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Call for Regulations regarding Liquidity Providers

  • #1
  • First Post: Jan 16, 2015 11:08am Jan 16, 2015 11:08am
With all focuses on brokers, I believe the cause of this turmoil is the failure on the liquidity providers' part on making and maintaining an orderly market; they are the real culprit in causing all this calamity. I believe if these "prime banks" like Citi, Deutsche Bank were there doing what they are supposed to, making market and providing liquidity, we wouldn't be in this kinda s*** as right now, accounts all in negatives, wiped out and brokers closing doors. In this kind of s***storm, you really realize that your broker is your partner; we are all in this together against the next level, the unscrupulous chicken s*** liquidity providers, the "prime" banks like Deutsche who conveniently stopped providing price feed to brokers and some liquidity providers even putting in "errorneous quotes" on Currenex according to IC Markets.

Bunch of chicken s*** limpy dicks!! WHY call themselves "liquidity providers", "Prime banks", when liquidity is needed the most, they were NEVER there to provide it, back in 2011 during the Flash crash and this? They were supposed to be there providing liquidity? They were the "Liquidity Provider"??? Where was liquidity when SNB news came out???!!! THEY are the "prime liquidity providers" with all their flashy logos, having billions of $$ of assets and yet they all bail when s*** hits the fan and leave us little retail traders with just several K of account balance holding the bag and brokers absorbing losses from all those negative balances. It's like in the face of the biggest storm on the sea, all the huge tens-of-thousands-of-ton ships all sail away and leave us little fishing boats to pick up the pieces and rescue those drowning at sea.

If SEC, NFA/CFTC REALLY wants to get off their a$$'s and do something, they should investigate this. WHY did the liquidity providers, the "prime banks" stop providing liquidity to ensure a smooth and orderly market when their function of providing liquidity and market-making was needed the most?? WHY did those "prime banks", the most capable and most able with the deepest resources, all bail in the face of most gruesome market condition and leave us retail traders and brokers, the least capable to struggle to provide a market? As far as I can tell, we, the little retail traders and our fx brokers were the ones providing liquidity with our orders execute left and right and yet we have the smallest $$ of assets and we are not even compensated.

Since NFA/CFTC are so good at coming up with regulations, why don't they 1) Heavily fine those liquidity providers who stopped quoting prices during this SNB event thus making all CHF-related pairs untradable and disrupting the market and distribute the fines proceeds to all the brokers who had to absorb all the negative balances of the retail traders who were the true market makers at the time and 2) Come up with a regulation that will force ALL liquidity providers to be there making market in ALL market conditions no matter what to ensure a smooth and orderly market at all times. WHY don't those regulators do that? Do they dare? To go against those banks who are basically the ones paying for their existence? No they don't. All they know is clamping down on us little guys, forbidding us to fund our account with credit cards! Ridiculous!! Another bunch of useless limpy dicks!!


Any comments and thoughts are welcome. I am too angry to say anything more.
Make your losses in demo. Earn your profits live.
  • #2
  • Jan 16, 2015 11:19am Jan 16, 2015 11:19am
Quoting Forexia
With all focuses on brokers, I believe the cause of this turmoil is the failure on the liquidity providers' part on making and maintaining an orderly market; they are the real culprit in causing all this calamity. I believe if these "prime banks" like Citi, Deutsche Bank were there doing what they are supposed to, making market and providing liquidity, we wouldn't be in this kinda s*** as right now, accounts all in negatives, wiped out and brokers closing doors. In this kind of s***storm, you really realize that your broker is your partner; we are...
Why would a liquidity provider provide a market when price drops as it did yesterday? The issue is not with the LP, there is no exchange if they don't want to take the other side of the trade that is up to them, you can't force them to take a price they are not interested in, what are they going to do with it? That is how the system works, the problem is with the overleveraged traders that think that 1.20 was set in concrete.

The only other solution is to move the whole currency trading onto an exchange, the problem is that it would become so expensive, not just for traders but for businesses, importers, manufacturing and governments that it would become a systematic risk to the world's economy the like we haven't seen yet.

Currency trading is a voluntary business, you need 2 willing parties to have a market and you can't force the one to come to the table if they are not interested in the price you are willing to pay. You make an offer, either in your trade or as your stop and if nobody is willing to take you up on that there is no trade, I like this system. Nobody is forcing anyone to buy or sell anything, you need 2 willing parties to enter into an agreement, can't get fairer than that.
A contrarian; I always disagree.
  • #3
  • Jan 16, 2015 11:46am Jan 16, 2015 11:46am
Calm down, man! Lets get one thing straight, you trade to make money for yourself, I trade to make money for myself, same for everyone else, INCLUDING the liquidity-providers. They do it because they wish to make money, just like the rest of us. So expecting LPs to make losing trades to protect traders & brokers is totally unrealistic.

