How does FxPro offer 'negative balance protection' on big lots | Forex Factory

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How does FxPro offer 'negative balance protection' on big lots

  • #1
  • First Post: Mar 22, 2015 8:38pm Mar 22, 2015 8:38pm
Hi,

After reading all of FXpro's risk disclosures and chatting to them online, they say they guarantee negative balance protection and did so in the EURCHF move.

My question is, if I was trading 100+ lots at big leverage, how can they offer negative balance protection if I'm in the red 2000 pips?

Surely that's millions, potentially even more than they can afford?
Or is it not all they say it is?
  • #2
  • Mar 22, 2015 9:43pm Mar 22, 2015 9:43pm
Quoting flinx
Hi, After reading all of FXpro's risk disclosures and chatting to them online, they say they guarantee negative balance protection and did so in the EURCHF move. My question is, if I was trading 100+ lots at big leverage, how can they offer negative balance protection if I'm in the red 2000 pips? Surely that's millions, potentially even more than they can afford? Or is it not all they say it is?
Question: if you actually had the capability of trading 100+ lots, would you really trade with anyone other than prime brokers?
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #3
  • Mar 22, 2015 9:44pm Mar 22, 2015 9:44pm
Quoting skenobi
{quote} Question: if you actually had the capability of trading 100+ lots, would you really trade with anyone other than prime brokers?
can you give some example of prime brokers? u mean big boys like jpmorgan?
  • #4
  • Mar 22, 2015 10:07pm Mar 22, 2015 10:07pm
Quoting rapphire
{quote} can you give some example of prime brokers? u mean big boys like jpmorgan?
Any player in the interbank market.

Let's not forget that the retail forex "market" is not really a real "market". It's a lot like an off-track betting parlor i.e. a faux market that is parallel to the REAL market in the interbank world.

Would you really trade 100 lots in a faux "market"?
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #5
  • Mar 22, 2015 10:16pm Mar 22, 2015 10:16pm
Quoting skenobi
{quote} Any player in the interbank market. Let's not forget that the retail forex "market" is not really a real "market". It's a lot like an off-track betting parlor i.e. a faux market that is parallel to the REAL market in the interbank world. Would you really trade 100 lots in a faux "market"?
Does big player in the interbank market offer negative balance protection?
  • #6
  • Mar 23, 2015 12:21am Mar 23, 2015 12:21am
Quoting rapphire
{quote} Does big player in the interbank market offer negative balance protection?
To each other, no, because there is no such thing as "balance" to "protect". "Balance" in this case refers to margin account balance.

Interbank players trade with each other with real money, not with leveraged contracts the way retail traders do i.e. they do not place margins with each other or with a broker. And interdealer brokers (who only broker deals between interbank players not retail) make money from per deal commissions, unlike most retail forex brokers.

Do big players in the interbank market offer negative balance protection TO THEIR RETAIL CLIENTS (who will mostly be HNWI)?

Good question. I would be very surprised if they did for any trade size, small or large.

But that's not the point of this thread. The point is whether FXpro has any business offering negative balance protection for large lot trades. I don't think FXPro makes this claim, which is fine and I have no problem with that.

I could be wrong about that last para, and to be frank, I don't really care if I'm wrong.

But I don't think I would be wrong to say that if a trader is capable of trading 100+ lots, he should really think twice before placing orders with just ANY RETAIL forex broker.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #7
  • Mar 23, 2015 2:01am Mar 23, 2015 2:01am
Quoting skenobi
{quote} To each other, no, because there is no such thing as "balance" to "protect". "Balance" in this case refers to margin account balance. Interbank players trade with each other with real money, not with leveraged contracts the way retail traders do i.e. they do not place margins with each other or with a broker. And interdealer brokers (who only broker deals between interbank players not retail) make money from per deal commissions, unlike most retail forex brokers. Do big players in the interbank market offer negative balance protection TO...
There might be no margins in interbank, but you take counter-party risk. Otherwise the system is the same is not it? Margin is merely counter-party risk management tool.

