Brokers chasing you for negative account balance

Don't confuse things: All traders are OK to take responsability.They all find it 100% OK to take losses on this event.
There could have been a few HUNDREDS pips of slippage on the execution of their stops, it would be acceptable.

Now, having CREATED 1500+ to 2000+ pips gaps or having amended the trades afterwards with that kind of requote isn't. Does that make sens to you ?

This makes perfect sense. They are probably trying to recoup some of the losses they incurred over SNB, Alpari owe them $10 mill. I guess the next thing you will see will be brokers widening spreads or A book brokers switching to B book.

What you think brokers have to do and what they really legally obliged to do are obviously 2 different things. The SEC definition is just what it is a definition. There is a special note for you at the bottom that it is neither a legal interpretation nor a statement of SEC policy.

Forex is unregulated off-exchange market so there is no single order book, some liquidity providers had quotes other did not. Neither law not the contract required brokers and liquidity providers to give you a quote at any given time and execute your order at it. They can stop when they want and resume quoting when they want and as long as they execute you within publicly recognisable range for that day you have a seriously uphill battle to prove them wrong. EBS is widely accepted as reference by courts and it published a special statement that the low for the trading day was 0.8500 for EURCHF. If your trade was executed below, then you have a case if not then you don't.

The contract between you and your broker is legally binding. If you come to court saying that you knew that it was in favour of the broker, but signed it anyway and now ask the court to make it void, you will be disappointed with the outcome.

@wookey: I mainly agree with what you wrote.
So, to you, if a broker shut down quotes and trading on EUR/CHF beetween 1.20 and quoted again @0.86 to execute all stop losses at this price (claiming there was no liquidity all that time) while executing all buy limit orders at the prices of the orders (like there had been an order book, which we both know doesn't exist) is ok, and 100% legal in your opinion ? (They even maybe hedged all excess stop losses correctly but waited to see what happens: price could have gone up again, they would have executed all stop orders on customers accounts then. If price continued to go down, they just wait for the bottom to enable quotes again, and say: Oh, there was no liquidity, and execute customers at the bottom while pocketting the difference ?)

I mean, we both understand it's fraud pure and simple.
There wasn't many buy limit orders on EUR/CHF, but there was on USD/CHF (I have Oanda's published data on their customer's orders that day for example).
About the broker being able to hedge himself or not, that's the broker's problem, not the customers one. It would have been on a real market, not with a market maker.

What's the point of having "regulators" which are supposed for example to enforce the Mifid directive in Europe (which doesn't cover spot forex, it's right) if brokers can do whatever they want and get away with it ? So basically, you're telling me that leveraged forex is a scam ?

Whenever there is an event, they just suspend trading to get the most out of customer's accounts ?

I don't assume there are laws about specifically what a broker can or can't do, but what I know is that there are laws which forbids FRAUD pretty much all over the world. And I have the pretention to be able to demonstrate that this is a fraud.

With your way to present things, you mean that there is no limit to UNFAIR practices a forex broker can employ ? Creating slippage, disabling trading when it suits them and so on ? Why would anybody have troubles when committing fraud if brokers can do whatever they want and a court would just say that everything is ok ?

I guess we all assume a market maker has to quote prices apporoximately reflecting the fair value of the instruments. There isn't any specific rule, and there can be differences, but at one point, it becomes fraud (spikes and so on), no ?

Maybe you're right and they can get away with "we disable trading when we want, and especially when it's favorable for us. If you don't like it, just f*ck you"
I would apreciate your thoughts.

(About the contract, I agree with your points. It's not that I "knew", it's just that I didn't understand the underlying idea as "we can disable things specifically to rob our customers" because it was just the kind of thing I was thinking you cannot do, especially not that obvious)

EDIT: I just searched quickly on google: In the UK, the 2006 FRAUD ACT section 4 "Fraud by abuse of position", says:
(1)A person is in breach of this section if he—
(a)occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b)dishonestly abuses that position, and
(c)intends, by means of the abuse of that position—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
(2)A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

Don't you think it suits pretty well to the behavior of UK brokers ?