The kind of regulations that you have proposed will probably kill the forex market, at least the retail forex as liquidity would be thin & spreads massive because who'd want to be an LP if it means being obligated to take others' losses?

More control & more regulation isn't the solution to every issue. In fact, this whole episode would probably have not occurred at all if SNB hadn't been trying to artifically control the markets but that's what most people want I guess. People want governments to mess with markets, manage economies & when that leads to problems, the answer always is more messing around with the markets & more problems; people want cheap houses but don't realize that it would cause housing-bubbles, they want governments to reduce unemployment through artificial growth but don't like the inflation that comes with it, they want government to provide "free" stuff but don't want to pay high taxes, they want equality when it comes to everything else but not when it comes to paying taxes, they want freedom for themselves but control for others, the list goes on & on..........

Yeah, I'm just as frustrated as you are but for different reasons......I want more freedom for everyone & less of governments messing around with everyone & everything.

A bit of a rant but that's probably not out of line considering the nature of the thread
  • #4
  • Jan 16, 2015 12:21pm Jan 16, 2015 12:21pm
Quoting goldfinch
{quote} Why would a liquidity provider provide a market when price drops as it did yesterday? The issue is not with the LP, there is no exchange if they don't want to take the other side of the trade that is up to them, you can't force them to take a price they are not interested in, what are they going to do with it? That is how the system works, the problem is with the overleveraged traders that think that 1.20 was set in concrete. The only other solution is to move the whole currency trading onto an exchange, the problem is that it would become...
Why would a liquidity provider provide a market when price drops as it did yesterday? Well tens of thousands of small forex traders across the world like cescof from Italy and thousands of forex brokers all did and we are NOT even supposed to. They are the liquidity providers and they shouldn't be called "liquidity providers" for nothing. When the market condition is normal, anybody can be a liquidity provider, but it's in time like these that there needs to be liquidity to make a market otherwise we will be operating like stock markets, halting trading with the tiniest news. And in that case, we will be halting trading every single day and maybe several times a day because there are market-impacting news and economic numbers coming out almost everyday and multiple times a day impacting different currencies. How expensive would that be?

And is it correct and fair when firms calling themselves "liquidity providers" who are equipped with $billions of assets all take off when s*** hits the fan and yet expect small traders who are only furnished several K and brokers who are capitalized with several millions to step in to foot the bill and get ourselves wiped out in the process? Leverage is the only way for us retail traders to compete in the forex market. If we all have the money like Warren Buffett WHY would we need leverage in the first place? This is what retail forex is all about. If they can shove a leverage cap down our throat they can force liquidity providers to make market in ALL market conditions.

From the sound of your post, you seem to be from the banks, then IF that's the case, your employer should be ashamed of themselves, not doing their proper job when they were needed the most.
Make your losses in demo. Earn your profits live.
  • #5
  • Edited 12:55pm Jan 16, 2015 12:24pm | Edited 12:55pm
Quoting r41225
Calm down, man! Lets get one thing straight, you trade to make money for yourself, I trade to make money for myself, same for everyone else, INCLUDING the liquidity-providers. They do it because they wish to make money, just like the rest of us. So expecting LPs to make losing trades to protect traders & brokers is totally unrealistic. The kind of regulations that you have proposed will probably kill the forex market, at least the retail forex as liquidity would be thin & spreads massive because who'd want to be an LP if it means being obligated...
Yeah but we all took losses, all the traders, all the brokers, all took losses and the liquidity providers are the ones who are the best capitalized. So the richer a company becomes, the more wimpy and stingy it becomes? I guess so from how these "liquidity providers" a.k.a liquidity stoppers behaved.
Make your losses in demo. Earn your profits live.
  • #6
  • Edited 1:47pm Jan 16, 2015 12:40pm | Edited 1:47pm
Frankly, I believe that the issue is not on the LP's side. If there is no market because of a major market dislocation, then they are not going to create a fake market out of thin air where they will take losses after losses. We all complained about bucket shops for years. These guys provided a bid/ask at all times and had to recoup that by trading against their clients, doing stop hunting, charging higher spreads and what not. Now we got ECN's, people complain again for other reasons. The fact is that you cannot complain about ALL aspects of the business all the time.

