulatory Guide (RG=Regulatory Guide) bothers me ...
  • #11
  • Mar 9, 2011 8:07am Mar 9, 2011 8:07am
financial data is easily manipulated.. Such as certain US brokers claiming client funds as liquid capital to surpass the capital requirements.

Just because there are numbers on a page, doesnt make them legitimate.
  • #12
  • Mar 9, 2011 3:42pm Mar 9, 2011 3:42pm
Quoting Takisd
financial data is easily manipulated.. Such as certain US brokers claiming client funds as liquid capital to surpass the capital requirements.

Just because there are numbers on a page, doesnt make them legitimate.
I concur ......
  • #13
  • Mar 9, 2011 9:39pm Mar 9, 2011 9:39pm
Quoting Takisd
If a broker is using client monies to pay the bills, then I have no doubt they will collapse, and it will fall under the above. But they would have to go bust really quickly before their auditor finds out. If KPMG or the likes got hint of this happening they would report it immediately to the government.

I understand your hatred towards sunray, but that was because of their own dealings and not problems with the Australian regulator. They obviously were commiting fraud if they got away with using client funds to line pockets or pay bills.
- The auditors in this case did not find out the descripency between Client Seg account and reality.
- Agreed that part of fraud was use of money for own business and other outright illegal withdrawals but that was smaller part main reason for the 47 million deficiency was directors allegedly traded as if they were another client co mingled seg account.
SO ASIC is very much to blame for not regulating the OTC client money safety aspect.
Two issues
- Seg account is not really segregated, you take on risk of other clients defaulting ( including directors who might trade through seg account)
- No national guarantee fund
- Capital adequacy- Disclosure.. I don;t know enough about that aspect. May be ASIC regulation is not as good as USA?

It sucks and ASIC allows it to go on...

They consulted the industry( CP114)which was a joke ( now which industry will willingly agree to stringent regulation

So people are not just angry with Sonray directors but also with ASIC ,
  • #14
  • Aug 19, 2011 11:37am Aug 19, 2011 11:37am
Did you end up finding an Australian broker that you deemed as safe?

I'm not sure where to place my money at the moment, I had some money with GoMarkets but I'm wondering whether it's better off with a bigger overseas broker? Then I am worried about the state of the US at present as well.
  • #15
  • Aug 20, 2011 12:07pm Aug 20, 2011 12:07pm
any comment about this broker http://www.axitrader.com.au/ ?
  • #16
  • Aug 20, 2011 7:17pm Aug 20, 2011 7:17pm
Quoting nbafx
any comment about this broker http://www.axitrader.com.au/ ?
Great broker, been with them for over a year now. They use the integral grid for liquidity. Happy with them
  • #17
  • Aug 21, 2011 2:41am Aug 21, 2011 2:41am
I still haven't found a broker that I'd be happy to place a substantial amount of money with.

Currently though I'm trialling a demo on Maquarie Bank. Looks ok but their spreads are a bit higher although I might accept that if I feel my funds are safer.... I still need to perform my due diligence though on Maquarie before giving them my ok..

Cheers all, Joe

Quoting nhen
Did you end up finding an Australian broker that you deemed as safe?

I'm not sure where to place my money at the moment, I had some money with GoMarkets but I'm wondering whether it's better off with a bigger overseas broker? Then I am worried about the state of the US at present as well.
  • #18
  • Aug 21, 2011 3:02am Aug 21, 2011 3:02am
I was just talking about this with my wife last night. It seems strange that traders seem to worry more about the spreads when we are first starting out...I know I have been until yesterday.

Here are a couple ideas/thoughts as to what I'm looking for in a Broker;

1) Is my money/account with a safe/reliable broker. Someone who has been in the biz for a while...with little or no negative feed back in the last couple of years*.

2) NDD, this is very nice to have...but often hard to find if you are starting with a small account size.

3) Does there data feed provide/show the True market range...while I realize this is hard to prove I can give an example...It is possible to open a live account with a broker and than open their platform and compare the highs and lows with their demo account and another brokers account.

I have done this with a broker (who will remain nameless) and this was very interesting because, I was able to open an account (I just never funded the account) for each of the 4 trading accounts they offer ;

Micro
Classic
Classic NDD
Pro ECN

All the data feeds offered different highs and lows in addition to higher PIP spread.

So do your research but more importantly I think worrying over 1/2 a PIP more spread when your using 1:500 or 1:400 or 1:200 leverage should not be your first priority. Using a reliable broker and increasing your account size will take care of the spread difference in good time.


* The reason I say last couple of years is because we should all know that before regulation it was the Wild West



Quoting GetSmart
spreads are a bit higher although I might accept that if I feel my funds are safer....
  • #19
  • Aug 21, 2011 3:23am Aug 21, 2011 3:23am
Axitrader, definately not!

Locked me out of silver trading when price was going my way, enough to crash my account losing well over 10K.

As for a reputable one in Oz? Don't exist if you are profitable to any extent.

Would be so refreshing to find an honest one. MT4 and 5 offer too many server side settings to sqeeze you out.
My comments are not to be taken as trading advice, not a financial advisor
  • #20
  • Aug 21, 2011 4:07am Aug 21, 2011 4:07am
Quoting nhen
Did you end up finding an Australian broker that you deemed as safe?

I'm not sure where to place my money at the moment, I had some money with GoMarkets but I'm wondering whether it's better off with a bigger overseas broker? Then I am worried about the state of the US at present as well.

I'm with pepperstone, ecn with better spreads than gomarkets. Gomarkets are still very competive for non-ecn. Both are sufficient if you are not scalping or trading news spikes. With 400-1 leverage you only need to keep a small amount of your money online anyway (keep the rest in an interest earning bank account). I rarely keep more than enough for a few trades worth of my full bankroll with my brokers, also means i'm protected if a black swan event happens. Keeping all your money with a retail broker makes no sense.

From my research so far if you have $20k or more to keep in your broker account, leave the retail brokers and go with someone like london capital group (not australian, from memory think they have AUD accounts)
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