(About SEC definition of a market maker, you're right, but it was just an example to point out that the widely accepted role of a market maker is to provide quotes all the time and in all situations. It's their only job to adjust that quotes, hedge, assess their risks and so on. Someone entering trades when he wants is a trader, not a market maker.)

One huge problem that makes negative balance always possible after the weekend, is professional FX accounts can trade longer after retail accounts close for the weekend and can start trading EARLIER after the weekend. So if something huge happens on the weekend, the professional traders could trade a currency BELOW your stop loss and into a negative balance before you are allowed to trade. On Monday, you would see a GAP down of the pair, and your stop loss and margin call of the broker would not have been activated.

If they didn't allow professional accounts to trade longer this wouldn't happen. And its kind if cheating the retail trader anyway.

​Great post Mevo, thank you for it. Finally someone understands what I am saying.

To be clear, I am not an advocate of brokers I am trader like most of the people here. However, I have vast experience and I remember the times when gaps 100-200 pips were pretty common on news like NFP and Feds rate decisions. It was time when retail spot forex brokers were all ugly and traded against their clients and if you had been winning consistently your broker had asked you to leave. Since then a lot of things have changed. Now we have all variety of brokers from scams to pretty decent ones. If what you are saying were true majority of brokers would not have suffered losses. Alpari would be sitting pretty with nice profit from your deposits and FXCM would be fine too. The fact that they were insolvent means they did not profit from your deposit. In fact they shared the risk with you. The fraud requires the offender to make a gain not go into insolvency. This event made losses to any kind of brokers ECN, DMA, STP and Market Makers. You also cannot tell that your broker was dishonest, they described it all in the terms and conditions. It is not a fraud if it happens according to the contract.

But what you are right about is that spot forex in not true market. Exchange has anonymity of byers and sellers, you do not know you win from or lose to. In spot forex you trade against a few liquidity providers, so both you and they know exactly who they win or lose to. That creates some problems, but it does not apply to this case. In this case the LP's working with your broker pulled out their bids on all CHF pairs and there was no liquidity to fill your orders. Occasional limits by other traders were immediately eaten by enormous amount of stops and margin calls.

The thing is that the possibility of such event was written in the contract which all traders signed. The judge on the process will ask you if you understood the contract when you signed it. And you either have to prove that you are dumb or that your broker breached the contract. I still do not see any legal argument which can support any of these positions.

Is the the contract written with the terms you explained Wookey not evident enough to fall under the category of Fraudulent . One must ask who would allow such a contract to even of been signed off and passed for the doors to be potentially opened at some point for potential fraud

My view is solid on this the brokers are guilty and it works hand in hand keep fucking your clients and whats the point of business. The very reason this market revolves around Margin regardless of the dodgy contract is to protect 20% of the account equity. If the broker cannot full fill this margin they need to carry the losses and target in another direction for recovery i because there end of the deal failed to there clients.. If you are trading with Mt4 and its software failure then they need to take it up with Meta Quotes and i doubt it very much. The merry go round....
There is no point having margin stop then a ton of slippage to see that fail . It failed and its not the clients problem. If anything the brokers should be crediting there clients accounts back to there 20% margin cap. They wont because they just stole a shit load of there clients money and for those who got stuck in the recent chf move that had minor losses will credit there accounts back to balance because it not worth hassle. Add all the people up that do this and they just stole a shit load. Shit rolls down hill push it back up and tell your brokers you want you accounts back to the 20% margin and dont want to hear bullshit excuses.

Something that occurs to me is that in the UK all accounts are 'spread betting' because under English Law there is no tax on a bet. However such a contract is not enforceable under English law. So if a broker decides not to payout then there is no way you can force them in law to payout. This is a two way street and consequently when a negative balance occurs there is no way the broker can force you to pay. I have not seen this point raised in the thread and was wondering whether it had any validity.

Spread bet debt is enforceable by law.

