CMC Markets - 'Flash Crash' Spread Manipulators

[N Rothschild]

I do all my big scale trading that involves Equities on a number of full broker platforms that don't involve Spreads, this was a small test of a new SB platform for the benefit of potentially utilising it for small investor clients...requiring leverage in a familiar structure (Namely Spreads).

SB is culturally understood and accepted in the UK, whether you wish to refer to them or not as Bucket shops.

Where your contribution as in many other interactions we have had - amount to 'you are a schmuck get a real trading relationship going' or 'all certain types of companies are thieves', I would like to invite you to curtail your contributions and let the adults interact. There is detail in this that is clearly over your head, Have a nice day.

Over my head? errm..YOU are the one crying on youtube that you got stopped out because you dont understand that the bid went below your sotp on the underlying as showed by paulp, i was going to post the same but i found it much better to sit here chuckling at your ignorance. so pipe down.

 

[The Baptist]

With CMC yes, however the execution policy differs from firm to firm. I have had this happen to me many a time with IG, Capitals Spreads and City Index and their execution policy is to only use traded price becuase of the very fact you highlighted above about people being able to pull bids/offers and manipulate the market. So in this case I would not expect you to have been executued if you were trading with those firms.

Unfortunately, CMC are an altogether different beast....

Thanks for highlighting that differential..

So by this information the other platforms mentioned will not spike a spread where no trade has taken place then..
Would there just be no response at all if without trade the market depth and bid levels on a share alter substantially?

 

[The Baptist]

to check... do they quote a fixed spread on this?

No it is variable seems to flex with volatility as expected but in between 1.0 & 2.0 pence range has captured all trade i have witnessed to date.

One thing not clear is whether their spread actually changed as the level is just the midpoint.. surely if you justify diving the spread so suddenly and returning it you have created 'artificial' volatility (as underlying has not changed).

So does that also allow them to widen the spread as well given they took midpoint down to highest remaining bid a 2% move..whilst everyone shuffled their orders in bid cue.

The minute you base your actions not on underlying actual trade but 'bid shuffling' you have a license to create hyperactive spread activity and the next step is to imply volatility as a result and further widen said spread when you dip down?

Which would allow a deeper sweep of stops as you head to the bottom of the spike down. On the basis a big 'move' has occurred.

All this whilst the underlying has not traded for 3 sec's and accepted market price is still deemed indicative. In fact all the orders that were pulled were re-entered and judging from the trade may well have been re-entered higher as the share traded up from the Open low to high near close.

How Ironic?

If that makes sense.

 

[arabianights]

Yeah that is the point I was getting at. Of course they can make the price however they like but I don't think it's reasonable to bash things down that far just because of a sudden lack of liquidity... that is to say provide an automated quote in this way if you want but redact it later... It's not uncommon for there to be no bids or no offers in plenty of securities.... would they argue that infinity is a reasonable bid or 1/2 offer a reasonable offer? I assume not...

I would personally continue arguing

 

[arabianights]

P.S. not terribly relevant but

has just steamed past my balcony. How cool is that?

 

[The Baptist]

New development...!

I recieved this comment..from an employee. Ref a point on £2million 'only' volume


'This will mean that the spreads on that particular product will tend to be particularly volatile. This can be seen on the platform, by selecting a 'spread' type graph, an example of which is attached.'

the example did not include the period in review I wondered why..

Maybe the attachment may show why..I went and looked at their Spread representation.

The Chart shows at no point does their Spread charting reflect the dip they enforced at all?

I have highlighted the cursor on the chart at 0900 and the spread is like eveyone elses Data, according to their spread chart no dip occurred the low point at 0900 was 390.80 with their spread upside buy price was 392.09 - given LSE underlying was 390.9 at that exact moment their Bias was Long with a midpoint at 391.45? correctly so as it went up all day? wtf?

In short their spread was at one of its tightest points according to this chart he referred me to just 1.29 pence in total - no sign of a spike at all.

Clearly after pointing me to their very granular charts and 'spread' function, this would be where they say 'Our charts are merely indicative not factually based representations' wtf..?

