CS: dealer interventions, unfair fills, and eventually poor customer service
i am happy to state that if you are a profitable client then we do not penalise you at all. If we feel that you are attempting to 'scalp' on a regular basis then we may put you to dealer confirm.
There seems to be differing opinions here on what constitutes scalping. Definitions have varied from holding short intra-day positions to deliberately trading on latent prices. For those clients who have been selected for "dealer confirm", would it be policy to be honest with them about this, or would they be told that their slow fills were due to volatile markets? Further, when a punter notices that every trade is going to a dealer, and they ask your staff about this, would it be explained that you do not like the stlye of their trading?
It is certainly possible, although not easy, to make consistent profits by making extremely short term trades in index futures, looking to take a 5-10 point move net of spread, and having the discipline to cut losses short immediately. This style of trading may involve short bursts of activity, including placing multiple trades inside of five minutes. This style of trading does require fast executions, and when your account is put on dealer confirm and you need to wait around 20 seconds or longer for fills, it can be somewhat more difficult. Regarding penalising clients, I have a query about "dealer interventions".
If every trade a client makes is referred to a dealer, and the dealers are busy, it can take some time to get orders filled. In a volitile market, 20 seconds is enough for the price to have moved outside your quoted spread. It is my personal experience that whenever I have had a trade go to a dealer and there has been a delay in filling the order, I am only filled if the price has moved against me.
To clarify; if the price is 20 points higher on a buy order when your dealers eventually take a look at it, the order is not filled. If the price is 20 points lower on a buy order (and therefore outside your spread of 4 for the Dow) it is filled. Deals are only rejected with a message "price no longer valid" if the market has moved against the client. This, combined with the time it takes your dealers to fill orders in busy markets, makes dealer intervention a severe penalty indeed! I would challenge some of the best traders to make good returns against that handicap. The delay in executions may be acceptable to those who do not trade on small timeframes, but only filling orders that are already losing? That is fairly impossible to get around.
I am expecting references to be made to the fact that it is easier to sell into a rising market than buy it, etc. I am not terribly interested in this, simply because there is an apparent bias. If your dealers rejected all orders which were outside the spread, including the losing ones, this would appear fair. Alternatively, you could pass the change in price on to the client, and this would also appear fairer. Clients are advised by your dealers in cases of discrepancies when orders are not filled that we trade against "your quote", in which case I would suggest that we should be able to trade it. Your computer dealing program can give good executions at the price you see on the screen, so the vast majority of clients won't have any problems with your firm in that regard until they trade too frequently, or win too much, or whatever your definition of scalping is and get this "dealer intervention". The price is correct at the time the order was made, however clients suffer due to your dealers decision to reject an order 20 seconds later because the price has moved in that period of time.
Other firms handle the matter differently; CMC requote in a fast market, and I have experienced both requotes in my favour and against me. This seems fair. It appears that what your firm can do is take a buy order in the Dow at 13560, wait 20 seconds to have the order confirmed, at which time the price is 13540, confirm the order and put any applicable hedge on at the lower price, and pocket the difference.
As an aside, to those of you who still trade with CS and are having this problem; the solution to the poor and delayed fills appears to be to take advantage of telephone trading. The dealers at CS are usually efficient and professional, and if you call them they are happy to quote a price in any market which they will let you trade at instantly. (one of the last times I tried this, the dealer entered incorrect orders and it took 15 minutes to clear the situation up - this would be the exception rather than the rule though - I simply gave up at this stage due to other issues with my account)
I understand that in fast moving markets executions may not be good, and in many cases your dealers do better than may be expected. I do however have issues with the honesty and transparency of your firm: you will admit here that you select suspect accounts for dealer confirm, however when my account was selected in the same manner your staff fobbed me off and would not even suggest it was my account which had been selected for this treatment. One of your dealers remarked that he could see how delays with the fills would affect any short term trading, and apologised for the unfortunate volatility in the markets. I did not realise it was my account which had been singled out for this treatment until I personally witnessed another CS client place a similar order in the same market and get filled instantly. I was rather appalled to discover I had been deceived.
When I had called your desk, I had been told that the slow fills were due to market volatility. I explained the style of my trading, and how being unsure of a fill for several seconds could be disadvantageous. Your dealers did not tell me that I was "scalping" or that this was an unsuitable way to trade, however somebody somewhere had made the decision to place my account on dealer intervention without telling me. Your dealers were not honest about the situation, to the extent that they would not admit that my account had been singled out in this way, and made several excuses as to why dealer intervention was being used (including that it was happening to all clients on certain markets, or that it was due to volatility in certain markets). At this point, I was able to independently verify that it was my account which was subject to this policy by watching one of your other clients trade the same markets at the same time with the same stake size.
Could I ask you to respond to the above issues about scalping, dealer intervention, and your fills policy? Further, could you state whether it is your policy to inform punters who are put on dealer intervention of this fact, or indeed is it your policy to offer alternate explanations if they happen to notice a change in the quality of service provided?
It is with regret that I must advise I am extremely disappointed with your firm. In addition to the dealer intervention / poor fills issue, one of your dealers made several mistakes transacting an order which took around 15 minutes to clear up, I have had funds erroneously debited from my account due to payment processing problems at your firm, and I further note that your FX prices were once again manifestly incorrect on Thursday evening. I had been advised that the FX issue was fully resolved.
To be fair, the funds were returned to my account after I was able to persuade your staff to have your accounts department look into the matter, and your mistake was discovered. Your staff were helpful in explaining and rectifying this matter. Your dealer did reverse her erroneous transactions (eventually) and my account balance was returned to what it should have been, but I did feel that I had to insist somewhat in order to have her correct the issue. In general however, I did feel that your staff were becoming less accommodating, to the point of declining to acknowledge correspondences relating to the manual fills issue.
I've read some of this thread, and noticed that you appear direct and frank in response to any queries. While I am not affected by these issues as I no longer trade with CS, I do feel it would be helpful if you could clarify some of the points I have made for the benefit of your (prospective) customers here.
Thank you for providing the Charity Trading Account - I feel that is a most laudable act. While my experience of your firm may have been somewhat unpleasant in the end, I am sure you have many happy clients. I never had any serious problems with your firm before my account was selected for dealer intervention, and always received very good executions prior to this.
I will not trade with a firm who have taken to shifting the odds further against me without having the courtesy to explain why, or to respond to my queries. I will not tolerate dishonesty either. The situation is most unfortunate. I only hope that you are able to clarify here how your other punters can expect to be treated. Perhaps you should include a section in your literature where you define "scalping" and expressly warn clients not to do this?