I never though you were. To me, you seem to correctly make the difference beetween the reality of things, and how you would like things to be. A lot of persons don't.
I apreciate your comments as it enable me to think about the question: "Can this case be defended in court ?", so thank you. too.

Not necessarily.
First, a lot of brokers CLAIM to have big losses. I don't say it is NOT true, but I wouldn't bet it IS either.
I don't know if you have some corporate knowledge, but it's pretty easy to understand: They can lie without lying in fact. A lot of brokers have several companies in different countries, due to taxation and due to "regulation". For example FXCM have subsidiaries in the US regulated with the NFA/CFTC, in UK with FCA and in other places with local regulations. Now all this companies have local customers accounts. Do you think FXCM is going to sign agreements with liquidity providers for each subsidiary ? It's far easier to create one more subsidiary which signs agreements with the liquidity providers and then this company serves all the others. The best is to use an offshore company to do that, to keep the big part of the profits there and then just leave a small part of profit for the local subsidiaries.

In the FXCM example, it's no secret they are using a Bermuda subsidiary. I mean, just do a few researches, pretty much all brokers use some offshore subsidiaries without it being a secret. So in the FXCM example, the local FXCM may have taken some huge losses that have been profits being made by the offshore subsidiary.I am NOT saying this is the case, but I definitely not sure it isn't.

Alpari UK went bankrupt. Are you sure Alpari UK wasn't hedging their trades with another offshore alpari subsidiary where the same amount of profit has been made ? I mean other alpari branches are fine. They even CLEARLY stated that (Alpari's own statements quoted) "We draw your attention to the fact that the company Alpari UK is a separate legal entity under international brand Alpari, and its financial situation did not appear to have any effect on other company brand.". They even stated the other companies which are NOT affected: "Alpari Limited (Saint Vincent), Alpari Limited (Belize), Alpari International Limited (Mauritius)". The company in Belize does not deal with customers, so what is its use ? Are you sure the losses from Alpari UK did not end up in Belize ? Because the belize company was the liquidity provider of the UK and other subsidiaries ? This way they can even try to take more money than customers actually had with them (chasing negative balances, which is the subject of this thread in the first place). And they can even take money from people which didn't have any CHF trade. Again, I am not claiming it IS what happened, but it definitely smells this.

(The main thing I was pointing out is: Are you sure the forex brokers want to themselves take the risk of discussing about all this in a court a law by suing customers with negative balances ? I HIGHLY doubt it.)

It's pretty much the same problem you are pointing at with the contract: Is it fraud ? I would say it is ! But it's mainly legal. There just need to be a contract of liquidity providing beetween the offshore subsidiary and he local customer's dealing company, and everything's "fine" (This contract would state they can stop to provide liquidity when they want)

Now, all this doesn't matter at all with the main problem.
"If what I say was true" ? Because you are going to argue that what I said previously isn't ? That the brokers who suspended trading just EXTRACTED the most from customer's accounts ... ON PURPOSE ?

Maybe the brokers effectively suffered losses, but in this case, they had FAR LESS losses than what they should have had ! So they indeed benefited from their bad move. Why would they have done it if it wasn't the case ? Why suspend trading at all if it didn't benefit them ?

And you can even see in the FRAUD act of 2006 I quoted that even if they didn't get any benefit for themselves the fact "to cause loss to another or to expose another to a risk of loss" makes it a fraud. (section 1) c) ii))


Hummm, I maintain the market makers who suspended trading to maximise losses of their customers have been dishonest, because it is the case. To me it's clearly a fraud but maybe not in the LEGAL way. You may be right that this move may be legal.

As I said, that's the question I'm asking myself now. I mean, could you defend the broker's behavior as "NOT DISHONEST" ? I doubt it. If you can, please do it as I'm curious to see how.
Now, can I manage to have they condamned by a court for their behavior or was it just a legal fraud, that went according to the contract ?