I got affected by the CHF mess and I am very bitter too although IC Markets is still in the process of solving the issue. But guess who I am bitter against? I am enraged at the PUBLIC AUTHORITIES for shamelessly manipulating the price of their currencies way beyond the limits of where it belongs. The bottom line is that the central bank could not keep their currency at this artificial level forever and removed the carpet from underneath everybody's feet in a matter of seconds, when the actual adjustment would have taken months in a free market without causing any harm to anyone.

It is not the brokers and LP's that should be blamed, it's the public authorities that get a free license from regulators to manipulate prices, create huge imbalances in the market and screw everybody in the end: that is banks, brokers and their clients. And guess what is this kind of blame game pointing fingers at the industry gonna bring? That's it, MORE REGULATION and more of what caused all this nonsense.

Be careful what you wish for guys.
  • #7
  • Jan 16, 2015 12:49pm Jan 16, 2015 12:49pm
Quoting Princeton
Frankly, I believe that the issue is not on the LP's side. If there is no market because of a major market dislocation, then they are not going to create a fake market out of thin air where they will take losses after losses. We all complained about bucket shops for years. These guys provided a bid/ask at all times and had to recoup that by trading against their clients, doing stop hunting, charging higher spreads and what not. Now we got ECN's, people complain again for other reasons. The fact is that you cannot complain about ALL aspects of the...
All central banks should agree that they can't intervene with more than 250 pips per day or so MAX. or make it 100 pip maximum per day. That way the issue is solved and will never ever happen again what hapenned with this idiot CHF story.
  • #8
  • Jan 16, 2015 1:25pm Jan 16, 2015 1:25pm
Quoting Princeton
Frankly, I believe that the issue is not on the LP's side. If there is no market because of a major market dislocation, then they are not going to create a fake market out of thin air where they will take losses after losses. We all complained about bucket shops for years. These guys provided a bid/ask at all times and had to recoup that by trading against their clients, doing stop hunting, charging higher spreads and what not. Now we got ECN's, people complain again for other reasons. The fact is that you cannot complain about ALL aspects of the...
If not for the public authorities announcing s***, there would be other s***. There is ALWAYS s*** in the market and s*** is what makes the market move. If there is no s*** , then there is NO market movement. Look at the forex market the day before X-Mas and New Year, there is no s*** happening, the market movement on those days is about 5-10 pips on average. Market movement or not, there has to be a MARKET!! This is what we are all here for, is trading in the forex MARKET!! If there is no market, what are we doing here? That was the problem yesterday is because liquidity providers who were paid handsomely I might add to provide liquidity to make a market when they were supposed to didn't. They dropped the ball on us and that's unacceptable.
Make your losses in demo. Earn your profits live.
  • #9
  • Jan 16, 2015 1:28pm Jan 16, 2015 1:28pm
Quoting goldfinch
{quote} The only other solution is to move the whole currency trading onto an exchange, the problem is that it would become so expensive, not just for traders but for businesses, importers, manufacturing and governments that it would become a systematic risk to the world's economy the like we haven't seen yet.
That's right & wouldn't trading spot-forex on an exchange mean that we'd have to bring our own money in full, like stocks? That wouldn't really work well because most retail traders don't have 10s or 100s of thousands of dollars to trade forex without leverage. So that would probably spell doom for retail forex traders.

Quoting Forexia
{quote} Yeah but we all took losses, all the traders, all the brokers, all took losses and the liquidity providers are the ones who are the best capitalized. So the richer a company becomes, the more wimpy and stingy it becomes? I guess so from how these "liquidity providers" a.k.a liquidity stoppers behaved.
I'm sure even some of the LPs took losses just like traders & brokers but again, the price fell so sharply because SNB had been holding it artificially so when SNB declared that they are going to discontinue the peg then almost everyone was puzzled as to how much it was going to fall. It should be obvious to traders that most of the time markets move pretty smoothly & markets tend to move erratically when governments come out with their plans to poke around the economy. As things stand, markets can be turbulent, it's their nature, it's what makes profitable as well so traders must be careful, & not risk too much & always have a backu plan because $hit happens, you know.

