I would be highly interested in knowing why you think they should cover your losses?
What is different losing a trade and going into negative balances compared to losing any other trade?
YOU take the trade. YOU take on the risk. YOU are in charge of your own money. YOU ARE LIABLE FOR YOUR OWN ACTIONS.
Why would a broker pick up these costs to them just because you ****ed up and you feel it isn’t ‘fair’?
Do we know how the other brokers who are forgiving negative balances fared during the SNB move?
I see forex.com forgave negative balances as well but they also made over 3m being market maker in the move so not really hard for them to do so.
There are quite a few instances where brokers have mis-executed stops at inaccurate levels. This would be a very good reason for brokers to cover losses that resulted in a negative account. More then likely there will be many lawsuits that FXCM will have to deal with, and more then likely lose, that revolves around this very issue.
[QUOTE=“rindoan;678953”] Think the key word there is ‘generally’ and that you can easily claim what happened to be a special circumstance where it would not apply.[/QUOTE] Lol any time an account manages to go negative before being margin called is a rare and special circumstance.
HIGH RISK INVESTMENT
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade products offered by Forex Capital Markets, LLC (“FXCM LLC”) you should carefully consider your objectives, financial situation, needs and level of experience. FXCM LLC is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission and is a member of the National Futures Association (NFA #0308179). FXCM provides general advice that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. FXCM recommends you seek advice from an independent financial advisor.
I dont think you understand the reality
Is a big different to lose you balance in you account but imagine you have a 10 K account and you awake up to minus 20 - 30 K one you account …That is the reality for many FXCM traders.
You can read the FXCM risk warning advice not a word that you can get a negative balance or get in deep personal problem to open a FXCM account because FXCM SL do not working …
Every upgoing broker have reduced their leveraged against CHF in long time before 15, NOT FXCM
So because you do not know how the forex market works and the risk involved then the broker is liable because they didn’t inform you correctly?
This sounds awfully like the case with the women who tried to dry her cat in the microwave and since the microwave company hadn’t specifically said you couldn’t microwave your cat she then sued them…
Did this actually happen? I’m sure it did but what worries me with things like this that the courts take them seriously. Its probably similar to my thoughts as to why the film hot tub time machine got funded. Its perfectly fine to write a script about a hot tub capable of going back to the 80s but that doesn’t mean any one should give you millions of dollars to fund it. I’m not sure if i have gone off topic…
I think that it points to these outstanding debts in the loan agreement that they received from the lender and the lender expects to be paid a % of these per month. I could be wrong in my understanding of it. It was in that link (you?) supplied before.
If that is the case, it will be out of FXCM’s hands about forgiving the debts.
I’m sure there will be lawsuits, it is America after all. I can’t see how those will be won by customers who signed agreements and were made aware of the potential downside to trading and that illiquid events could happen with major downside risk for customers financial standing.
The only fight that might be is if it can be proven that there was liquidity in the market at a different level and FXCM could have closed out positions at a better level. Which they may have done but could only get filled for certain amounts at each level. Then what, everyone should have been scaled out of positions equally on a % basis of position?
I think a combined $250M negative account balance is a little outside general. Final cost will be somewhere north of $500M? So they are already taking a hit of $250+M for customers beyond the original debt, who will never even think about that or thank them.
Client expectations should be if it happens that debts are forgiven, they are all extremely thankful. The expectation should be customer owned position, illiquid event outside of FXCM’s hands and we understand positions can move into a negative position. Stops are not a finite point where we can always limit risk, this is VERY clear when you read up about stops in any market. FXCM are not trading against customers, they did not win like other companies did who can then afford to “forgive” customers debt with the very profit they made off the customers with the debt by trading against them.
And if you bothered to keep reading the risk disclosure, T&C’s and other important information that FXCM supply, you will find things like the following.
Additionally, when triggered, stop orders become a market order available for execution at the next available market price. Stop orders guarantee execution but do not guarantee a particular price. Therefore, stop orders may incur slippage depending on market conditions.
LIQUIDITY
During the first few hours after the open, the market tends to be thinner than usual until the Tokyo and London market sessions begin. These thinner markets may result in wider spreads, as there are fewer buyers and sellers. This is largely due to the fact that for the first few hours after the open, it is still the weekend in most of the world. Liquidity may also be impacted around trade rollover (5PM EST) as many of our multiple liquidity providers momentarily come offline to settle the day’s transactions which may also result in wider spreads around that time due to a lack of liquidity. In illiquid markets, traders may find it difficult to enter or exit positions at their requested price, experience delays in execution, and receive a price at execution that is a significant number of pips away from your requested rate.
MARGIN CALLS AND CLOSE OUTS
Margin calls are triggered when your usable margin reaches zero. This occurs when your floating losses reduce your account equity to a level that is less than or equal to your margin requirement. Therefore, the result of any margin call is subsequent liquidation unless otherwise specified.