Explains why they were in no hurry to send a pic example of the actual event in question.. it undermines their case further... 384.0 is off the chart..

I have copied cells from their own scale in paint to show where their midpoint should be in terms of their representation to me on these charts.

The mind boggles as their chart shows a tight very stable situation at 390.8- 392.09

No spike, why refer a client to feature that undermines your case still further

 

[The Baptist]

Attached the Chart for the time period in question Orange lines inserted by me in paint with 384 level their stated midpoint?

Redline where their midpoint of spread should be

 

[The Baptist]

Yeah that is the point I was getting at. Of course they can make the price however they like but I don't think it's reasonable to bash things down that far just because of a sudden lack of liquidity... that is to say provide an automated quote in this way if you want but redact it later... It's not uncommon for there to be no bids or no offers in plenty of securities.... would they argue that infinity is a reasonable bid or 1/2 offer a reasonable offer? I assume not...

I would personally continue arguing

Take in the latest detail.. on their 'spread charts' they reffered me to really helps the case! duh.. only he would not send for that period..

 

[arabianights]

Again I'm sure it is a reasonable mistake by their algorithm, but it really ought to be corrected now you have pointed out the flaw. No sensible broker would sell into that bid, thus their quote is a nonsense...

 

[The Baptist]

Again I'm sure it is a reasonable mistake by their algorithm, but it really ought to be corrected now you have pointed out the flaw. No sensible broker would sell into that bid, thus their quote is a nonsense...

No sign of that contrition... 3 rebuttals of all claims..

Plus... 'Firstly, allow me to address the insinuation you made in your Email that CMC Markets deliberately manipulate our prices in order to adversely affect our clients' trading. This is completely untrue.'
...

Of course as your own charting package you referred me to clearly shows.

 

[Black Swan]

FWIW Baptist you're probably right, they're wrong, endex...But what are you looking for, is it "the principal not the money" argument? In my experience (I've won a few of these ickle battles, well 3 out of four partial refunds over 3 years iirc), but overall nothing changes much and you obviously know what you're doing so why waste your energy on it and upset yourself? Unless I've misread and it's for big potatoes..

BTW picked up on your gold thread the other day, well played . I gave up buying physical at circa $1000 per Oz..

 

[The Baptist]

FWIW Baptist you're probably right, they're wrong, endex...But what are you looking for, is it "the principal not the money" argument? In my experience (I've won a few of these ickle battles, well 3 out of four partial refunds over 3 years iirc), but overall nothing changes much and you obviously know what you're doing so why waste your energy on it and upset yourself? Unless I've misread and it's for big potatoes..

BTW picked up on your gold thread the other day, well played . I gave up buying physical at circa $1000 per Oz..

You 100% correct on wasted Energy comment, I had already decided to leave it all after last post then the reply came in referring to the chart which just added a new angle of peculiarity as it only further endorsed my case.

I have had my bleat on this matter and made it public record for those who face similar with full details. It was not substantial in money terms, the shock value and annoyance on a nontrade related that rankled. You not only have to be right, express the trade accurately, you may need higher tolerance margins than necessary to manage around other peoples systems.

This was a very small new SB acc with 2 grand with a 7£ bet. Small element of what I do but makes me appreciate my existing full services more.

I am undecided if followers could utilise my trade system with anything but major FX and primary pairs to avoid possibility of similar when stops need to be tighter than 2% away (FTSE100 majors prob Ok with tightish stops).

Best set ups often a level down in size.

Anyway I commit this thread to the records for reference, I learnt from posters here that other SB's don't run same algo & wouldn't have spiked it.

 

[stevespray]

In my experience you're far better off trading these thinly traded small cap stocks with someone like Capital Spreads because they have a far more transparent dealing / execution policy. This is especially true with stocks like the one that you mention because the quotes are driven by market makers. Market maker driven stocks generally have only a few bids and asks showing. Let's say in your case that one particular MM was trying to slowly buy stock and thus was bidding 391 - It could well be that the next best bid was infact only 384. Now imagine that, for a split second, there is some kind of interuption in the data transmission between the MM and the exchange? What would happen? I can tell you; the bid would drop to 384 for a few seconds and then pop back up. This can and does happen.