I would not call access points to interbank as faux market, but I guess it is mostly rhetorical question. Of course, one needs size to play in wholesale marketplace or use some broker for a fee.
  • #8
  • Mar 23, 2015 2:50am Mar 23, 2015 2:50am
Quoting skenobi
{quote} Question: if you actually had the capability of trading 100+ lots, would you really trade with anyone other than prime brokers?
100 + is nothing to a PB, they'll be interested if you do 10000+ lots a month
  • #9
  • Mar 23, 2015 4:38am Mar 23, 2015 4:38am
Quoting grin
{quote} There might be no margins in interbank, but you take counter-party risk.
I don't disagree with you. What I'm saying is that it's all beside the point. The question asked was whether FXPro can protect negative balances for large lot trades, and my answer was that it doesn't matter since for large lot trades, the trader should really be using more established counterparties anyway.

Quoting grin
Otherwise the system is the same is not it? Margin is merely counter-party risk management tool.
It's similar but not the same. For instance, if I was Citibank and I wanted to trade with UBS, we would have mutual credit lines and counterparty limits for each other and that would be enough to trade without any broker intermediation. But we did not have to deposit margins with each other or even with any broker who mediates for us. Everything is done on trust. "A trader's word is his bond". That's what been drilled into us in trader training. That courtesy does not necessarily extend to our hedge fund or HNWI clients of course (for instance). For example, we would absolutely insist that our clients deposit a margin as per our risk policies for clients.

Quoting grin
I would not call access points to interbank as faux market, but I guess it is mostly rhetorical question.
I'm not sure where I've said that "access" to interbank is a faux market. What I said was "retail forex market is a faux market".

It's a faux market in the sense that retail volumes have zero chance of affecting the price that you see on the screen. Retail traders with over-valued sense of their worth in the financial markets will disagree with me of course. It's no skin off my nose, tho.

Quoting grin
Of course, one needs size to play in wholesale marketplace or use some broker for a fee.
No argument there.

Quoting plotinus82
{quote} 100 + is nothing to a PB, they'll be interested if you do 10000+ lots a month
If you say so, mate! By all means, please continue to believe that!
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #10
  • Mar 23, 2015 5:55am Mar 23, 2015 5:55am
Dear Flinx,

FxPro offers ‘Negative Balance Protection’ (‘NBP’) to all Retail Clients irrespective of the volumes traded. NBP forms part of the inherent Service Agreement agreed to by the client prior to the establishment of a business relationship; you can find the below in the Client Agreement (Annex A, section 5.1) at the following link http://www.fxpro.co.uk/trading/products/legal.

5.1 CFDs. Which are leveraged products, incur a high level of risk and can result in the loss of all of the client’s invested capital. However, it should be noted that FxPro operates on a ‘negative balance protection’ basis; this means that the client cannot lose more that his/ her initial investment.

Shall you have any other questions, please do not hesitate to contact us directly.

Kind regards,

FxPro Team
Trading CFDs involves significant risk of loss.
  • #11
  • Mar 23, 2015 9:37am Mar 23, 2015 9:37am
Chances are they wouldnt be able to recover a whole lot anyways, so might as well score the PR win and offer protection. And they can always do a 180 like FXCM and try to collect the few big accounts anyways.
  • #12
  • Mar 23, 2015 10:09am Mar 23, 2015 10:09am
Quoting FxPro Global
Dear Flinx, FxPro offers Negative Balance Protection (NBP) to all Retail Clients irrespective of the volumes traded. NBP forms part of the inherent Service Agreement agreed to by the client prior to the establishment of a business relationship; you can find the below in the Client Agreement (Annex A, section 5.1) at the following link http://www.fxpro.co.uk/trading/products/legal. 5.1 CFDs. Which are leveraged products, incur a high level of risk and can result in the loss of all of the clients invested capital. However, it should be...
With this, flinx's concerns should be adequately addressed then.

Caveat emptor, irregardless. I have nothing against FxPro, but the importance of prior due diligence cannot be overstated.