Quoting Princeton
Frankly, I believe that the issue is not on the LP's side. If there is no market because of a major market dislocation, then they are not going to create a fake market out of thin air where they will take losses after losses. We all complained about bucket shops for years. These guys provided a bid/ask at all times and had to recoup that by trading against their clients, doing stop hunting, charging higher spreads and what not. Now we got ECN's, people complain again for other reasons. The fact is that you cannot complain about ALL aspects of the...
Wow! Didn't expect anyone to say this. Good post

Quoting attilafx
{quote} All central banks should agree that they can't intervene with more than 250 pips per day or so MAX. or make it 100 pip maximum per day. That way the issue is solved and will never ever happen again what hapenned with this idiot CHF story.
It doesn't work like that. SNB didn't choose to make the market move that much, in fact, they tried to minimize the impact of the revelation by further lowering interest rates, the move occurred because of the uncertainty about the price after the 1.2 floor was breached. The only way to prevent that is to not have the governments meddling in the markets in the first place.
  • #10
  • Jan 16, 2015 1:31pm Jan 16, 2015 1:31pm
Quoting Forexia
{quote} liquidity providers who were paid handsomely I might add to provide liquidity to make a market
Who pays them?
  • #11
  • Jan 16, 2015 1:59pm Jan 16, 2015 1:59pm
Quoting Princeton
Frankly, I believe that the issue is not on the LP's side. If there is no market because of a major market dislocation, then they are not going to create a fake market out of thin air where they will take losses after losses.
When those very same liquidity "providers" engaged in high leverage trading in extremely speculative derivatives, the MBS's and lost $billions, we ALL bailed them out with our tax dollars and they paid all their top executives handsomely with our bailout money. So now it's us who lost money in doing the same thing as they did, leveraged trading in not even derivatives but cash products and they can't absorb some losses?
Make your losses in demo. Earn your profits live.
  • #12
  • Jan 16, 2015 1:59pm Jan 16, 2015 1:59pm
Quoting r41225
{quote} Who pays them?
Who pays them?? Read my previous post.
Make your losses in demo. Earn your profits live.
  • #13
  • Jan 16, 2015 2:04pm Jan 16, 2015 2:04pm
Quoting r41225
{quote} That's right & wouldn't trading spot-forex on an exchange mean that we'd have to bring our own money in full, like stocks?
That's NOT true. Stocks, futures, commodities all trade on exchanges but you can trade all of them on margin. Margin is NOT an issue here and exchange is NOT necessary. We can still retain anonymity by trading forex OTC BUT we need to ensure there is ALWAYS an orderly market there in all situation. That is the key. That's why we need rules and regulations that states NO liquidity providers are allowed to just not provide two-way quotes or wrong quotes to take unfair advantage of others. They are NOT called liquidity providers for nothing.
Make your losses in demo. Earn your profits live.
  • #14
  • Jan 16, 2015 2:14pm Jan 16, 2015 2:14pm
you go right ahead call for more regualtion you gonna get more then you bargin for buddy, there's been talk about raising the min for retail forex traders to trade to 10k and they might lower the margin to 2:1
  • #15
  • Jan 16, 2015 2:22pm Jan 16, 2015 2:22pm
If you want to have a go at someone, other than yourself really as you were the ones with the trades on, nobody held a gun to your head, then have a go at the SNB. The SNB is not your normal Central Bank, they are listed on the SMI, are half owned by the local Cantons and the other half is owned by private shareholders, the largest of which is a director of DB.

The SNB became sick and tired in propping up the euro and they themselves were spending more than the country's GDP to do so, unlike other CB's they can't print, they are listed on the exchange and can only add to their reserves at a loss if they raise additional capital, that is just how Switzerland works.

It is obvious you are seeking to blame someone going by all your posts on the subject here in the last day and a half at no time did you admit that you were wrong on your trade, overleveraged and had not taken into account that a sudden drop would cause you to get filled at unreasonable prices.

You were banking on a CB, that isn't even a real CB in the true sense of the word to continue holding up an arbritary level for your convenience. What are you going to do next week when Draghi starts QE and the euro drops 600 pips, are you coming back again to blame LP's and the big banks?