Maybe, maybe not. As I said, there has been CHF trading on many places. [Again, you are refering only to what market makers are CLAIMING]
But even if that's 100% correct, it still is 100% the broker's problem (in the case of market makers). Customers are dealing with the market maker. Customers have no relationship with LP at all.

I give an actual example which may be easy to understand: I had long SILVER trades on my account wiped out at Oanda with this story, because I have physical silver to deliver to someone in the future and I locked in the price and stored the needed USD for the purchase on this account. Do you think my customer will accept it if I tell him "I'm sorry, my hedge trades and the money for the purchase have been eaten by Oanda" ? Or he will answer me: "That's not my f$ck!ng problem, it's yours"

I chose the wrong partner, I assume the risk. I took an engagement, my customer expects me to deliver. Same for market makers, why would the customers have to take the losses because they chose the wrong liquidity providers, didn't identify their risk correctly, or don't want to provide the service they are expected to when it doesn't suit them ?

They are not expected to make you wait MORE THAN AN HOUR to prevent you from getting out of the trades until it reach the bottom. I would argue customers have the right to expect to get out of their trades at an actual "fair value" according to what is done on other big platforms. If there wasn't any liquidity, price would have dropped accordingly on these platforms, which has not been the case. We're not taking of a few seconds or couple minutes here (or some little slippage). This, in a world of High Frequence Trading where we're talking everyday of micro or nanoseconds.

Now, you are arguing that customers are 100% responsible because they "agreed" (if we can say) to a contract saying: We will take your money for no good reason if we want to. You can't argue about anything according to these "contracts". If they don't like a trade you made, they can cancel it and you can't argue. Anything could happen, you can't argue.

Maybe, and sadly you may be right. That's what a court may say: You "signed" a contract, everything's just fine according to it.

They were eaten by the brokers as they didn't execute the stop side at all until the bottom.
Again, any trader doesn't argue about the "event". I am arguing about the quotes and trading suspended for an outrageous period of time until the price reached the bottom, and the fact that they (the market makers) didn't honore the stops until then. Some slippage due to the "event" is acceptable for example in my opinion.

After, you can go into legal considerations too: Contracts have not been SIGNED. At best, a box have been ticked on a computer screen. Legally, this is NOT a signed contract. Some brokers now make you enter your full name as a "signature" or use Adobe tools for you to "sign" electronically contracts. All this has not been used by the market makers, so legally, they will hardly be able to rely on a SIGNED contract either ...

After, the suspended trading is quite for sure in the contract. The stop losses not honored is less sure for those who had hard stops on their trades.

Maybe traders could even argue that we indeed were too stupid to understand the contract and what we were doing. I mean, if brokers want to play games, we probably should play the same kind of games with them.

I guess the real lesson of all this is that NOBODY should deal with a forex broker, because it's some kind of legal scam. And if anybody talks again about "regulation" concerning forex brokers if they get away with this, he is an idiot.

Yes, and Spread bet probably is a financial product covered by the Mifid directive too.
Let the brokers demonstrate first how they handled the execution of the trades in the BEST INTEREST of the customer according to the directive and manage to end with such a negative balance. I wish them good luck with that

Hi, we are chased by SaxoBank and we are working with a Danish lawyer: http://www.andersen-partners.dk/en/content/645

I had several postions all with stopploss ordres at 1.2005. They were all executed at 10.30.45-46CET between 1.2005 and 1.2000.....but re-qouted to 0.9625.
I would appreciate all comments.

br
vvt

Something just came to my mind referring to my previous long post, about broker CLAIMS:

Oanda, advertised everywhere, and still is on their frontpage that "In the wake of the unexpected market events on January 15, we did not re-quote or amend any of our clients' CHF trades"
Now, if you chat with them, and I have a transcript of my chat with them about that, they will perfectly admit that nobody was able to place any trade for more than 1 hour because they "halted" trading. They don't deny it.

Just tell me, how would they requote or amend trades that you just couldn't place in the first place ????
All this is the same kind of tricks: They don't lie, they indeed didn't requote or amend trades, lol. All this is just amazing.

To me, this pretty much reflects the value of broker claims.