The idea of margin trading is that your margin acts as a good faith deposit to secure the larger notional value of your position. Margin trading allows traders to hold a position much larger than the actual account value. FXCM’s Trading Station has margin management capabilities, which allow for the use of leverage. Of course, trading on margin comes with risk as leverage may work against you as much as it works for you. If account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions. When positions have been over-leveraged or trading losses are incurred to the point that insufficient equity exists to maintain current open positions, a margin call will result and all open positions will be closed out (liquidated).
Please keep in mind that when the account’s useable margin reaches zero, all open positions are triggered to close. The liquidation process is designed to be entirely electronic.
Although the margin call feature is designed to close positions when account equity falls below the margin requirements, there may be instances when liquidity does not exist at the exact margin call rate. As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during market gaps or volatile periods. FXCM will not hold traders responsible for deficit balances in this scenario, but clients should be cognizant that all funds on deposit in an account are subject to loss. FXCM also recommends that traders use Stop orders to limit downside risk in lieu of using a margin call as a final stop.
It is strongly advised that clients maintain the appropriate amount of margin in their accounts at all times. You may request to change your margin requirement by going to myfxcm.com and filling out the “Margin Change Request Form,” which is subject to approval by FXCM. Margin requirements may be changed based on account size, simultaneous open positions, trading style, market conditions, and at the discretion of FXCM.
And it looks like with that last bold highlighted statement, everyone who wants to take wildly over-leveraged risks with no risk analysis is free to do so with no worries about running into a negative account.
Suggest you read the US client agreement on their website page 3 section 7 where it states its up to the brokers discretion what to be done in case of negative balances and in either case forgivness does not apply in case of force majeure, which I believe FXCM claimed applied in this case.
(I cant copy paste the terms from the agreement as the PDF is locked or something stupid so you will have to go read it there yourself).
Before I head out for the day, here’s an FXCM business update we just released:
[B]Strong Operating Metrics[/B]
Through Thursday, January 22, FXCM’s month-to-date retail customer trading volume, which includes all retail FX and CFD volume, is $406 billion* with 30% coming from the last 5 days alone, which included a U.S. bank holiday. Average retail customer trading volume per day during this period is $27 billion.* As of January 22, tradable accounts were 224,547, and client equity was $1 billion.
“A week after the unprecedented movement of the Swiss Franc, and our financing agreement with Leucadia, FXCM continues to operate in the normal course of business. All of our entities have capital in excess of regulatory requirements. As our month-to-date metrics show, FXCM continues to be a global leader in retail FX with volumes on pace to set a record. We are especially thankful for our customers’ loyalty and support,” said Drew Niv CEO of FXCM.
Niv continued, “[U]The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business while reducing our debt through the sale of non-core assets.[/U] We anticipate that the proceeds from these sales and continued earnings, we can meet both near and long term obligations of our financing, while preserving the strength of our franchise.”
Richard B. Handler, Chief Executive Officer, and Brian P. Friedman, President of Leucadia, commented: “We view FXCM as our next opportunity to work with an investee company to create long-term value for all stakeholders, including FXCM’s dedicated employees and customers. We look forward to assisting Drew Niv and his team to develop the liquidity opportunities to repay last week’s emergency financing and then, as the long-term investors we are, to exercising the patience and diligence needed to maximize the value of FXCM over time as we strive to do for every investment in our portfolio, many of which we have held for the long term, and, in some cases, for over a decade.”
*Amount excludes volume generated by clients with negative balances following the Swiss National Bank’s decision to abandon the maximum exchange rate of 1.2 Swiss Francs per Euro.
As our CEO Drew mentioned, thank you to our traders for your continued support. I appreciate your patience while we work on answers to your most pressing questions, and I will continue to provide more information as I am able to.
[QUOTE=“rindoan;678944”] I would be highly interested in knowing why you think they should cover your losses? What is different losing a trade and going into negative balances compared to losing any other trade? YOU take the trade. YOU take on the risk. YOU are in charge of your own money. YOU ARE LIABLE FOR YOUR OWN ACTIONS. Why would a broker pick up these costs to them just because you ****ed up and you feel it isn’t ‘fair’? Do we know how the other brokers who are forgiving negative balances fared during the SNB move? I see forex.com forgave negative balances as well but they also made over 3m being market maker in the move so not really hard for them to do so.[/QUOTE] http://youtu.be/Vr2vnM9O0oA Skip to 1:30 … Plain and simple… FXCM just stated that they guarantee that one cannot lose more then their deposit. They should be forgiving all negative balances.
It will be interesting to see how long FXCM keeps this video up as they begin wrongfully chasing account holders for negative balances.
Educational Videos: All videos are provided for educational purposes only and [B]clients should not rely on the content or policies[/B] as they may differ with regards to the entity that you are trading with. Further, any opinions, analyses, prices, or other information contained on this website is provided for educational purposes, and does not constitute investment advice. FXCM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
[QUOTE=“rindoan;679276”] Just below the video on FXCM’s website: [/QUOTE]
Such a strongly worded “we guarantee clients will not lose more then their deposit” will be more then enough to override anything they try putting in fine print. If they do try pursuing negative balances now every account holder can sue for false advertising claims.