As someone else already commented, if you're going to trade these stocks then you would do well to choose a company whose execution proceedures best fitted your strategy. These practices vary drastically from firm to firm and, in my experience, this 'selection of the right broker (tool)' is so often overlooked by the would be trader.

Interestingly you could ask CMC what would happen if there was a role reversal; what would they do if the bid spiked higher for 3 seconds triggering your limit sell? Would they still fill the limit sell regardless of the fact that there is no volume traded (on the exchange) at the quoted price? In my experience they'd argue their way out of it claiming that there wasnt enough volume to support your trade. In the past I've had situations where a firm has argued two different ways in the space of days regarding fill policies on matters like this one - it is very straight forward generally - they will argue that they can apply the policy which is most financially rewarding for them. If you do happen to catch them out then they'll close your account.

Hope this helps,
Steve.

 

[The Baptist]

Good comments & suggestions Steve.. Thanks.. No doubt both way arguements would apply.

 

[trader_dante]

I would personally continue arguing

I'd listen to arabian. Last time he helped me draft a response to a bucket shop, I got my money refunded.

Still owe you a drink for that dude

 

[tar]

from IG's agreement :
" A Stop Order, which is an offer to deal if our quote becomes less favourable to
you. A Stop Order is generally placed to provide some risk protection, for example
in the event of your Bet moving into loss, and can be used to either open or close
a Bet. Each Stop Order has a specific stop level, set by you (but subject to our
agreement). Your Stop Order will be triggered if our bid price (in the case of an
Order to Sell) or our offer price (in the case of an Order to Buy) moves against you
to a point that is at or beyond the level specified by you. The exception to this is
Stop Orders placed in respect of Bets on Order Book Shares, which are triggered
only when a deal takes place on the Underlying Market for that Order Book Share
at a price, which, when adjusted for fair value and Spread, is at or beyond your
specified stop level. Once a Stop Order is triggered we will, in accordance with
Term 11(3) and subject to Term 11(4), open or as the case may be close a Bet at a
level that is the same or worse than your stop level. "

http://www.igindex.co.uk/content/files/CustomerAgreement_igi_en_GB.pdf

 

[MYJ1]

i have had cmc cancel trades after i have executed them because not enough volume traded to fill my position. so i would def not let this go. they have also cancelled trades for being done on incorrect prices.... do not let them get away with this.

 

[The Baptist]

Hi,

I have spoken over the phone and a few items I would like to make clear:

Firstly in CMC's Favour:

1. I accept fully they have an automated system, this means no individuals actively fished Stops
2. I believe the trade was there 'Algo' working on the Bid Offer spread rather than on the actual Underlying

By using a SB I believed I was trading leverage on the Underlying.

In Fact I was leverage trading their spread on that Underlying, which adjusts even without the Underlying trading, if Bid's are pulled or shuffled.

This will effect Moderate to Light volume stocks, subsequently in fairness to them they have accepted that many other people may have been under the same situation/impression and may elect to further highlight this in any way they see fit.

I also pointed out that trading their own Spread but providing charting on the actual Underlying was inconsistent (ie. there was no spike on their chart Spread as with underlying).

This they also accepted in good spirit as feedback.

They have agreed to look into reinstating the Trade (s), I closed one other trade shortly after events, during my Platform 'Crisis of confidence' both have faired well since (Lol).

So following a heart to heart, I consider CMC safe to trade with on nearly all underlyings, and would suggest that customers only need show additional awareness of the nature of their 'Algo' on Lightly supported or traded underlyings. (Bloomberg also captured a micro dip, so their system is not unique in doing this)

If bids are pulled or moved on such stocks, it remains a technical possibility that for a short period such an underlying may pull the spread down (or up) where the market depth was temporarily reduced.

As occurred with this instance, Their subsequent action has me believe they are good guys and that no individual scope for 'stop Fishing' is available nor sought.

I hope everyone can benefit from the experience and keep stops deep on moderate volume entities if you elect to trade these.