​Mevo, your concerns are valid of course, but do not think that they were not explored before in courts and by regulators. With 1:500 leverage even 100 pip gap can do a lot of damage to account. It happened before. It is why all regulated brokers are now obliged to put the risk disclaimer about the danger of leveraged trade. The truth is traders have been benefitting from the leverage for the long time, but this time the leverage turned against them and all who lost money now saying that spot forex is scam. Everyone knew that Swiss Frank was seriously undervalued, there were neither technical nor fundamental reasons to be short CHF. The only reason a trader wanted to be long EURCHF is that they wanted easy money right from the SNB. Unfortunately, the SNB thought differently. Will you now have a debate about who is moral and who is not. We all trade financial markets and by majority of people it is already not very noble way of earning money. What will they say when they know who these traders wanted to extract supposedly risk free money from the SNB? I do not think you can expect a lot of compassion here. People who were highly leveraged at 1.2010 were thinking that their loss is limited to few pips while the potential gain is huge. However, there is no such thing as high return without high risk. Risk and return is proportional. There is nothing immoral in the LP position to not take your loss on themselves. They did the thing which was most sensible in the circumstances suspended quotes until it all calmed down and the SNB started selling CHF again. As you can see your fraud argument can be reversed by brokers. What if they say that it was you who wanted to defraud the SNB by exploiting its difficulties with CHF strength?

Alapri collapsed because it owed money to its Liquidity Providers not to its offshore division. By the FCA regulation they have to risk their own money not client's. They failed at risk management of course, but they did not lose or steal client's money. The client's segregated account is whole. It is unregulated brokers who do not segregate funds who pretend they are fine but in fact they might be sitting on huge losses too, but we'll not know it until they have troubles returning money to clients.

I'm sorry, but this does make as much sense as the rest of this post. How does all you wrote this time have anything to do with market makers creating a 1500+ pips gap that does not exist ?
Were people selling or buying CHF, thus helping the SNB to fight CHF strenght or the opposite ? I'm sure you will find the answer by yourself when you think a little about it.

So, it seems that I failed miserably to convince you that market makers did something wrong by halting quotes. It's 100% traders' fault. They even were doing something evil in the first place.
Brokers were 100% honest. I stop here.

Hello Mevo, I have followed your posts with interest, and am in complete agreement
the following is an excert of my complaint sent to the UK FCA regarding the actions of my broker who has slapped me with a demand to repay over 60K -ve balance

regarding XXX they offer "100% automated execution" and state that clients have the "ability to Set risk management"
They also claim to “(We) have invested heavily in the hardware and infrastructure that supports our award winning* platform, to enable us to handle over one million prices per second, so even during turbulent market conditions we are confident of the stability of our platform.”

Their platform was not stable, it froze and then according to them, it produced prices which they later refused to honour.

They closed my positions at levels significantly below my preset stop-loss levels, and it took them 51 seconds to do so.

I accepted this close out of my positions as slippage is expected on such news, however, then to come back and make an adjustment 10 – 12 hours later, claiming circumstances out of their control, is totally unfair & unacceptable.

With their claim of being able to handle over 1 million prices per second, how many price updates in the first 60 seconds after the announcement did they provide on Eur/Chf, and why the delay in filling my and other clients stops if it wasnt for their own benefit. (the only conclusion I can draw from this is that they have been at the very least, negligent and probably much worse than that! In my view this is outright cheating.

I nor any small retail/hobby trader, can be held responsible for a market maker, not having in place the necessary liquidity partners, and systems to support such events, even though they claim to have them, furthermore, the latency of their system in closing my stops demonstrates failures in and the weaknesses of their platform

Also again I and other small retail clients have no understanding of how XXX hedges their clients positions, or what the liquidity actually is available.
I have an account with another FCA regulated FXbroker, namely OneFX, my account also had Eur/CHf positions, these were closed out at exactly the levels my stop losses were set at, there were no adustments or slippage! – They are an Honourabe company.