It also doesn’t have that fine print in the YouTube video title, description or embedded in the video itself… Therefore if one were to watch only the video that they posted on YouTube, they would not see it.
I’m definitely not arguing against you! Was just posting what I had found and also added sarcasm at the end.
It has always been my understanding that any customer position is exactly that, a customers position. If there is a black swan event and no liquidity in the market and your position can’t be closed out until $136 000 in debt, then that is just the markets really f***ing your whole decade up. Its certainly the way it is in the futures market. Who knows maybe that’s the difference between exchange trading and broker market?
Can you link to the US terms? Maybe different rules between places. UK and Aus have segregated accounts also which the US doesn’t from what I hear.
What about all the paper work when signing up to the service? If it is in there, regardless of advertisements then the company could say the customer was told prior to getting the active account? I guess in legal terms if the company can show the customer was made aware of these things prior to having the lodged paperwork ok’d then they have it covered. Most things will be hidden in fine print that 99% never take the time to read but it is there. This is what you should be trying to get a copy of to go through and check. It could even be that depending on when you signed up you might be under a different agreement if they didn’t send out any update’s to Terms & Conditions.
If it turns into a fight, I don’t think it will be the slam dunk you hope it to be.
I notice the “red bull will give you wings” add is still around, it just has a written disclaimer in fine print at the end now. Red bull got sued for that when it didn’t give people wings but a simple disclaimer after the add seems to cover it.
[QUOTE=“Getty;679413”] What about all the paper work when signing up to the service? If it is in there, regardless of advertisements then the company could say the customer was told prior to getting the active account? I guess in legal terms if the company can show the customer was made aware of these things prior to having the lodged paperwork ok’d then they have it covered. Most things will be hidden in fine print that 99% never take the time to read but it is there. This is what you should be trying to get a copy of to go through and check. It could even be that depending on when you signed up you might be under a different agreement if they didn’t send out any update’s to Terms & Conditions. If it turns into a fight, I don’t think it will be the slam dunk you hope it to be. I notice the “red bull will give you wings” add is still around, it just has a written disclaimer in fine print at the end now. Red bull got sued for that when it didn’t give people wings but a simple disclaimer after the add seems to cover it.[/QUOTE]
The consumer protection handbook makes it pretty clear a company cannot simply contradict a claim with a disclaimer. Disclaimers don’t absolve false statements, which FXCM clearly is making in this video.
“Advertisers cannot rehabilitate literally false claims by simply contradicting them with disclaimers.”
The statement FXC made in the videos could not have been any more direct and unambiguous.
So either the statement FXCM made in this video will bite them in a court case over a negative balance dispute, or it will bite them in the follow up suit over false advertising.
Given the following definitions/explanations it would be interesting to see if in this particular case a “force majeur” defence would stand up in a court of law…
“Force Majeure clause is a provision in a contract that excuses a party from not performing its contractual obligations that becomes impossible or impracticable, due to an event or effect that the parties could not have anticipated or controlled. These events include natural disasters such as floods, earthquakes and other “acts of God,” as well as uncontrollable events such as war or terrorist attack. Force majeure clauses are meant to excuse a party provided the failure to perform could not be avoided by the exercise of due diligence and care.” - definitions.uslegal.com
“…The importance of the force majeure clause in a contract, particularly one of any length in time, cannot be overstated as it relieves a party from an obligation under the contract (or suspends that obligation). What is permitted to be a force majeure event or circumstance can be the source of much controversy in the negotiation of a contract and a party should generally resist any attempt by the other party to include something that should, fundamentally, be at the risk of that other party.[4] For example, in a coal-supply agreement, the mining company may seek to have “geological risk” included as a force majeure event; however, the mining company should be doing extensive exploration and analysis of its geological reserves and should not even be negotiating a coal-supply agreement if it cannot take the risk that there may be a geological limit to its coal supply from time to time. The outcome of that negotiation, of course, depends on the relative bargaining power of the parties and there will be cases where force majeure clauses can be used by a party effectively to escape liability for bad performance…” - Wikipedia
Bear in mind too that negative balance protection is a huge selling point and I think the problem for Fxcm is that they explicitly stated that clients will not be held responsible for negative balances as indicated above. If they now plan to pursue clients with deficit balances then surely they can argue a case of misleading advertising?
Also, brokers more so than most clients are well aware of the significant financial risk associated with leveraged trading/speculation so the question is what steps if any has FXCM taken to mitigate said risk in this particular case?
Other key questions:
Was the event forseeable?
Was the event preventable?
Was due diligence and care exercised?
Was FXCM negligent?
The fact that a number of brokers in anticipation of the SNB decision (although apparently nobody else knew when exactly the decision was going to be made) had increased margin requirements on CHF pairs months prior further weakens any “force majeure” protection (imo).