All the best all round!
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #13
  • Mar 23, 2015 12:12pm Mar 23, 2015 12:12pm
Quoting skenobi
{quote} I don't disagree with you. What I'm saying is that it's all beside the point. The question asked was whether FXPro can protect negative balances for large lot trades, and my answer was that it doesn't matter since for large lot trades, the trader should really be using more established counterparties anyway. {quote} It's similar but not the same. For instance, if I was Citibank and I wanted to trade with UBS, we would have mutual credit lines and counterparty limits for each other and that would be enough to trade without any broker intermediation....
I deal with prime brokers myself, people won't take you on unless you trade yards a month.
  • #14
  • Mar 23, 2015 12:13pm Mar 23, 2015 12:13pm
Quoting shrike
Chances are they wouldnt be able to recover a whole lot anyways, so might as well score the PR win and offer protection. And they can always do a 180 like FXCM and try to collect the few big accounts anyways.
Very correct.
  • #15
  • Mar 23, 2015 12:17pm Mar 23, 2015 12:17pm
Quoting plotinus82
{quote} I deal with prime brokers myself, people won't take you on unless you trade yards a month.
And as I said, please continue to believe that.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #16
  • Mar 23, 2015 12:30pm Mar 23, 2015 12:30pm
Quoting skenobi
{quote} And as I said, please continue to believe that.
lol ok i hope i can deal with a true prime broker trading 100 mil a month placing through velocity, autobahn or cortex, dream come true immediately
  • #17
  • Mar 28, 2015 9:40am Mar 28, 2015 9:40am
Quoting skenobi
{quote} And as I said, please continue to believe that.

What about telling us the truth finally ?
  • #18
  • Mar 28, 2015 12:07pm Mar 28, 2015 12:07pm
Quoting available
{quote} What about telling us the truth finally ?
The truth:

1. People will continue to believe whatever they want to believe; trying hard to convince people to change their beliefs is fruitless.

2. If there are erroneous beliefs out there, some (if not most) pros will want to hope that the less sophisticated will continue to believe in those erroneous beliefs, for obviously selfish reasons.

3. In regards to the last point, pros have nothing to apologize for.

4. The truth doesn't matter, as long you're making money i.e. it doesn't matter if you're wrong about anything or everything with regards to some nebulous trading-related philosophy or concept, as long you're making money. (pointless debate is pretty entertaining, tho)

5. In the search for "truth", if only the seeker would ask first whether the answers to his question(s) will even add anything meaningful to his bottomline....
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #19
  • Apr 5, 2015 6:58am Apr 5, 2015 6:58am
Quoting FxPro Global
Dear Flinx, FxPro offers Negative Balance Protection (NBP) to all Retail Clients irrespective of the volumes traded. NBP forms part of the inherent Service Agreement agreed to by the client prior to the establishment of a business relationship; you can find the below in the Client Agreement (Annex A, section 5.1) at the following link http://www.fxpro.co.uk/trading/products/legal. 5.1 CFDs. Which are leveraged products, incur a high level of risk and can result in the loss of all of the clients invested capital. However, it should be...

12.1 In the case of a Force Majeure Event the client shall accept any loss arising.

24.1 Fxpro shall, in its reasonable opinion, determine that a force majeure event occurred; under such circumstances the Firm shall take all reasonably steps in order to inform the Client.

24.2 A FME is as an event of circumstance, including but not limited to any natural, technological, political, governmental, social, economical (including without limitation to the suspension of a currency) or similar event or circumstance that occurred after a transaction in a financial instrument occurred and such event or circumstance has not been anticipated at the date of entering into the transaction...........................

24.3 If Fxpro determines that a FME occurred, without prejudice to any other rights of the client under the Client Agreement, the Firm may: ....................
- amend any of the content of the Client Agreement on the basis that it is impossible for Fxpro to comply with it.
  • #20
  • Edited 8:47am Apr 5, 2015 7:55am | Edited 8:47am
Quoting str8
{quote} 12.1 In the case of a Force Majeure Event the client shall accept any loss arising. 24.1 Fxpro shall, in its reasonable opinion, determine that a force majeure event occurred; under such circumstances the Firm shall take all reasonably steps in order to inform the Client. 24.2 A FME is as an event of circumstance, including but not limited to any natural, technological, political, governmental, social, economical (including without limitation to the suspension of a currency) or similar event or circumstance that occurred after a transaction...
Wow, good find.

So by looking at this... it seems you actually ARE responsible for losses should they decide so??

EDIT - Also, where have you actually fond this info? I can't see it.
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