In the Order Execution Policy XXX state that as a Market-Maker, the platform generates its own prices. For me this means that e.g. if I am buying eggs, the price I pay at the point of purchase, is the price i pay, and that the shop keeper (who sets his own prices) cannot come back after the fact because of an instant birdflu epidemic, and tell me I have to pay up to 100 times more for the same eggs !!

So they generate the prices, they have control over them, and it would appear they have the ability to delay quoting at will– hence in a rapidly moving market, they can ensure that clients best interests are ignored. And then regardless of what happens they can reset any price they choose. – Is that fair?

XXX's delay in filling stop losses on client posititons after the SNB announcement, ensured that the liquidity had disappeared in the EUR/CHF pair, and this gave them the right to claim "Circumstances Out Of their Control" (COOC)/Force Majure or what ever, which further gave them the right to enact their reserved action clause and adjust prices as they deem fit!!

As the regulator of these companies, you have to put in place controls that protect the ever growing number of small retail hobby traders.

One has only to see all the slick marketing / suggestions on FX brokers websites of instant riches, to realise that many are being sucked in to this deception, and it doesnt matter if they state “losses can exceed your initial deposit”, unless they quantify such statements, e.g. “any client trading with us has to realise that should similar events to those that occoured on the 15 jan happen, and you are holding just one standard lot position in Eur/Chf, your account could be wiped out and you would be owning us around £10,000.00, and if you had 10 lots, you could easily loose up to £100,000.00 in a matter of a few minutes – Do you really want to open an account with us?

Its often also stated that one should only speculate with funds you can afford to lose - In the light of 15 Jan, very few can afford to trade FX - there can be no more retail traders. To lose ones life savings and/or house, just because some slick "legal jargon" is hidden in the 50 odd pages of conditions that we signed! its fraudulent!!

Please everyone,

if you have made a complaint to your FCA or Ombudsman, please post them here that we can all benefit from what is said - hide the broker name and any personal info, but lets be strong together, lets support each other, in ensuring a fair outcome, mine is in my previous post

​Mevo,
I wrote that post because there are people here who like you think that while what liquidity providers did was probably legal, but it was immoral. And my point was that putting fully leveraged trades with margin call being just few pips below the current price, counting that all gains will be yours, but all losses should be covered by the broker is not a bit more moral.

Now to more concrete things. Who told you that the gap did not exist. Forex is decentralized market different liquidity providers have different prices if you compare brokers datafeeds you will see that they are not identical. So if you saw some prices in one platform and did not see in the other, the both can be true just for 2 different LP's. There is no single place where you can see what the price was at certain time. In disputes they use EDS High and Low of the trading day and Fix price calculated by WM/Reuters at 4pm London time.

Suspension of trading is nothing new and it is quite common in other markets, there are certain conditions when trading of an instrument is suspended. CHF event was of so high magnitude for the forex market that it would definitely qualify for suspension if it was an exchange.

And finally, you misunderstood me. I have never even thought that all brokers are good. There are good brokers and bad brokers. 10 years ago all brokers were ugly compared to now. FXCM spiked you out on a regular basis, spreads were artificially widened few mins before news and finally reaching 20-30 pips in the last 20 seconds, obviously it was because they traded against you and your loss is their gain. Since then a lot have changed. New brokers with better models arrived and even FXCM became a bit better, their raw spread execution was quite good (although, I heard that since Jan 15th a lot of ugliness returned since they need to repay the loan they need a lot of money quick). So now you can select a broker which suits your needs. Obviously, clients who wanted to trade with enormous leverage should have chosen a broker with negative balance protection. The possibility of the loss being more than the account balance, highly illiquid market condition, slippage and suspension of trading was in terms in conditions. If clients read it but chose to ignore they have only themselves to blame.

Wookey we all have debts or most. Suspending trading or fixing the game to pay back debt is evident enough of fraudulent behaviour. It's simple and keep it simple. No excuses

Hi bg123, thanks for your post.
I wish you good luck with the FCA.
Keep us informed of the result !