You can't regulate for stupidity and ignorance.
A contrarian; I always disagree.
  • #16
  • Jan 16, 2015 2:24pm Jan 16, 2015 2:24pm
Quoting PoundTrader
you go right ahead call for more regualtion you gonna get more then you bargin for buddy, there's been talk about raising the min for retail forex traders to trade to 10k and they might lower the margin to 2:1
Yup that's the problem. We ask for the right regulations and they always end up giving us more crap like forbidding us to use credit cards to fund the account, anything to stop us retail traders to succeed so the "big boys" who bailed out on us this time can continue to make millions with our bailout money.
Make your losses in demo. Earn your profits live.
  • #17
  • Jan 16, 2015 2:33pm Jan 16, 2015 2:33pm
Quoting goldfinch
It is obvious you are seeking to blame someone going by all your posts on the subject here in the last day and a half at no time did you admit that you were wrong on your trade, overleveraged and had not taken into account that a sudden drop would cause you to get filled at unreasonable prices.
Yes but that's not the issue. I am ALWAYS wrong on my trade and I am ALWAYS highly leveraged and I am ALWAYS facing to me unreasonable slippages and spread but that has NEVER been a problem before. The question is WHY now? Like I said before because there has ALWAYS been a MARKET, not like yesterday where a pair is completely untradable for an hour. If you look at the charts for any CHF-paris from 4:45 am to 5:45 am there was NO bars, NO candles, NO nothing, just the background of the chart. THAT is unacceptable and NOT right!!!

So don't blame on the leverage, don't blame on the government and don't blame on the bad trading, but instead have the guts to blame on somebody who really dropped the ball on us, the retail traders AND the brokers, the liquidity stoppers!!

Quoting goldfinch
What are you going to do next week when Draghi starts QE and the euro drops 600 pips, are you coming back again to blame LP's and the big banks?
NO not if the LP's are doing their job providing quotes. If they made a market and I suffered losses in that market then I don't blame no one but myself but if I suffered losses because there was no market then, yes, I will blame on the LP's who were supposed to be making that market. That's their job for which they have been richly compensated.
Make your losses in demo. Earn your profits live.
  • #18
  • Jan 16, 2015 2:34pm Jan 16, 2015 2:34pm
Quoting goldfinch
If you want to have a go at someone, other than yourself really as you were the ones with the trades on, nobody held a gun to your head, then have a go at the SNB. The SNB is not your normal Central Bank, they are listed on the SMI, are half owned by the local Cantons and the other half is owned by private shareholders, the largest of which is a director of DB. The SNB became sick and tired in propping up the euro and they themselves were spending more than the country's GDP to do so, unlike other CB's they can't print, they are listed on the exchange...
I guess we can all agree on the fact that Central Banks are authorized market manipulators.

Now regarding clients getting affected by the CHF move, there are two kinds. The first is Forexia whining about the fact that this move caused a huge loss and not willing to take responsibility. And those like me that only demand to fairly take their loss, but not to get margin called at a price 20 or 30 handles away from real market levels and that what was not generated anywhere else on the planet but their broker's erroneous feed. And trust me, there are a lot of us in this case.
  • #19
  • Jan 16, 2015 2:35pm Jan 16, 2015 2:35pm
Quoting goldfinch
You can't regulate for stupidity and ignorance.
No you cannot regulate stupidity and ignorance BUT you CAN regulate against irresponsibility and greed, like taking off and letting others holding the bag suffering losses when you are 1 million times better capitalized to absorb the same losses.
Make your losses in demo. Earn your profits live.
  • #20
  • Jan 16, 2015 2:38pm Jan 16, 2015 2:38pm
Quoting Forexia
{quote} That's NOT true. Stocks, futures, commodities all trade on exchanges but you can trade all of them on margin. Margin is NOT an issue here and exchange is NOT necessary. We can still retain anonymity by trading forex OTC BUT we need to ensure there is ALWAYS an orderly market there in all situation. That is the key. That's why we need rules and regulations that states NO liquidity providers are allowed to just not provide two-way quotes or wrong quotes to take unfair advantage of others. They are NOT called liquidity providers for nothing....
I'm not sure but I think keeping a trade overnight requires one to bring in the full value of the stocks. Anyway, if you make a rule like that then there will be no liquidity providers, or at least nobody would want to call themselves a liquidity provider, they may have to come up with a new term because it's totally unrealistic to believe that anybody would want to be a LP if it meant taking massive losses just so others could trade without any trouble during times of extreme uncertainty.

Can you force your grocery store guy to give you groceries at any price you ask for? I think not. He says what price he's going to sell at & if you can't or don't want to pay it then you can't force him, he's running the store for a profit, he will sell if he can make a profit or minimize losses. In forex, you can buy as well as sell but it is like that too, LPs trade to make a profit so if they believe they can't make a profit at a given time then they won't want to trade. Forcing them to do so through regulation would be like forcing grocery stores to sell their stuff at unprofitable rates, it would destroy the incentive to run a grocery store just as forcing LPs to trade on unprofitable terms would destroy incentive to become a LP.
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